US economic imperialism has gone too far

America risks alienating its friends and allies by weaponising its all-powerful currency through sanctions

So much for the bromance. We all thought the crafty Emmanuel Macron had played a blinder by cosying up to Donald Trump. Politically, the two are polar opposites – one a globalist out of the same mould as Tony Blair, the other a selfproclaimed nationalist and protectionist – but the Gallic charm seemed to work a treat. By pandering to the Donald’s ego, Macron would tame the beast and bend him to French purpose.

Or so we thought. This week, the strategy blew up in the French president’s face. All that diplomacy came to nought when Trump surprised the international community by actually doing what he had long promised, and withdrew from the Iran nuclear deal, thereby putting billions of euros of French contracts at risk – from Airbus orders to Total’s development of Iran’s South Pars gas field.

In the modern world, warfare comes in many forms. We are not talking just about the latest, high-tech kit – robots, drones and artificial intelligence – but with the birth of the digital economy, of cyberwarfare, and in an age of unfettered globalisation, the ever more extensive use of financial weaponry.

Post 9/11, this latter form of warfare has been developed into a fine art by the US Treasury to target terrorist organisations, rogue states and other presumed enemies of the American people. Other signatories to the Iran nuclear deal, including the UK, have vowed to carry on regardless, but the extraterritorial nature of US sanctions has rendered the deal virtually meaningless whatever everyone else wants to do. EU leaders are pressing Washington to exempt European firms; it seems unlikely Trump will agree. If he does, US withdrawal would be no more than a gesture; it would have very little economic impact. To work, Iran’s economic isolation has to be comprehensive.

There is nothing new in the use of sanctions. Their recorded application is as old as warfare itself. As far back as 4th century BC, in the Peloponnesian War between Athens and Sparta, Athens would block merchants with any known association with Sparta from using its ports. But it is globalisation, and the central role the dollar plays in it, that has turned this weapon from a form of useful persuasion into a potentially lethal means of extraterritorial control, or of effectively making other countries do the US’S bidding.

Bruno Le Maire, the French finance minister, has been no friend of Britain during the Brexit negotiations. He’s proved calculating, uncooperative and vindictive. Yet that doesn’t mean he’s wrong about everything. “The international reach of US sanctions makes the US the economic policeman of the planet, and that is not acceptable,” he fumes. His protests may be futile, but they are justified.

Whatever one thinks of the rights and wrongs of Trump’s stance on Iran, it is indeed quite unacceptable for him to be leveraging the central position of the dollar in international trade to force his world view on everyone else.

In his book, Treasury’s War: The Unleashing of a New Era of Financial Warfare, Juan Zarate called the elite team of lawyers and forensic accountants he set up at the US Treasury in the early noughties to weaponise the dollar “guerrillas in grey suits”. Highly effective they proved to be too. By threatening banks with removal of their dollar clearing licences, without which they are out of business, the US is able to freeze the targeted country or organisation out of the international payments system.

Those that kick against America’s bully-boy tactics get severely punished. Tens of billions of dollars in fines have been levied against UK and European banks for alleged infringements of US sanctions and laws. Even when the bank believes itself innocent of the charges, as occurred with Standard Chartered with respect to Iranian sanctions, it has no option but to bend over, accept the punishment and then thank the US for administering it.

It’s the same for companies, whatever their domicile; if they do any dollar or US business, they face a potentially existential threat should they also be found to be dealing with sanctioned parties. What’s more, so do their customers and suppliers, just for dealing with a company thought to be in breach. The extent of the US nexus is all encompassing.

Once bitten, twice shy. No British bank I know of went back into Iran, even after the nuclear deal supposedly lifted the previous round of sanctions. It just wasn’t worth the risk of old sanctions being reapplied; their judgment has proved 100 per cent correct.

“Unacceptable” this form of economic imperialism might be. Less clear is what can be done about it. The risk the US runs is that, by interfering with the sovereign right of other countries to choose their own foreign policy, it encourages the establishment of rival, offshore payment and clearing systems. The EU and China are actively exploring the possibilities. Overly aggressive use of dollar hegemony might, ironically, end up destroying it, undermining US power accordingly.