The US is sanctioning one of the largest exporters of oil, a host of other important raw materials, and agricultural products, all of which much of the rest of the world is dependent upon in varying degrees. What could go wrong? From Michael Maharrey at schiffgold.com:
Economic sanctions serve as a powerful foreign policy tool for the US government. But could this ultimately backfire on the US?
Over the last several years, many countries have made a concerted effort to limit dependence on the US dollar. The economic warfare waged against Russia reveals exactly why.
The US hit Russia with a round of economic sanctions after Russian President Vladimir Putin recognized two breakaway republics in Ukraine and announced he would send troops into those regions. President Biden announced additional sanctions after Russia invaded Ukraine.
Peter Schiff recently explained how US sanctions against Russia could harm the US economy in the short-run and cause even more inflation. But there are also possible long-term consequences for using the dollar as a tool for war. It could accelerate de-dollarization globally and even threaten the dollar’s role as the world’s reserve currency.
The US is a global superpower and maintains an aggressive foreign policy. But the US doesn’t only project power across the globe through its massive military. It also weaponizes the US dollar, using its economic dominance and its privilege as the issuer of the global reserve currency in a carrot-stick tool of foreign policy.
The US government showers billions of dollars in foreign aid to “friends.” On the other hand, “enemies” can find themselves locked out of SWIFT, the global financial system that the US effectively controls using the dollar.
This is the nuclear option when it comes to economic warfare.