The Dollar as a Trade Weapon: Legal and Economic Analysis of the U.S. Secondary Sanctions on SWIFT Transactions

The U.S. dollar’s dominance and SWIFT’s global reach have enabled Washington to use finance as a tool of foreign policy. Through secondary sanctions, the U.S. extends its jurisdiction globally, compelling governments, companies, and banks to comply or risk exclusion from the dollar-based system. While effective in cases like Iran’s SWIFT expulsion (2012) and Russia’s disconnection (2022), these actions raise complex legal, economic, and humanitarian issues. This paper analyses the legal foundation of such sanctions under the International Emergency Economic Powers Act (IEEPA), the Countering America’s Adversaries Through Sanctions Act (CAATSA), and new proposals like the Sanctioning Russia Act (2025). It also examines their global repercussions, including humanitarian fallout noted in Iran v. United States (ICJ, 2018) and destabilisation of trade and energy markets. Counter-responses—such as the EU Blocking Statute, INSTEX, Russia’s SPFS, China’s CIPS, and BRICS currency initiatives—illustrate growing resistance. The study further explores digital payment systems and CBDCs as alternatives to Western-controlled networks. It concludes that while the dollar remains a powerful trade weapon, excessive reliance on unilateral sanctions risks accelerating de-dollarisation. Sustainable policy demands multilateral legitimacy, humanitarian exemptions, and institutional neutrality to preserve U.S. credibility and global financial stability.