War by Other Means: Financial Sanctions as Strategic Weapons
The dollar cuts deep—but for how much longer?
In ancient warfare, generals relied on siege engines and starvation to win without battle. Today, the siege lines are digital, and the starvation comes via spreadsheets. This is the world of financial sanctions—tools of soft power that can cripple economies, isolate regimes, and signal geopolitical red lines without a single shot fired.
No bullets, no boots—just banks, bonds, and the bureaucratic firepower of the U.S. Treasury.
But as effective as sanctions have been in the short term, cracks are forming. And the rest of the world is watching very, very closely.
Sanctions: The Dollar’s Sword
The United States’ ability to impose sanctions that actually bite rests on one thing: control of the global financial operating system.
Because the dollar is the world’s reserve currency and because most global trade flows through U.S. financial institutions, America has the unique ability to block access to the pipes. When the Treasury’s Office of Foreign Assets Control (OFAC) puts a person, company, or country on its list, U.S. banks must cut ties. So must international banks that want to keep doing business in America. The result? Near-total financial isolation.
You don’t need to freeze tanks if you can freeze assets.
In recent decades, U.S. sanctions have targeted Iran, North Korea, Venezuela, Syria, and most famously, Russia. After the 2022 invasion of Ukraine, the U.S. and EU coordinated an unprecedented financial freeze: they cut off major Russian banks from SWIFT, seized yachts and villas, and froze hundreds of billions in Russian foreign reserves.
It was shock and awe, in ledger form.
SWIFT Justice or Blunt Instrument?
But here’s the catch: sanctions don’t always work as planned. They can devastate economies—but they rarely change behavior.
Iran still enriches uranium. North Korea still fires missiles. Venezuela’s regime remains intact. And Russia? It adapted—faster than most expected. It rerouted energy exports to China and India, beefed up domestic production, and doubled down on non-dollar trade settlement mechanisms.
The very success of the financial weapon has made it less of a surprise attack and more of a standard playbook—and adversaries are learning to build bunkers.
Enter the Workarounds
In recent years, we’ve seen a quiet acceleration of efforts to de-dollarize—not because other nations think their currencies are better, but because they fear becoming the next target.
Russia and China are conducting more trade in yuan and rubles.
India has settled oil payments with the UAE using dirhams.
Brazil and Argentina flirted with regional currency proposals.
Even France conducted a liquified natural gas trade with China in yuan.
Then there’s INSTEX (now defunct), the EU’s attempt to create a sanctions-proof payment mechanism for Iran. While largely symbolic, it showed Europe’s unease with being a co-pilot in America’s financial wars.
At the technological frontier, CBDCs (Central Bank Digital Currencies) and blockchain-based payment systems could someday offer alternatives to the dollar-based system. If they become viable at scale—and that’s a big if—the world could shift from a unipolar monetary regime to a multipolar one.
Can the Dollar Stay the Scalpel?
To be clear, the dollar isn’t losing its edge overnight. There’s no credible, scalable substitute with the same liquidity, trust, and network effects. But if sanctions keep expanding—used not just against bad actors but also to punish policy disagreements or apply political pressure—Washington risks turning a scalpel into a club.
And here’s the paradox: the more often the U.S. uses its dollar power, the more incentive it gives other nations to build escape hatches.
Even allies have started asking tough questions. If your reserves can be frozen based on political winds, are they really reserves? If trade contracts can be canceled by unilateral decree, are they really binding?
The Future of Financial Warfare
In an age of great-power competition, sanctions will remain a go-to tool. They’re cleaner than war, cheaper than aid, and more immediate than diplomacy. But they come with diminishing returns and long-term strategic costs if overused.
The next frontier is not just about whether sanctions work, but how to make them smarter—targeting individuals and sectors with surgical precision, coordinated multilaterally, and paired with off-ramps to avoid permanent estrangement.
It’s a tall order in a fragmented world. But if the U.S. wants to keep the dollar both a symbol of strength and a tool of trust, restraint may be the new power move.
Because even soft power, when wielded too often or too broadly, stops looking soft.