China Is Defanging the Dollar, Not Dethroning It

China offers Iran and Russia a way to circumvent US sanctions and continue doing business. But this comes at an elevated cost, because these countries are paid in onshore, non-convertible renminbi, which they must then convert into dollars using underground financial networks—tacitly reinforcing the greenback’s dominance. WASHINGTON, DC—After Russia’s full-scale invasion of Ukraine in 2022, the United States sought to freeze Russia out of the global financial system, leading many to speculate that weaponization of the US dollar’s dominance of that system would accelerate the world’s shift away from the greenback. Speculation only intensified when the US launched its war against Iran earlier this year and tightened its financial sanctions on the country.