Srinagar, Jan 21, 2026 — From decades-long sanctions on Iran and pressure on Venezuela to a 10% tariff imposed on European Union countries, the United States continues to wield economic power few others can match. Why Washington can threaten countries with sanctions — and why others cannot.
When the United States threatens sanctions, governments listen; markets react, currencies wobble and companies rush to comply. No other country—not even major powers like China or Russia—wields comparable coercive economic power. The reason lies less in military might and more in the unique position of the US in the global economic system.
Washington’s leverage flows from the sheer size and depth of its economy. The United States remains the world’s largest consumer market, accounting for roughly a quarter of global GDP. For multinational companies, access to US consumers, capital markets and technology is often indispensable.
Sanctions work because firms and banks are forced to choose: do business with the US, or with the sanctioned country. For most, the choice is straightforward. This market dominance allows Washington to impose penalties even on foreign companies that have no direct presence in the US—a practice known as extraterritorial sanctions.
The second pillar of US sanction power is the US dollar. Most global trade, energy transactions and sovereign reserves are denominated in dollars, while international payments typically pass through US banks or US-linked clearing systems.
Why the US dollar dominates global trade and payments
The US dollar dominates global trade because it became the world’s anchor currency after World War II, when the United States emerged as the largest and most stable economy. Under the Bretton Woods system, the dollar was pegged to gold and adopted as the primary reserve currency, embedding it at the centre of global finance.
Even after the gold peg ended in 1971, the dollar retained its dominance because of deep trust in US institutions, political stability and the unmatched size of American financial markets. US Treasury bonds remain the safest and most liquid assets in the world, making them the preferred store of value for central banks.
Energy markets further cemented dollar dominance. Oil and gas are largely priced and traded in dollars, forcing importing and exporting countries alike to hold dollar reserves.
International payments flow through US banks because the dollar-based financial system is vast, efficient and globally interconnected. Many transactions clear through US correspondent banks or US-linked systems, even when neither party is American.
No other currency offers the same combination of liquidity, stability, legal predictability and global acceptance. Until an alternative provides all four at scale, the dollar—and US sanction power—will remain dominant.
This dominance gives Washington extraordinary oversight and control. If a bank or firm violates US sanctions, it risks being cut off from dollar transactions altogether—a potentially fatal blow in global finance. Institutions like SWIFT, while formally international, operate within a system heavily influenced by US regulations, further amplifying American reach.
Moreover, US sanction laws allow authorities to penalise non-US entities if their transactions touch the American financial system—even indirectly. This means a European or Asian firm trading with a sanctioned country can still face US fines if payments pass through US banks or involve dollars. No other country has comparable legal and financial reach.
Why others can’t replicate it
China and the EU have large economies, but their currencies do not rival the dollar in global trust or usage. Their financial systems are not as central to international payments, and their markets—while significant—are easier for companies to avoid than the US. Russia, meanwhile, lacks both market scale and financial centrality, limiting the effectiveness of its counter-sanctions.
On Venezuela: US sanctions on Venezuela targeted its oil exports, state institutions and access to international finance. While internal mismanagement played a major role, sanctions sharply reduced government revenue and foreign exchange inflows, worsening shortages and accelerating economic collapse. Even countries sympathetic to Caracas were reluctant to defy US restrictions, fearing secondary sanctions.
On Iran: Iran offers a clearer illustration of US leverage. Since the Islamic Revolution, sanctions on its banking, oil and shipping sectors have isolated the country from global markets, slashed oil revenues and weakened its currency. European efforts to bypass US sanctions through alternative payment mechanisms largely failed, as companies refused to risk access to US markets.
Even where countries attempt to trade with Iran discreetly, such efforts are constrained by extensive surveillance and monitoring mechanisms. Satellite imagery, shipping trackers, port data, insurance records and financial intelligence allow US and allied agencies to trace vessel movements, cargo transfers and port activity with increasing precision. Tanker movements, ship-to-ship transfers and changes in vessel identification are routinely flagged, making covert large-scale trade difficult to sustain. This visibility deters governments and companies alike, reinforcing compliance even in the absence of formal enforcement action.
Beyond sanctions, the US increasingly uses tariffs as a political tool. Trade penalties or threats of tariffs—whether over security, diplomacy or strategic disputes—carry weight precisely because of America’s market size. Even allies find it difficult to absorb the economic cost of losing access to US markets.
Is US dominance permanent?
There are signs of pushback. Countries like China and Russia are seeking alternatives to the dollar, while regional trade in local currencies is slowly expanding. However, these efforts remain fragmented.
For now, no other country combines market scale, currency dominance, legal reach and financial centrality the way the US does. US sanctions work not because Washington is uniquely willing to use them, but because the global economy is built around American money, markets and institutions. Until that architecture changes, the US will continue to wield a sanction power no other country can match.