How the US uses the dollar payments system to impose sanctions on a global scale

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  The US dollar’s global dominance gives Washington a powerful tool that it uses to enforce sanctions on people, institutions and countries
• The decoupling of the world’s two largest economies has raised concerns about the United States deploying the ‘nuclear option’ of freezing China’s banking sector out of the global US dollar payments system

Karen Yeung

When sanctioning Chinese officials and companies involved in what Washington says are human rights abuses on a massive scale in Xinjiang, US lawmakers singled out Chen Quanguo (above), a member of the policymaking Politburo. Photo: AFP

The pervasive nature of the US dollar payments system along with its dominance in international transactions have afforded Washington broad powers to impose economic and financial sanctions on other countries.

Upping the ante against its opponents, the United States has restricted foreign governments, institutions and individuals from using US dollars in international finance so that they are unable to receive payments for exports, pay for the purchase of goods, or own US-dollar denominated assets.

When did the US start using its payment system for political purposes?

The US’ ability to exploit the US dollar payment system began during the administration of former president Bill Clinton (1993-2001) and expanded under subsequent administrations. Since US President Donald Trump initiated his “American first” policy three years ago, a number of payment sanctions have been imposed on Iran, North Korea, Syria, Venezuela and, to a lesser extent, Russia. Chinese individuals and institutions have also been sanctioned for allegedly handling payments from Iran and North Korea. This includes the Bank of Kunlun, a regional Chinese lender that was cut off from the global payments system in 2012 for financing deals with Iran.

Last month, the US imposed sanctions on several Chinese government firms and officials, citing ties to alleged human rights abuses against ethnic minorities in restive Xinjiang. Most notably, the sanctions hit Chen Quanguo, a member of China’s Politburo, the centre of power within the Communist Party.China warned to prepare for being cut off from US dollar payment system as part of sanctions22 Jun 2020And in the wake of Beijing’s implementation of the controversial national security law for Hong Kong, the US Department of the Treasury sanctioned 11 Hong Kong and mainland individuals this month for undermining Hong Kong’s autonomy and restricting the freedom of expression or assembly of citizens in the city.

These US sanctions block any of the named individuals or entities – dubbed specially designated nationals – from doing business involving property transactions or investments with US entities operating anywhere around the world or with foreign entities in the US…….More Here

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