What would disprove this analysis? (Criterion 1)

Dollar share of global reserves stabilizes or increases despite continued sanctions use

What would disprove this analysis? (Criterion 2)

Alternative payment systems fail to gain meaningful transaction volume

What would disprove this analysis? (Criterion 3)

Sanctions effectiveness does not diminish with repeated use

When should you avoid sanctions dedollarization acceleration?

You assume sanctions have no cost to the sanctioning country's financial hegemony. You're using sanctions as a first resort rather than last resort

What are alternatives?

Targeted individual sanctions: Narrower scope reduces systemic hedging incentive. Trade policy tools: Tariffs and export controls without weaponizing financial system. Diplomatic engagement: Address root causes without triggering financial system alternatives

Catalog

P018

Policy

Sanctions Dedollarization Acceleration

HIGH(80%)

February 2026

3 sources

Context

Western nations use financial sanctions as a primary foreign policy tool, leveraging dollar dominance to punish adversaries. Sanctions work in the short term — targeted economies suffer. But each sanctions episode teaches the rest of the world a lesson: dollar dependency is a strategic vulnerability. Countries accelerate development of alternative payment systems, bilateral currency agreements, and reserve diversification. China's CIPS, Russia's SPFS, and BRICS settlement mechanisms all gained momentum after major sanctions events. The weapon works, but each use dulls it and accelerates the very dedollarization it was designed to prevent.

Hypothesis

What people believe

“Financial sanctions effectively punish bad actors and change behavior.”

Actual Chain

→

Targeted economy suffers immediate pain(GDP contraction, currency collapse)

└

Sanctioned country develops workarounds

└

Black market and crypto channels emerge

→

Non-sanctioned countries observe and hedge(60+ countries diversifying reserves)

└

Central banks increase gold reserves at record pace

└

Bilateral currency swap agreements multiply

└

Alternative payment systems gain adoption

→

Dollar share of global reserves declines(From 72% (2000) to 58% (2024))

└

US borrowing costs gradually increase

└

Sanctions become less effective with each use

Impact

Metric	Before	After	Delta
Dollar share of global reserves	72% (2000)	58% (2024)	-14pp
Central bank gold purchases	400 tons/year avg	1,000+ tons/year (2022-2024)	+150%
CIPS transaction volume	Minimal (2015)	$15T+ annually (2024)	Exponential growth
Bilateral currency agreements	Rare	30+ active agreements	Rapid proliferation

Navigation

Don't If

•You assume sanctions have no cost to the sanctioning country's financial hegemony
•You're using sanctions as a first resort rather than last resort

If You Must

1.Target sanctions narrowly to minimize demonstration effect on neutral countries
2.Pair sanctions with diplomatic off-ramps to limit duration
3.Monitor dedollarization metrics as a cost of sanctions policy

Alternatives

Targeted individual sanctions — Narrower scope reduces systemic hedging incentive
Trade policy tools — Tariffs and export controls without weaponizing financial system
Diplomatic engagement — Address root causes without triggering financial system alternatives

Falsifiability

This analysis is wrong if:

Dollar share of global reserves stabilizes or increases despite continued sanctions use
Alternative payment systems fail to gain meaningful transaction volume
Sanctions effectiveness does not diminish with repeated use

Sources

1.
IMF: Currency Composition of Official Foreign Exchange Reserves
Tracks dollar share decline from 72% to 58%
2.
World Gold Council: Central Bank Gold Demand
Record central bank gold purchases post-sanctions
3.
Atlantic Council: Dollar Dominance Monitor
Comprehensive tracking of dedollarization trends

P014 M025