Ever since B.R.I.C.S. expanded, there has been a renewed rhetoric to accelerate “de-dollarization,” which is the process of finding an alternative currency to the dollar to conduct international transactions and business.

In the aftermath of World War II, the American dollar has been the world’s reserve currency. “A reserve currency is a foreign currency that a central bank or treasury holds as part of its country’s formal foreign exchange reserves.” Officially, the I.M.F. recognizes eight reserve currencies: the Australian dollar, the British pound sterling, the Canadian dollar, the Chinese renminbi, the euro, the Japanese yen, the Swiss franc, and the U.S. dollar – however, the dollar is the most used reserve currency.

From the onset, there was opposition to the dollar’s dominance. Infamously, the former French finance minister and president Valéry Giscard d’Estaing viewed the dollar as giving the U.S. an “exorbitant privilege.” Today, the primary reason for the growing calls for de-dollarization is the American weaponization of the dollar through sanctions, which is seen by other countries as “economic warfare.”

One of the reasons sanctions have been used by the U.S. and other countries/organizations is that it is the “less harmful” option, with the alternative being a war. However, economic sanctions are as harmful as an outright military invasion. The sanctions against Iraq during the 1990s resulted in widespread hunger and increased child malnutrition rates.

Importantly, sanctions have done little to cause regime change, aside from Apartheid South Africa. (Although in that case, it was an internationally coordinated effort with an existing grassroots opposition movement). North Korea has been sanctioned for almost the entirety of its history; however, the Kim family remains in power. Many analysts argue that sanctions help the Iranian Revolutionary Guard Corps (I.R.G.C.) since they control the black market and illicitly smuggle oil or send cash to groups like Hezbollah.

The US’s usage of sanctions has been so excessive that it diminishes its importance. During the Trump administration, sanctions were imposed on members of the International Criminal Court (I.C.C.) for their investigations on the U.S. military for possible war crimes in Afghanistan. After the I.C.C. announced arrest warrants for Israeli officials and members of Hamas for their war crimes, Secretary of State Antony Blinken said that the US was considering working with members of Congress to sanction members of the I.C.C.

As a result of the weaponization of the dollar, many countries have expressed a desire to reduce dependency on the dollar. In 2018, After the U.S. left the Iran nuclear agreement (J.C.P.O.A.) and reimposed the sanctions, the president of the European Commission, Jean-Claude Juncker, called to “boost the euro’s role in the global economy, which would help shield Europe from “selfish unilateralism.” In 2023, French President Macron insisted that Europe needed to reduce dependency on the dollar to avoid being “American vassals.” In 2022, the Saudis were considering pricing its oil sales in yuan, at a time when relations between the Americans and the Saudis were fraught.

The sanctions imposed on Russia after it invaded Ukraine have reinforced the desire to de-dollarize since “the fear in many capitals that the U.S. could someday use the power of its currency to target them the way it has sanctioned Russia,” and more and more countries are conducting business with Russia in other currencies. For example, Reliance Industries in India signed a one-year deal with Russian company Rosneft to buy oil in rubles.

As the Secretary of Treasury Janet Yellen admits, “it will not be easy for any country to devise a way to get around the dollar.” However, in the long run, it is possible that the dollar’s share as the global reserve will decline due to countries “natural desire” to diversify.

If the U.S. wants to ensure that the dollar remains the world’s reserve currency, it should rethink its sanctions policy. Instead of imposing blanket unilateral sanctions on an entire country hoping for regime change (or “behaviour change”) or sanctioning members of the I.C.C. for narrow political ambitions, the U.S. should pursue policies in which sanctions have a clear goal and are supported by a broad international coalition to achieve success as it did in against the apartheid regime in South Africa.