Page 18 - Soundwave Magazine
P. 18

 THE ECONOMY... AT A GLANCE (CONT’D)
  That would restrict Iraq’s use of oil revenues, causing a cash crunch and flattening its economy.
America is uniquely well positioned to use financial warfare in the service of foreign policy. The dollar is used globally as a unit of account, store of value and medium of exchange. At least half of cross-border trade invoices are in dollars. That is five times America’s share of world goods imports, and three times its share of exports. The dollar is the preferred currency of central banks and capital markets, accounting for close to two- thirds of global securities issuance and foreign-exchange reserves.
The world’s financial rhythm is American: when interest rates move or risk appetite on Wall Street shifts, global markets respond. The world’s financial plumbing has Uncle Sam’s imprint on it, too. Most internation- al transactions are ultimately cleared in dollars through New York by American “correspondent” banks. America has a tight grip on the main cross-border messaging system used by banks, SWIFT, whose members ping each other 30m times a day.
Another part of the US-centric network is CHIPS, a clearing house that processes $1.5 trillion worth of payments daily. America uses these systems to monitor activity. Denied access to this infrastructure, an organ- ization becomes isolated and, usually, financially crippled. Individuals and institutions across the planet are thus subject to American jurisdiction— and vulnerable to punishment.
America began to flex its financial muscles after the terrorist attacks of September 11th, 2001. It imposed huge fines on foreign banks for money-laundering and sanctions- busting; in 2014 a $9 billion penalty against BNP Paribas shook the French establishment. Mr. Trump has taken the weaponization of finance to a new level (see chart). He has used sanctions to throttle Iran, North Korea, Russia, Turkey (briefly), Venezuela and others. His arsenal also includes tariffs and legal assaults on
companies, most strikingly Huawei, which Mr. Trump accuses of spying for China. “Secondary” sanctions target other countries’ companies that trade with blacklisted states. After America pulled out of a nuclear deal with Iran in 2018, European firms fled Iran, even as the EU encouraged them to stay. SWIFT quickly fell into line when America threatened action if it did not cut off Iranian banks after the reimposition of sanctions in 2018.
Using the dollar to extend the reach of American law and policy fits Mr. Trump’s “America first” credo. Other countries view it as an abuse of power. That includes adversaries such as China and Russia; Russia’s president, Vladimir Putin, talks of the dollar being used as a “political weapon”. And it includes allies, such as Britain and France, who worry
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