US Treasury Secretary Janet Yellen looks on during a meeting with Ukrainian Prime Minister Denys Shmyhal (not pictured) at the US Treasury Department in Washington, DC, on April 13, 2023. (AFP)
“There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,” Yellen said on CNN.
“Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative,” she told the network’s Fareed Zakaria in an interview. “But the dollar is used as a global currency for reasons that are not easy for other countries to find an alternative with the same properties.”
The robust US capital markets and rule of law “are essential in a currency that is going to be used globally for transactions,” she added. “And we haven’t seen any other country that has the basic… institutional infrastructure that would enable its currency to serve the world like this.”
Yellen noted that sanctions are an “extremely important tool,” all the more so when used by the United States and its allies as “a coalition of partners acting together to impose these sanctions.”
Asked about the possibility of using frozen Russian assets to rebuild war-ravaged Ukraine after Moscow’s invasion, Yellen said that “Russia should pay for the damages that it’s caused.”
But she noted there are “legal constraints on what we can do with frozen Russian assets, and we’re discussing with our partners what might lie in the future.”
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