Watch the full event
Speaker
Daleep Singh
White House Deputy National Security Advisor for International Economics
Moderator
Kimberly Donovan
Director, Economic Statecraft Initiative, Atlantic Council
Introductory remarks and presentation
Josh Lipsky
Senior Director, GeoEconomics Center, Atlantic Council
Alisha Chhangani
Assistant Director, GeoEconomics Center, Atlantic Council
Mrugank Bhusari
Associate Director, GeoEconomics Center, Atlantic Council
Event transcript
Uncorrected transcript: Check against delivery
JOSH LIPSKY: Good morning, and welcome to the Atlantic Council.
I’m Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center, and it is my honor to open today’s special event on the future of economic statecraft with White House Deputy National Security Advisor Daleep Singh.
Today is a special day for us here at the Council. It marks the four-year anniversary of the creation of the GeoEconomics Center and the three-year anniversary of the launch of the Economic Statecraft Initiative.
When we began this project in 2020 many people asked us what is geoeconomics and we explained that it is the fusion of national security, economics, and finance. We built a team and produced cutting-edge research on digital currencies, China’s economy, sanctions, the future of the Bretton Woods system, and more.
And then in 2022 Russia invaded Ukraine. The G7 responded to Putin by deploying the tools of statecraft in a unified and unprecedented way. Suddenly we did not need to explain what geoeconomics was anymore because the world was seeing it on full display every day. And here in the United States we were reminded that geoeconomics was not a new idea, but an old idea that the West had the luxury of forgetting in the post-Cold-War era.
But our guest today didn’t need any reminding. He is a geoeconomist at heart. His career in public service and the private sector is a model for the kind of multidisciplinary expertise that is required to confront today’s challenges. In the Obama administration, he served at the Treasury Department as acting assistant secretary for Financial Markets. During the outbreak of COVID-19, he was executive vice president and head of the markets group at the New York Fed. That’s not a position many people leave, by the way. But when President Biden asked him to become deputy national security advisor and deputy director of the National Economic Council, a role that also required him to become both G7 and G20 sherpa, Daleep did not hesitate.
Over the past four years he has served two tours in the White House and in between held senior roles in the private sector. And what a four years it has been. Daleep has been at the center of some of the most challenging international economic questions of our time. What happens when a G20 country’s sovereign reserves are blocked? How can supply chains built over decades be reshaped in a matter of months? How does the US confront the practices of a country like China without destabilizing the global economy?
He has helped answer these questions in a way that demonstrates a type of creative economic thinking that would make Keynes proud. He is not bound by what has happened before and can enable those around him—both within his own government and in allied governments around the world—to see solutions others have missed.
It is fitting, then, that after four years of hosting senior Biden administration officials for key speeches, from Brian Deese announcing the vision for US industrial policy to Secretary Yellen announcing the friend-shoring policy, our final guest of the Biden administration is Daleep Singh.
Following Daleep’s speech, my colleague, Kim Donovan, director of the Economic Statecraft Initiative, will interview Daleep, and then our team will—in true GeoEconomics Center fashion—launch all-new research on the status of the dollar as a global reserve currency.
But first, Daleep, the Atlantic Council floor is yours.
DALEEP SINGH: During this century, major powers have deployed economic sanctions and other restrictive tools of economic statecraft to an unprecedented degree. The number of sanctioned individuals and entities across the world has increased by an order of magnitude since 2000. Tariffs and other trade restrictions have tripled over the past five years. The percentage of OECD countries screening investments in sensitive sectors has risen over the past decade from less than a third to more than 80 percent, while the number of countries with sophisticated export controls has quadrupled since their inception during the Cold War.
These trends are global, and while precise data are difficult to source in many jurisdictions, the growth of restrictive economic measures is accelerating both from the United States and our strategic rivals. China, despite having issued the lowest cumulative number of explicit sanctions among major economies, increased its designation activity by almost 100 percent last year—the highest rate of growth within this peer group—on top of its existing array of informal and extralegal barriers such as consumer boycotts, tourism restrictions, phytosanitary standards, and corporate pressure. Russia, for its part, now applies its own sanctions regime at scale and is routinely weaponizing its commodity exports—including nickel, tin, titanium, refined uranium, and, of course, oil and gas—to coerce trading partners and adversaries.
In my judgment, the trendlines are set to extend, for three main reasons.
First, sanctions and other restrictive measures are symptomatic of new and durable geopolitical realities. As Josh just mentioned, we’re no longer in the post-Cold War, unipolar order that underpinned the so-called “great moderation” of the global economy. Instead, we’ve returned to the “old normal” that prevailed for much of modern history, in which divergent forms of national governance and political ideology lead to intense geopolitical competition, less opportunity for cross-border cooperation, and greater risk of cross-border conflict. Since most of today’s “great powers” are also nuclear powers, barring catastrophic miscalculation, the logic of mutually assured destruction suggests that direct competition is likely to continue playing out mostly in the theaters of economics, energy, and technology, rather than in kinetic conflict on the battlefield. Set against this backdrop, the range of potential outcomes—the promise and peril for major powers to rise and fall—has widened, ushering in an era of more active use of economic tools to shape the course of events.
Second, these trends reflect opportunity. Though we’ve left the era of hyperglobalization, the world economy is still nearly as connected as ever—which provides scope for economic powers to break existing linkages, or threaten to do so, in exchange for geopolitical leverage. The ratio of global trade to global GDP has plateaued not far from the peak reached earlier this century. Worldwide foreign direct investment declined sharply after the pandemic but is rebounding and still exceeds the long-term historical average at well over a trillion dollars per year. Technological diffusion across borders remains largely unabated for all but the most sensitive items, in part because US restrictions on technology remain narrow and targeted.
Third, the succession of cross-border shocks this century—most prominently the COVID pandemic, but also financial crises, climate change, mass migration, and acute episodes of energy and food insecurity—have all punctuated the sense among policymakers that the singular pursuit of maximal efficiency and minimal cost will leave critical supply chains insufficiently resilient against a more volatile and uncertain global backdrop. Here in the United States, the Biden administration centered its geoeconomic strategy on making long overdue public investments at home and building partnerships abroad to strengthen and scale our productive capacity, but we also imposed targeted tariffs in strategic sectors to level the playing field against competitors playing by a different set of rules. Under the same rationale, many other leading economies have also implemented a similar mix of policies—including tariffs—to “de-risk” their supply chains from disruption and distortion.
Indeed, there is a growing policy reflex across the world to navigate a more uncertain and turbulent world by applying a sanction, a tariff, an export control, or an investment restriction. As President Biden reminded us, however, these measures are never costless. In each instance, they weaken or sever economic bonds that took decades to build, with immediate and sometimes unintended costs for households and businesses. And though in our administration we’ve deployed restrictive measures in service of a higher geopolitical objective—not as an end to themselves—their repeated use can invite skepticism about American stewardship of the global economy.
To the extent that our use of restrictive tools is perceived as arbitrary or illegitimate, the incentive to “hedge” against perceived dependency on the United States will rise. China and Russia are making every effort to increase their and others’ capacity to do so in finance, technology, and other domains in which the United States has a dominant position.
Take, for instance, China’s longstanding effort to build a cross-border payment architecture without any nexus to the US financial system—and therefore outside the reach of US sanctions authorities. Several nonaligned G20 economies have already signed up for this platform, and while the volumes transacted are far from reaching a threshold of macroeconomic significance, they have already surpassed a threshold of geopolitical consequence, with a run rate large enough to intermediate a significant portion of Russia’s procurement of dual-use items from China that are finding their way to the battlefield in Ukraine.
In addition to strengthening the incentives to hedge against the sources of American economic power, the unconstrained use of restrictive economic statecraft also invites efforts by adversaries to deploy these same tools to target our own and our allies’ vulnerabilities.
This isn’t conjecture, but rather a description of reality. The PRC is by far the world’s largest supplier of manufactured goods, accounting for almost a third of global manufacturing in value-added terms—equivalent to the combined production capacity of the United States, India, Japan, Germany, and South Korea. From this position of strength, China has already weaponized its economic leverage in its attempts to coax geopolitical concessions from smaller trading partners such as Lithuania, Australia, Japan, and South Korea. It also has untapped potential to exploit chokepoints in a wide range of supply chains in which it has dominant market share and where the current productive capacity of the United States and our allies is limited for now, including medical equipment, ship-to-shore cranes, solar panels, EV batteries, pharmaceutical ingredients, lagging-edge semiconductors, and so on. Russia restricted its export of enriched uranium last November, creating the risk of disruption to our and allied nuclear power production, and for years has attempted to coerce Europe by modulating its supply of natural gas. Iran and its proxy forces have repeatedly exploited their control over the [Strait] of Hormuz and Red Sea shipping lanes to pressure the United States and its allies.
Against this backdrop, we have an urgent need to implement a set of principles that guide and constrain why, how, when, and to what extent we deploy restrictive economic tools. I believe this effort should have three overarching goals: first, to sustain the credibility and the potency of America’s economic statecraft toolkit for when we need it most; second, to prevent an escalatory tit-for-tat in the use of restrictive tools that could make the United States and the world worse off; and third, to update the rules of the international economic order we’ve worked to build and sustain for over seventy-plus years.
I suggest we seek to embed five principles in the practice of restrictive economic statecraft, first in our own conduct, and then among allies, nonaligned countries, and eventually our adversaries.
First, economic and financial sanctions should be used sparingly and in service of clearly defined and achievable geopolitical objectives.
Sanctions are a tool, and often a force multiplier, but never a standalone strategy. They should be designed and deployed in service of a geopolitical objective that policymakers outline prior to implementation and assess periodically afterward.
Prior to articulating the objective, policymakers would be well served to analyze and explain—at least internally—how they expect an economic measure to influence the decision-making calculus of the target, how they are expected to reinforce other levers of foreign policy—military, diplomatic, humanitarian—and the degree to which a multilateral coalition is necessary for their success.
These objectives could be pursued before an adverse “trigger” event occurs, either to deter a target’s malign behavior, degrade its capabilities, or both. Alternatively, or additionally, these measures can be imposed after a trigger event to impose costs, change the calculus of the target, or create leverage for an eventual diplomatic settlement.
In every instance, the objective should be achievable. Efforts to engineer regime change through maximalist sanctions, for example, predictably fail to persuade the target, often an autocrat, that the benefits of sanctions relief outweigh the costs of giving up power—which is typically jail, or worse.
Relatedly, the individuals or entities being sanctioned need to know why and for what behavior they are being penalized, so that the consequences of an action—whether it’s support for a terrorist organization, a serious human rights abuse, or the prosecution of an illegal war—are understood, such that the key actors can ultimately seek the reversal of these sanctions through a change in behavior.
Second, the force of restrictive actions should be responsibly calibrated to their expected impact, spillovers, and associated uncertainties.
As the leading economic and geopolitical force in the world, restrictive measures imposed by the United States are capable of imposing great and lasting harm, producing ripple effects that are impossible to identify fully in advance. The force of our restrictive actions must be calibrated in proportion to their expected impact, their spillover costs, and the uncertainties involved.
This requires the US government to continue building the analytical muscle to conduct rigorous, data-driven analyses on historical and imagined scenarios in which restrictive measures could be implemented—whether unilaterally or multilaterally, alone or in tandem with military and diplomatic levers, before or after a trigger event.
Assessments should highlight the degree to which the range of outcomes depends on the breadth of the implementing coalition, the target’s potential to mitigate the impact—for example, by substituting the good or service with domestic supply or import from third countries—and our own vulnerabilities and potential for risk mitigation in an extended and escalatory conflict.
Third, policymakers must consider explicitly and upfront the efficacy of restrictive measures on the decision-making calculus of the target.
The design of restrictive measures is typically prepared by those with expertise on how to impose costs on the macroeconomy and the financial system of the target while minimizing spillovers to the US and the global economy. While this is a vital and necessary contribution, the ultimate success of restrictive measures depends on how these costs are likely to influence the decisions of key actors in the target country or entity. It also depends on the extent to which these actors are influenced by their economic, political, social, and humanitarian impact on political elites and the civilian population of the target. Meeting the analytical test of sufficiency requires the upfront and explicit integration of economic analysis with political intelligence.
Fourth, restrictive measures should be maximally coordinated, both with domestic stakeholders and international partners.
Unity with partners multiplies the impact of restrictive measures—due to the higher impact it delivers on the target, the reduced opportunity for evasion, and the perceived legitimacy of the action. This last point on legitimacy is critical: It makes clear that our purpose is not the unilateral exercise of brute economic force, but rather the collective defense of shared principles that underpin peace and security around the world.
It’s also critical that restrictive measures are explained to the range of stakeholders that transmit the force of these measures to the real world—including private sector, the regulatory community, and central banks. Private sector actors, in particular, are often the “front lines” of implementing financial sanctions and export controls, and we depend on their cooperation and their sense of civic duty to spot and counter circumvention. In exchange, we owe them clarity and coordination.
Finally, restrictive measures must be flexible and adjust to unintended consequences, evolving economic and financial conditions, and the reaction of the target.
Even after exhaustive analysis and careful design, restrictive measures are blunt tools that are typically implemented under conditions of high uncertainty—often with little or no precedent from which to make confident projections about their likely effects.
It should surprise no one when the impact delivered, or spillovers caused, are materially different than expected. Humility requires us to admit when we’re mistaken in our judgments and to course correct as needed.
Separately, the context in which restrictive measures are applied inevitably evolves. The coalition that implements sanctions may grow or decline. Economic and financial conditions may change for the better or worse, both in the target country and within the implementing coalition. Political and power dynamics within the target may harden or soften, along with the behavior we seek to influence.
All of these are reasons why we must have timely and demonstrated pathways to ratchet higher or lower the scale and scope of restrictive measures, to adjust the channels through which we deliver impact, and to stand ready for mitigation of unanticipated risks or costs.
Under the leadership of President Biden and National Security Advisor Jake Sullivan, we’ve made important strides in putting these limiting principles into practice—not in a formalistic sense, but in real-time as events unfolded—and often in ways that have never been made public. Each of the principles I’ve just described animated the design and the execution of the sanctions program against Russia; the intuition of the oil “price cap” coalition; the logic of the “small yard and high fence” for our export controls and our investment restrictions; and the targeted nature of the tariffs we deployed against China in strategic sectors.
I’d like to close my remarks, and my time in government, with three recommendations on how to institutionalize these practices. Of course, it’s not going to be for me or us who are still in the Biden Administration to decide whether and how these get implemented, but I believe emphatically they would each serve to advance our shared bipartisan interests to safeguard America’s national security while enhancing our economic prosperity.
First, much as we restructured our national security apparatus amid rising tensions in the aftermath of the Second World War, this is a moment to evaluate whether the US government’s organizational design for conducting economic statecraft is fit for purpose. Too many of our tools and too many of our subject matter experts are spread across too many agencies without a unifying set of incentives, objectives, and metrics for strategic success. Japan pioneered the elevation of economic security to a cabinet level in 2021, and we would be wise to consider following suit in this new era of geoeconomic competition—particularly so that we could strike a deliberate balance between restrictive tools that impose economic pain and positive tools that offer the prospect of mutual economic gain.
Second, we have to continue to upgrade what I call the “analytical infrastructure” of economic statecraft—the personnel, the technology, the data, and connectivity to continually assess the efficacy, limitations, and tradeoffs of using our restrictive tools; to “stress test” and wargame their use against historical and simulated scenarios; to anticipate where and how evasion is likely to occur and build readiness for countermeasures that could be deployed in real time; to build surveillance capabilities that provide early warnings on developing economic security threats; and to maintain the capacity to execute at pace, even if multiple conflicts emerge at once. While these and other demands on the practitioners of economic statecraft have grown exponentially, their available resources have increased only at a linear rate, and often much less.
Finally, we should begin a series of conversations that aim to forge a common vision on the rules of engagement for why, when, how, and to what extent restrictive measures are used across the world. We should start with our allies and then seek to build consensus with nonaligned or multi-aligned countries. Ultimately, in the same spirit of the Geneva Conventions, we must include our adversaries in a good faith effort to avoid creating a fractured economic system that damages lives and livelihoods across the world and brings us closer to the hot conflicts that economic statecraft seeks to avoid. Thank you.
KIMBERLY DONOVAN: Great. Hi, Daleep. Thank you so much for joining us today, for your remarks and discussion about the future of economic statecraft. And thank you to all of you joining us in the audience. If you have questions for the deputy national security advisor, please go to AskAC.org.
So, Daleep, in your remarks you really reminded me of comments that former Treasury Secretary Jack Lew made back in 2016, where he warned of the risk of sanctions overuse and overreach, and even stated that we must be strategic and judicious in how we apply sanctions to challenges around the world. So, considering that we’re nearly ten years after Jack Lew made these remarks, and you offer a similar diagnosis and recommendations on how to address these issues, it’s just interesting to me that we continue to raise the alarm on the potential overuse and overreach of sanctions, in particular, yet we continue to increasingly use them. So I was wondering, I mean, why are policymakers continuing down this path, considering the risks at stake?
DALEEP SINGH: It’s a great question. I have, I mean, of course, unending respect and admiration for Jack Lew. He was spot on in 2016. His words have aged well. I would say the context has changed. All else isn’t equal. You know, the demand signal for sanctions and for restrictive economic statecraft, it’s just flashing in neon lights now. You know, and the supply of sanctions and economic statecraft, the bureaucratic capacity to do so and respond to the demand signal, it’s increased. So if you want to think about sanctions as having a clearing level, as any other market instrument would, the equilibrium level has risen. And I would say it’s probably going to stay high because it’s symptomatic of durable structural forces, all of which reinforce each other.
And I’ll just tick off a few. First, and most obviously, geopolitical competition has intensified. So, what does that mean for sanctions? Well, the risk of cross-border conflict is higher, the scope for cross-border cooperation is lower. And, you know, because today’s great powers are nuclear powers, barring catastrophic miscalculation, the logic of mutually assured destruction suggests the path of least resistance when conflict emerges is for that conflict to play out in the theater of economics more often than it does in terms of a kinetic conflict on the battlefield. And that’s one demand signal for sanctions.
But I would say, you know, just as we’re competing more intensely across countries, as we have in at least thirty years, many countries, including democracies, are also being pulled apart from within due to domestic political polarization. And that’s relevant to sanctions because it feeds—it feeds the geopolitical competition I just referenced. And it also makes it more likely that sanctions and restrictive statecraft get used. If there’s less weight in the political center, there’s probably, in my judgment, more willingness to subordinate positive-sum economic thinking for zero-sum geopolitical flexing.
And then think about technology. You know, the pace of change is dizzying. I mean, Jason Matheny uses the term, that I think a lot of policymakers think is about right, we’re all apocaloptimists now. You know, you could be wildly optimistic about technology, as long as it doesn’t make us extinct. But, you know, when you think about AI, or leading-edge semiconductors, or biotech, or quantum, each of these technologies has the potential to reorder the league tables of military preeminence. And so it’s not surprising that we’re seeing less technology diffusion across borders for commercial purposes and more controls to safeguard national security.
Take energy, another structural force. I hope all of us in the room still think it’s urgent and necessary that we make a transition from fossil fuels to clean energy. But it’s very unlikely the transition is orderly. Even under the most optimistic estimates, clean energy sources are not likely to fully substitute for fossil fuel energy in at least several decades. And meanwhile, the investments in fossil fuel production have plummeted. Well, that means we’re going to have periodic imbalances between energy supply and energy demand. And that creates opportunity for producers of energy to weaponize, whether it’s fossil fuels or clean energy supply, for geopolitical leverage.
And the last force I would just mention is—it’s not as much of a force—but the residue of the succession of shocks we’ve had this century, most obviously the pandemic but also Russia’s invasion of Ukraine. It’s left a psychological scar. And I would say it’s changed the psychological balance of risks for how policymakers and private sector leaders think about managing supply chains. So I think there’s a—there’s just a durable shift away from global supply chains that have a singular focus on efficiency and minimal costs. And they’re now going to be more geared around geopolitical alliances that have more regard for resilience.
I think those are the structural forces that are driving up the demand for sanctions. It’s not that the world hasn’t paid close attention to the words of Jack Lew, or what I’ve been saying. We’re just in a different environment. It’s even more reason why we have to lay down a set of principles and a rule—and a set of rules that avoid a global race to the bottom in the use of these tools.
KIMBERLY DONOVAN: I 100 percent agree. And I really appreciate the context for this. And actually wanted to pick up on your point of setting these principles, because I think that really is a very strong case for how we go forward with the use of economic statecraft tools. And you’ve laid out very sound recommendations that would ultimately, I think, strengthen our economic statecraft toolkit. And I was just wondering, from your experience, I mean, why have these concepts, at least appeared from the outside, to be difficult to really implement and enforce within the US government?
DALEEP SINGH: Yeah, I think about this a lot. I don’t know the answer. Let me give you four possibilities. One is policy is just—it’s all about tradeoffs. You know, when there’s a conflict that emerges, leaders want options. Often the least-worst option is to impose a sanction, or some related restrictive measure. And sanctions now fill the policy space between going to war—too risky, too costly—and merely issuing words of disapproval—you know, too meek, too soft. I think there’s also a time consistency issue. You know, the most profound costs of using restrictive economic statecraft are felt over the long term. The political economy benefits of doing something, you feel those immediately.
Third it’s—I mean, I kind of hinted at this before—it’s the path of least bureaucratic resistance, because when we implement sanctions or restrictive measures we use executive authority. It’s considered an extension of foreign policy under the Constitution. We get to decide. By contrast, if you use a positive tool of statecraft—you know, public investments, infrastructure finance, debt relief—those involve taxpayer dollars, and therefore Congress. It’s not surprising that there’s an imbalance between restrictive and affirmative tools.
And the last—I mean, the last factor that I would—I would pose for consideration is that this is a collective action problem. You know, if a major power decides unilaterally to constrain its use of restrictive measures according to a set of limiting principles but no other major powers do so, that country is putting itself at a strategic disadvantage. If you want to think about it in geoeconomic terms, you’re bringing—you’re bringing a plastic knife to a gunfight.
You know, so there is—there is a collective action problem. The only way to solve that problem is if a leading economic power like the United States decides to lead, and tries to coordinate and build trust towards something that can do an economic disarmament.
KIMBERLY DONOVAN: Thank you. And I’m really glad that you raised the affirmative economic statecraft tools because we’ve been doing a lot of research over the past couple years on what we’ve called positive economic statecraft—so the inducements such as development or investment tools that the US in particular can leverage to advance, you know, different foreign policy and national security objectives. Do you see positive economic statecraft tools, like, playing a significant role in the future of economic statecraft? And I mean, how do we kind of get around some of the challenges that you raised on, you know, executive versus legislative authorities?
DALEEP SINGH: Gosh, they have to. It would be one of the—one of the biggest strategic mistakes we’ve made in recent history not to place emphasis on building out the affirmative toolkit, because, again, let’s just step back. We’re in this intense geopolitical competition. Russia and China are both—they have both expressed and revealed a desire to disrupt the US-led order. We and our allies are pushing back. But there are a large number of non-aligned countries that are increasingly hedging their bets, right: India, Indonesia, Saudi, UAE, South Africa, Turkey, Brazil, Argentina, Mexico. It’s a long list, right? And our use of restrictive economic tools, they are necessary and they need to be principled, but they’re not going to win hearts and minds. You know, the far more potent tool if we want to attract countries into our strategic orbit is to use positive economic tools.
Now, why don’t we use them more often? I gave you one of the reasons. It’s bureaucratic friction. And you know, we—the Constitution requires us to consult with Congress, and there’s a lot of dysfunction in Congress and disagreement right now.
But also, I mean, there’s a—there’s a market failure. There is a problem of short termism in the private sector. If you think about projects that have—economic projects that have the greatest strategic value for the United States, whether it’s a technology moonshot like nuclear fusion or enhanced geothermal or post-quantum cryptography; or whether it’s s piece of critical infrastructure like ship-to-shore cranes or legacy semiconductor supply chains, resurrecting those, or just having a mining capability; a lot of these are sort of like hardware projects that require large upfront capital investment, they have long time horizons before they begin to recoup returns, they’re highly complex, they involve a lot of regulatory risk, and you know, a lot of early-stage private financiers say I can get superior risk-adjusted returns over a much shorter horizon by investing in software or apps. And so a lot of these projects—we can’t harness the power of the most innovative and dynamic financial system in the world for the projects that matter most to our national security.
So why don’t our public authorities fill the gap? Well, I mean, most of them aren’t really designed to be flexible, strategic investment authorities. The DFC—the Development Finance Corporation—is our flagship overseas investment vehicle, but it’s largely restricted against investing in countries that are upper middle income or high income. Well, 75 percent of the countries in Latin America and the Indo-Pacific are above that income threshold. Ex-Im and the Trade and Development Agency both are by mandate focused on promoting US exports, which is not the same thing as promoting US strategic objectives like technological preeminence or energy security or supply chain resilience. The Millennium Challenge Corporation and USAID have explicit development mandates; again, that’s not the same thing as what I’m talking about.
So we have a choice, either reimagine our existing institutions or develop new tools. I’m kind of agnostic as to what we do, but my bias would be that we should invent new tools. We should have a flexible, strategic investment authority that has the capacity to make investments where there’s a market failure, to invest at pace and scale in ways that allow us to compete. I think we should have much more frequent use of sovereign loan guarantees for middle-income countries so that we have a concessional lending instrument. I think we should consider having a strategic resilience reserve; kind of reimagine the Strategic Petroleum Reserve but focus on critical minerals and specialized technological inputs that we need, et cetera, et cetera.
But you know, we do have this unfortunate perception in much of the developing world that we show up with a long checklist of requirements before we invest and other countries have a blank checkbook. That’s a recipe for losing.
KIMBERLY DONOVAN: That’s an—you know, you raised this in your—China, specifically—in your remarks, and at least from my perspective, looking at the Belt and Road Initiative and where China is using its own economic statecraft rules to influence different countries. But I kind of wanted to switch gears a little bit where in your remarks you called out China from a cross-border payment project—
DALEEP SINGH: Yeah.
KIMBERLY DONOVAN:—and mBridge as one example of that. I mean, could you discuss, what has the US done in the past four years to kind of address advancements where China has made in a cross-border payment, and what should the US be doing going forward on that?
DALEEP SINGH: Oh gosh, ask me in one week. So mBridge—I mean, for everybody’s context, I mean, it’s the most advanced CBDC platform in the world. You know, it’s addressing a genuine market need. It’s faster, cheaper, less frustrating, if you want to move money across borders, than using the legacy dollar-based architecture. China, Hong Kong, Thailand, the UAE, Saudi have all joined the platform. Others are considering doing so. And it allows these countries, potentially others, to move money across borders to address the market need I referenced, but also potentially to sidestep any nexus with the US financial system.
Most worryingly—I mean, the BIS just pulled out of this project a few months ago, which means China now can exert tremendous leverage in setting the standards for this platform in terms of privacy, security, interoperability, and the enforcement of US sanctions.
So what should we do? We should compete. You know, we should innovate. We should build a better mousetrap or at least a prototype for a mousetrap that reflects our standards for privacy, for security, for interoperability, for illicit finance, counterterrorism, US sanctions enforcement, that leverages the most advanced technology, distributed-ledger technology, that brings in the major central banks of the world—Fed, ECB, BOJ, BOE—and that also creates a race to the top with privately issued dollar stablecoins. We can do all of those things, and we can bring in—Josh, you’ve written about this with Ananya—and we can get SWIFT into this conversation. This is the classic—this is the classic innovator’s dilemma. When you have an incumbent that’s been dominant for fifty years, it’s hard to reinvent yourself as more than just a messaging service, but it needs to become a messaging and a settlement service, just like SIPS, if we’re going to compete.
Now, this—all of these—all of these items, all of these lines of effort I’m mentioning were part of the implicit push of the digital assets executive order we announced in 2022, but the truth is—the truth is we’ve moved too slowly, too incrementally, and what we’ve done is utterly lacking in ambition.
KIMBERLY DONOVAN: That’s a great diagnosis—and hopefully—
DALEEP SINGH: That’s—
KIMBERLY DONOVAN: No, it’s very fair.
DALEEP SINGH: You know, truth-telling time.
KIMBERLY DONOVAN: Yes, absolutely.
If I can stick on China for a minute, I did go back and look at the Transatlantic Forum that we host every year—and you’ve been a huge part of this and we very much appreciate all of your support with it. So back in 2022 when we first launched the forum in Frankfurt, you did say that there was no country too big to sanction.
DALEEP SINGH: Yeah.
KIMBERLY DONOVAN: And now that—I know you’ve been in and out of government, but just—do you still feel that that’s the case?
DALEEP SINGH: Absolutely. But I mean, I—if I didn’t say it then, I should have—you’d better know what you’re getting into, right?
Because, you know, sanctioning Russia is not like sanctioning—sorry, sanctioning China is nothing like sanctioning Russia. It’s economy is ten times larger, the banking sector is thirty times larger, it’s got three trillion dollars of foreign reserves, multiples more than that in domestic savings. You know, it’s got all the chokepoints I mentioned in my speech, but it’s increasingly becoming a peer competitor in foundational technologies. It has enormous amounts of soft power with its development finance portfolio.
So this speaks to the need for the analytical muscle to simulate what does an escalatory tit-for-tat with China look like in a multiplayer, multistage contest that plays out over the course of years? And do we have the tools, do we have the defense mechanisms, do we have the kind of coalition that we would need to prevail? And you have to compare that path relative to other levers that you might deploy in a trigger scenario—military, diplomatic, et cetera.
I think you will come to the conclusion that there is no knockout blow that you can deliver without enormous spillover costs that may be unacceptable to Western democracies. And so we’d better try to avert that type of scenario as best we can.
KIMBERLY DONOVAN: That’s an—I really appreciated your points in your speech about the data-driven economic analysis that’s needed in this space, and I know at the GeoEconomics Center we work closely with Rhodium and try to do that on the—understanding the China front.
But, you know, I feel like some in our audience may actually be surprised to know that the US government doesn’t currently do a lot of this analytic work itself before it rolls out different sanctions packages and so I was wondering if you could talk with us a little bit of, like, why we haven’t as a US government really undertaken this type of in-depth economic impact assessments in the sanctions space which, you know, on the regulatory side is usually a huge requirement.
And then also if you could, you know, talk with us about, you know, how do we currently measure the impact and effectiveness of sanctions and identify where we need to kind of alter course.
DALEEP SINGH: Sure. I didn’t mean to suggest we don’t do this type of analysis at all.
KIMBERLY DONOVAN: I know. Yeah.
DALEEP SINGH: And I want to give kudos because the office of the chief economist at the State Department and the sanctions economic analysis unit at Treasury they’ve really ramped up and they’re doing fantastic work. It’s been instrumental for everything that we do.
But I just think we have got to strive to have the most sophisticated financial, economic, and political modeling on Earth. We have to. We can accept nothing less than having the ability to think about exactly what I just described.
If we’re in an escalatory tit for tat with a major economic power in which we and they are using sanctions, export controls, tariffs, investment restrictions, price caps, or some variation of price caps how does that play out over the course of time?
You know, if we apply pressure where our strengths intersect with the targets’ vulnerabilities and they do the same against us can we toggle that analysis, and, again, this should all be probabilistic, as I mentioned in my speech. Point estimates will be close to useless.
But we should have scenarios that think about how to toggle the estimates based on the size of our coalition, the size of the targets’ coalition, their ability to respond with monetary and fiscal responses, their existing buffers in terms of domestic production capacity. Can they import a product that we have controlled from third countries? Are we implementing sanctions by themselves or do we have other levers that we’re deploying at the same time? How do you attribute the relative weighting of those measures?
You know, that’s the kind of—and then we’ve got to imagine—we’ve got to also—beyond that analysis we’ve got to imagine scenarios that never happened before and what we’ll find, I think, from that type of infrastructure is we’ll recognize where we do need new tools, new defense mechanisms, new forms of coordination, if we’re going to prevail using economic statecraft in a variety of scenarios.
That we don’t have. We’re going to need more resources, we’re going to need more technology, we’ll need more expertise, and we don’t have a lot of time. So I do think this is urgent.
KIMBERLY DONOVAN: I agree, and it’s been really interesting just being in this space for so long where you look at the defense, you know, budget and, you know, trillions of dollars and then Treasury and Commerce. I mean, as you noted, like, their budgets have stayed pretty consistent in resource levels. So, hopefully, that’s an area for continued growth.
DALEEP SINGH: Yeah. I mean, we have—I mean, it would be the best bang for the buck that I can think of in our national security budget to upgrade the analytical infrastructure that exists at Treasury, Commerce, other departments, or just even third parties that can help us.
I can’t think of many other better uses. I mean, just to give you an idea, OFAC is still using IT systems that were built in the 1970s. You know this.
KIMBERLY DONOVAN: Yes.
DALEEP SINGH: That cannot continue to be the case.
KIMBERLY DONOVAN: Yeah. No, it’s—I a hundred percent agree with you.
So, like, while we’re still talking about sanctions I do want to highlight the fact that the Biden administration just ruled out very significant sanctions on Russia’s energy sector as well as different Venezuelan officials and in Sudan just over the past couple weeks and, you know, I wanted to get your thoughts on why are these sanctions so significant and why were they rolled out in the final weeks of the administration versus maybe earlier.
And do the sanctions that have been put in place, especially Russia oil sanctions and, like, the wind down with general licenses coming, do you think that these sanctions kind of follow the principles that you’ve laid out in your remarks on kind of recognizing the economic impact?
DALEEP SINGH: Yeah, I do. I mean, so why now?
I’ll start with Russia. The context changed. You know, for much of the—at the beginning of the war, the situation we faced was very different. Russia was the third-largest supplier of oil and gas to the world. Global energy supplies were very tight.
And so while we cut off our import of Russian energy imports within a couple of weeks after the invasion, and we soon thereafter surged to the tune of 180 million barrels from our SPR, our supply of oil to the world, the thought of—the idea of cutting off Russia’s exports to the rest of the world, that struck us as potentially self-defeating because it would likely have created a global shock to energy and food prices that would hurt millions of innocent people across the world, principally the most vulnerable members of society.
And even if the quantity of exports that Putin could sell to the world was reduced, the price spike could result in him benefiting the most in terms of energy export revenues, while at the same time inflating the cost of gas and energy at the pump. So we took a far more nuanced approach. We unveiled the price cap at the end of 2022 to try to limit the revenues that Putin could receive from exporting energy, while keeping the global supply of energy steady.
OK, so the situation is now very different. Most forecasters expect that global energy supply will comfortably exceed global energy demand over the next year. There’s plenty of spare capacity, both within OPEC+ and outside of OPEC+ if more production is needed. And, you know, the global inflation backdrop is also much improved. Here in the US, it’s down two-thirds from the peak. So we felt like the risk-reward of hitting Russia’s oil exports directly was much more favorable.
So the series of actions, not just what we announced last week, to really target every node of the production and distribution chain—two of the largest four oil producers, 183 vessels, dozens of oil service field—oil service providers, traders, a port that was receiving—knowingly receiving, sanctioned Russian energy—that, plus the designation of Gazprombank, and the removal of, you mentioned, General License 8, the energy exemption on our banking sector sanctions, all of those were done in the context of this changed reality.
And the geopolitical purpose, coming back to the principles, has always been the same. I mean, in the short term the way I’ve always thought about it is maximize the costs on Putin for prosecuting this war, subject to an acceptable amount of spillovers, to degrade over the medium term his capacity to exert influence and project power. And then, third, over the long run, create a demonstration effect for any other autocrat that wants to redraw borders by force. That’s still what we’re trying to do with these sanctions.
And if you want to make it really kind of short term, we’re trying to put Ukraine in the best possible position at the negotiating table, while at the same time increasing its staying power through other actions that we’ve taken to surge military assistance through the end of our term, but also to fulfill our commitment with the G7 to provide fifty billion dollars to Ukraine using the interest earned on frozen Russian reserves. In totality, that’s what we’re trying to do, is to change Putin’s calculus about the cost of continuing this war while giving Ukraine the best possible position to negotiate a just and lasting peace.
You mentioned a couple of other things that we did. I’ll just quickly—so with Venezuela, the actions that we announced were really an attempt to take a multilateral stand against the sham election. So the UK and the EU joined us in these measures. The EU had not done anything like this in a number of years. So it was—it was a big deal. Frankly, we’ve offered an off ramp to Maduro for some time. If he was willing to move in the direction of democratic norms, we were willing to relax sanctions. He chose not to do so. And that’s unfortunate. I think we inherited the maximalist sanctions regime. Put us in a bad position. And I think we’ve been trying to work our way out of it.
With Sudan, you know, the State Department found that Sudan’s Rapid Support Forces had committed genocide. That’s a very high bar. And so we responded. And then with Hungary, we announced a sanctions designation against one of Orban’s top aides who was the subject of a Global Magnitsky designation for serious human rights abuses and corruption. And here, again, there’s—we have a geopolitical objective to prevent any corrupt actors that are committing egregious human rights violations from having safe harbor in our financial system.
I think if one were to quibble about some of these latter measures, the question you would raise is efficacy. And I think, you know, to the extent that these principles get embedded into the practice of sanctions, you know, we should—we should require and demand that even if there’s a geopolitical principle that we’re upholding, whether it’s taking a stand against corruption or human rights abuses, there also has to be some threshold of efficacy that’s passed. And here I think reasonable people can debate whether we’ve done so.
KIMBERLY DONOVAN: That’s great. Thank you. And I very much appreciate all the sanctions that have come out over the past couple weeks. It really demonstrates the full range of these—the tools that we have at our disposal. And if you have time for one more question.
DALEEP SINGH: Sure, sure.
KIMBERLY DONOVAN: I just really wanted to get your thoughts. I appreciated that earlier this week President Biden laid out, you know, his legacy on foreign policy, and including, you know, where we strengthened the US position and our relationships with partners, as well as weakened our adversaries’ position around the world. And I was just wondering, from your perspective and your time as the deputy national security advisor two times—you know, what are some of your kind of biggest accomplishments? I mean, what are the memorable moments for you?
DALEEP SINGH: That’s a tough one for me. I mean, it’s just—I would need time and distance to give you a proper answer. But there’s nothing like—there’s nothing I have done alone, I promise you that. And anything good that we have done has benefited from those who did it before us, that’s for sure. I mean, honestly, rather than point to anything specific, maybe I can come to some of that, but what I have cared about most is creating a culture of conducting economic statecraft that I hope—that I hope endures. You know, because I think we are living through this extraordinarily uncertain moment where you have the intensification of geopolitical competition interacting with the polarization of our domestic political climate, all in the aftermath of a post-pandemic economy that’s still feeling the ripple effects of the shock. And so the uncertainty bands around what can unfold have widened dramatically.
And I think culture is really—having a cultural mindset in which we’re just constantly pressuring and probing our own base case, you know, attacking our own lazy narratives, trying to help each other see our blind spots, and trying to imagine as much as possible what could happen, because I always—things that have never happened are happening all the time, that’s the kind of culture that will allow us to make better decisions. And we made—I have made plenty of mistakes. But to the extent that we are caught off guard, if we’re surprised less often and we react better and we are surprised, we’re doing something well.
The only other thing I would say, in terms of culture, is we have really cared about relationships abroad. So I think the G7 really has become much more than a talk shop over the past four years. We’ve taken a number of actions which most people would have said the G7 would never take together. And that only happened because we did hard things together, like straight away. I remember in Cornwall in 2021, the first G7 summit, you know, we started—we started to do those things.
We agreed to give away a billion vaccines, which at the time was a big number, to the countries that were most in need, from our own stocks. We agreed with the EU to put down a seventeen-year tariff dispute between Boeing and Airbus. We came up with a transatlantic data privacy shield agreement. Those were hard things to do that built trust. And so then when the tanks rolled across the border on February 24 the subsequent year, we had relationships. You know, so we could—we could freeze over $300 billion of central bank reserves of Russia within forty-eight hours, because we trusted each other and we knew that we shared the same values, we had the same goals, and we’d have each other’s backs, to the extent that we could.
And then this year, you know, I came back. Most people said, you are—you are nuts if you think that you’re going to harness a dollar of the reserves that have been frozen for the benefit of Ukraine. And, you know, we listened to all the red lines. We listened a lot. And listening is a very important, and perhaps underappreciated, skill of diplomacy these days. And we found a way to maintain solidarity and to respect the rule of law, and still find fifty billion dollars of value that we could harness from those reserves to help forty-four million innocent people who have been terrorized for almost three years now fight for their freedom. I’m proud of that.
KIMBERLY DONOVAN: That’s fantastic. Thank you. And I know you have to get going, so just thank you so much for chatting with me today, thank you for your service, and thank you for your leadership in economic statecraft.
DALEEP SINGH: My pleasure.
KIMBERLY DONOVAN: And I would now like to—sorry, Will, but I would now like to introduce my GeoEconomics Center colleagues Alisha Chhangani and Mrugank Bhusari, who are going to review their research on the role of the US dollar and launch our new Dollar Dominance Monitor. Thank you.
ALISHA CHHANGANI: Thank you so much, Kim. And thank you so much, Daleep, for joining us today.
Very excited to be sharing a new update of our Dollar Dominance Monitor. The role the dollar plays in the international financial system is so core to the work we do at the GeoEconomics Center, so we’re very excited to be sharing this update.
So, Gank, the dollar has been the world’s reserve currency since World War II and the dollar has enjoyed this privilege for the last sixty years. But there’s kind of two roles the dollar plays, the macroeconomic role that we’ll talk about in the tracker—the reserves and transactions and trade—but there’s also a national security role of the dollar. And Daleep brought this up today.
MRUGANK BHUSARI: Yeah. As Daleep has mentioned multiple times in his speech and in the event, the US can wield influence in the global economy because everyone uses the dollar. It’s really central to the US power in the global economy.
And in the last two, three years, there’s two things that have happened simultaneously. In 2022, the US and the G7 sanctioned Russia. And also, the US Federal Reserve increased interest rates. So many emerging markets all around the world were now thinking about their dependence on the dollar, and they’ve been trying different things to reduce their dependence on the dollar. They’ve been trying to trade in domestic currencies. They’ve been building new infrastructures to facilitate that trade.
And in the media when we see these reports they’re often very alarmist, and they often miss a lot of context and data that we think is really important to bring to the discussion. And that’s why we created last year the Dollar Dominance Monitor, which brings in one spot all the data on the international reserves, on debt, on banking, on transactions, as well as what are different countries doing to reduce their dependence on the dollar and how is that progress going.
And today we’re launching a new major update to this data. And, Alisha, let’s dive right into it.
ALISHA CHHANGANI: So let’s get into the data. So let’s kind of walk through the three kind of main topline numbers that we are using to say—and the key takeaway for us is the dollar status as the reserve currency is secure in the short and medium term. And so these are the three topline numbers that we’re using to make this point.
First of all, the share of global foreign reserves. The dollar makes up 57 percent. And just to put this in perspective, just take a look at the euro. Take a look at the pound.
MRUGANK BHUSARI: They’re pretty small.
ALISHA CHHANGANI: Pretty small.
The two other numbers that I think are very important is this 54 percent. So the US is involved in about 12 percent of global trade, but it makes up 54 percent—or, the dollar touches 54 percent of export invoicing.
And third and finally, 88 percent in foreign exchange—in exchange transactions. So this means that nine out of ten transactions are touching the dollar. That’s huge, and basically makes our point that the dollar is so entrenched into the financial system and that the dollar is being used around the world outside of the United States.
MRUGANK BHUSARI: Even countries that are not the United States are using the dollar to trade between other countries, so that really tells you how deeply entrenched the dollar is in international trade and finance.
And, Alisha, you mentioned 57 percent, which is the share of—share of global reserves that are denominated in the dollar. Last year, when we launched this tracker, it was 59 percent, so a drop of two percentage points, which you might think is not a lot. But there you see—you can see a general downward trend for the US dollar since 2016, which is when the IMF data got really more complete.
But what you notice also is that this loss in US share is not being picked up by any single currency. It’s actually being distributed across all currencies, most notably in this “others” section. In this “others” is really the Canadian dollar and the Australian currency. And so what we see here is that the dollar’s reserve currency status, even though it’s becoming less dominant, is not necessarily—there’s no new competitor that is rising to compete against the dollar.
And we also have a lot more data that we invite our audiences to look through. We have data on currency transactions, on debt, and on banking. So please do take a look, and you will see that the dollar still maintains its share—at least maintains or has increased its share across these indicators.
ALISHA CHHANGANI: So, Gank, let’s go through probably my favorite part of this monitor, and this is this database that we use to track what it takes to be a reserve currency. And I think this is a very unique way of showing why the US dollar is the reserve currency, looking at its competitors and other currencies to see these six qualities that we have identified that makes the dollar the reserve currency. And here are some of the six that we have identified, but you’ll notice that there’s some shading. And the darker the color is, it’s more stronger in that quality, like the sizeable domestic economy, the size and depth of the financial markets. And so you’ll notice that the US dollar is very dark in many of these, and you can explore these much more there.
But, Gank, my question here for you is that the euro is also fairly dark here. What’s going on there?
MRUGANK BHUSARI: Well, it’s an interesting story, that one, and—because the euro has traditionally been considered as a competitor for the dollar. And you do see that it is dark across all six indicators, but these are just the basic requirements that you must have for the potential of being an international currency. The euro specifically has faced three challenges in the last few years that really have not helped it rise as a competitor truly to the dollar.
The first is that it joined the G7 sanctions, as Daleep mentioned. Any country that is looking to de-dollarize to sanction-proof its economy, there’s no point in moving to the euro because you’re also going to get sanctioned over there.
The second is financial markets and also interest rates. ECB’s interest rates and the Fed’s interest rates have moved generally in the—in similar directions for several decades. So if you want to reduce—if you want to enhance monetary policy sovereignty, the euro’s not the way.
And most importantly I think, it’s the lack—it’s the absence of a capital markets union. If you invest in the euro, you’re investing in many different countries. Each country has its own rules. Each country has its own market. And that—the absence of a market is making it really difficult for investors to really, truly invest in the euro in the same way that they look at the dollar as a store of value.
And so these are the reasons why the euro has not really risen as a competitor yet. And what I really find interesting here is also the renminbi. We all talk about how the renminbi could be a challenger, but it’s actually really light on all of these indicators. The only one where it really has a dark color is the share of global GDP. So, Alisha, now we have a good sense of where the dollar stands right now as an international currency. So let’s look at what countries are trying to do to reduce their dependence on the dollar.
And you’ve really looked at BRICS and the Kazan summit. This is something we’ve discussed, and you’ve written on a lot. So take us through it. What’s happened in Kazan?
ALISHA CHHANGANI: Yeah, for sure, Gank. So basically, the BRICS summit happened in Kazan last year in October. And a lot of conversations were happening on whether BRICS will create a common currency. Obviously, those plans were eventually ditched and they went to create something alternative, which is creating a cross-border payments infrastructure. And this kind of materializes in these three main projects.
But the main point here, Gank, is that they’re trying to make financial infrastructure to trade in their own national domestic currencies. And these are three individual projects that we found super interesting—BRICS Pay, BRICS Clear. But probably the most interesting to me is the BRICS Bridge. And the BRICS Bridge is using digital currencies, central bank digital currencies—Gank, you know, we’ve been interested in this at the GeoEconomics Center—as the backend for the financial infrastructure.
And this project will probably develop in the next couple of years. And we’d be looking into seeing what’s happening there. But with this table right here, we’ve also included some examples to kind of contextualize how these projects can actually be used in real life. But I do want to emphasize, Gank, really quickly, that these projects are in their early stages of development. They’re mostly words on paper, small agreements. There’s still a lot of internal disagreements that make negotiations around these projects extremely difficult. Which is why we’ve titled this section, “A Scattered Approach to De-dollarization.”
MRUGANK BHUSARI: Yes, Alicia, you’re completely right. Every country in BRICS has some issues with the dollar, but the issues are very different. So just look at Russia and Iran, for example. They are sanctioned. They have no choice but to look at other currencies, to look at domestic currencies. They have no—they have no other option. But India, on the other hand, for example, is looking to enhance monetary policy sovereignty. It wants to be able to trade with countries that do not have access to the dollar, or that have—that no law no longer dollar reserves. Egypt, on the other hand, it wants to enhance its access to global financial markets and capital markets because it has had some troubles in the past repaying debt denominated in dollars. So it’s looking at Japanese bonds and these kinds of other financial instruments.
These all bring different levels of urgency to the question of de-dollarization, and how do they deal with the dollar? So we’ve seen BRICS move very slowly. Russia this year, it did bring forward a lot of proposals which were actually agreed to and accepted. But they’re moving slowly because they don’t want these disagreements to rise up to the top. They want to keep it low enough that every country is fine with agreeing to it and moving on to see what happens.
And, Alisha, in the event we also mentioned—Daleep and Kim mentioned CIPS. And this is something that we’ve also been tracking. And we have data over here on what—how many banks are members of CIPS. And this is a part of—CIPS is the Chinese Interbank Payment System that they have developed to facilitate these transactions.
ALISHA CHHANGANI: And within just the last two years, the transaction volume has increased 80 percent on CIPS. And several of the BRICS members are involved and are direct members of CIPS. So we can really see that infrastructure being built. To your point, the renminbi probably doesn’t have a chance to challenge the reserve currency status, so it’s using alternative frameworks, that including the CIPS mechanism, to kind of challenge the role the dollar, and continue to use the renminbi in international transactions.
MRUGANK BHUSARI: And in this tracker we have—for every BRICS member we have included the size of the swap line that they have with the PBOC, which helps them build liquidity in the system if they ever need renminbi and they’re falling short of it, and also the number of members—direct members of the CIPS system, which Alisha just talked about. So we know exactly which banks and how many banks are part of this system, which gives you a sense of how CIPS is growing. And so, Alisha, you’ve spent the last six months working on dollar dominance and working on this subject. What are you looking for in 2025? Or, what are you keeping your eyes on?
ALISHA CHHANGANI: It’s a really good question, Gank. I think for me it’s the advent of financial technology in payments and payments architecture. We already see BRICS taking steps towards including, you know, central bank digital currencies and digital technology in their payments infrastructure. And I think this is going to play a bigger role. As Daleep mentioned, mBridge is becoming a larger project and is going to invite more members. Really looking at 2025 to see if the G7, the United States, and its allies can build an alternative that, you know, is using technology to make payments faster, safer, and cheaper for people.
What about you, Gank? Same question back to you.
MRUGANK BHUSARI: It’s fascinating. And I’m really watching out—or looking out for what the Trump administration does. President Trump himself and his administration has taken a keen interest in the dollar’s international role. In fact, the treasury secretary nominee Scott Bessent is at the Senate right now on Capitol Hill, where he has said that maintaining the dollar’s international role is critical for the US—the economic health of the US. And this—he has already threatened tariffs against BRICS countries, and also other economies that prop up a new currency as an alternative. I don’t think that’s likely, and I don’t know how it would happen.
But it does give you a sense that President Trump is taking this as a very serious concern. So BRICS members, especially those members that want to maintain close ties with the US, and with the West, and with the G7, will tread very carefully over here, because they don’t want to do anything to antagonize President Trump in his first few months in office. So that is something that I’ll be watching out for.
And so that is the tracker at large. And we welcome all of you to please explore. And, as always, we welcome your feedback, your thoughts. And we will be publishing analysis based on this tracker in the next few weeks. So keep an eye out for our new research. And we want to thank all of the GeoEconomics Center as well as well as the Atlantic Council’s engagement team. And especially thanks to Maia Nikoladze, who helped lead this project in its original design phase throughout 2024. And, Josh, with that, back to you.
JOSH LIPSKY: Well, thank you, Gank and Alisha, for that fantastic presentation. Thank you, Maia, for your contributions to this project since its inception last year. Everyone can check out the Dollar Dominance Monitor on the Atlantic Council website. I want to take a moment to thank the entire team of the GeoEconomics Center, as we mark our anniversary here. And if I could ask them to stand up. Charles Lichfield, Ananya Kumar, Maia Nikoladze, Sophia Bush, Jesse, Elizabeth de Kruijf. And you met Alisha and Gank earlier and, of course, Kim Donovan. This is our team. Please give them a round of applause. They help produce the amazing work you see every day. They are also geoeconomists at heart.
Now, next week a new chapter begins in Washington. And our commitment here at the Atlantic Council and at the GeoEconomics Center will remain the same. We will deliver world-class, data-driven analysis and provide a roadmap to help navigate the challenges of the era. First up, we are very proud to host Governor Waller of the Federal Reserve on February 6 for a special event on the future of the dollar and payment systems. We hope you join us in February. We wish everyone a pleasant rest of the day. Thank you for being here with us this morning.
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Image: Deputy National Security Advisor and Deputy NEC Director Daleep Singh participates in a news conference with White House Press Secretary Jen Psaki at the White House in Washington, DC on Tuesday, February 22, 2022. Photo by Chris Kleponis/Pool/Sipa USA via Reuters.