- The view that US sanctions hurt the dollar's status is "nonsense", the Institute of International Finance's chief economist said.
- On the contrary, sanctioned countries scrambling to get around those shows the greenback's power, Robin Brooks said.
- The de-dollarization drive has gained attention of late with countries seeking to cut their reliance on the dollar.
Washington's increased use of economic sanctions has sparked a movement among nations from China to Brazil to reduce their reliance on the dollar for trade and investment. And that has fueled much debate whether the so-called de-dollarization drive will undermine the greenback's status as the world's reserve currency.
But it's "nonsense" to suggest US sanctions will erode the dollar's dominance, according to one economist.
"In the past decade, US Dollar is up 21% vs G10 & 37% vs non-China EM. The view that sanctions erode USD status is nonsense. If tinpot dictators want to wage war, get sanctioned and then need alternate payment means, that's signals Dollar dominance, not weakness..." Robin Brooks, chief economist at the Institute of International Finance said in a tweet.
The anti-dollar drive picked up momentum after Western nations imposed a slew of sanctions on Russia in response to Moscow's war on Ukraine, barring the country's access to the dollar-dominant global financial system. That's left the country scrambling to find alternative payment methods to conduct trade.
Most recently, Russian President Vladimir Putin urged countries to dump the dollar and trade with Moscow in local currencies. Putin's sway has worked on China, with 80% of trade between Russia and China conducted in the yuan and the ruble.
IIF's Brooks was likely referring to just that – and suggesting that Russia's desperation to seek other methods of payment as it loses access to the dollar only underscores the greenback's dominance.
Like Brooks, several market thinkers have defended the dollar in the face of sanctions and efforts to de-dollarize. Nobel laureate Paul Krugman, recently saying the "hype about de-dollarization is much ado about almost nothing."