Financial sanctions and the dollar

: a critical perspective on the impact of financial sanctions on the dollar as the world's key currency

Abstract

This portfolio consists of two research articles, a discussion piece, and a commentary paper aimed to answer one fundamental question; to what extent have U.S. economic sanctions effected the key currency role of the dollar? Herein, I have presented each article beginning with the commentary, followed by two research papers, ending with a discussion piece. In the commentary paper, I review existing literature on the topic of sanctions and introduce the exploration of negative externalities, a field that is underexplored. The commentary also includes a review and summaries of the other articles in the portfolio followed by an overview and discussion of a wider scope than the articles themselves, to provide additional context, discussion, and conclusions. In one article, Establishment of non-dollar financial plumbing, I use a case study design to examine how oil producing targets of sanctions regimes and their export customers respond within a framework of currency competition in the energy trading market. In another article, Sovereign Europe and the euro, my research focuses on secondary sanctions and the reactions of an important ally as they relate to the dollar, the world’s reserve currency, using a similar research design. In the discussion paper, I approach sanctions broadly, and explore potential implications for emerging financial technology for the dollar and the efficacy of sanctions themselves. Overall, my findings show that the use of financial sanctions by the United States, enabled by a weaponized dollar, has led to significant backlash among rivals and allies alike, and that this backlash may be leading to an environment of increased competition for the dollar as an international currency. As a result, the efficacy of sanctions themselves comes into question as successful adaptations and countermeasures are developed.

Date of Award	1 Jul 2025
Original language	English
Awarding Institution	University of St Andrews
Supervisor	William Vlcek (Supervisor)