A Russia sanctions bill is posing a dilemma for the Trump administration: Lawmakers are pushing to wage further financial warfare just as the administration worries that heavy use of sanctions may erode the U.S. dollar’s supremacy.
The bill, which was the brainchild of Senator Lindsey Graham before his death, aims to impose mandatory sanctions on Russia and its allies and potentially broaden the reach of penalties to include tariffs on buyers of Russian energy. The White House has said that the scope of the sanctions could broaden to include Iran and Hezbollah. Republicans and Democrats have expressed optimism that the bill could become law this summer.
The policy underscores the complicated balance that the United States faces as it tries to leverage America’s economic might to reach diplomatic goals without weakening the nation’s position as the center of the global financial system. The legislation is coming just as the Trump administration is overhauling its sprawling sanctions program over concerns that the heavy use of financial warfare has made American statecraft less effective.
Despite a renewed effort to squeeze Iran’s economy in response to a faltering cease-fire, the Treasury Department has in recent weeks been quietly culling its list of sanctions designations, removing dead people, decommissioned vessels and individuals who no longer pose a threat to national security.
The United States has also eased sanctions on Venezuela and temporarily issued sanctions exemptions allowing the sale of Russian and Iranian oil. And this month, President Trump called for lifting sanctions on Turkey so that it could purchase American fighter jets.
U.S. sanctions effectively cut individuals and companies off from the Western financial system because the dollar is the primary currency for conducting global transactions. There is growing concern within the Trump administration about the possibility of a global shift away from the dollar, with increasing use of China’s renminbi and cryptocurrencies.
In some cases, heavy sanctions can lead other nations to seek alternative currencies as a way to circumvent the long reach of the U.S. government and mitigate potentially devastating effects on their economies. Sanctions can also cause compliance problems for American banks, which must ensure that they are not facilitating payments with people or companies that are blacklisted.
“The most effective actions are aggressive and targeted, with defined timelines to drive specific effects,” Treasury Secretary Scott Bessent said in a speech in Paris in May. “Sanctions left in place for years with no visible and tangible changes in behavior can have generational impacts that are nearly impossible to predict.”
The use of sanctions has surged over the past five years, with new designations hitting 3,000 in 2024. But they declined in 2025, as Mr. Trump leaned more heavily on tariffs as a tool to gain leverage in international diplomacy.
A working paper recently published in the National Bureau of Economic Research found that in countries such as Russia, Belarus, Kyrgyzstan and Myanmar, where the banking system has faced heavy U.S. sanctions, banks have notably shifted toward the renminbi.
However, the analysis, conducted by Gregor Matvos of Northwestern University and Brent Neiman of the University of Chicago, found that outside of those countries, shifts away from the dollar remained minimal.
According to International Monetary Fund data, 57 percent of global foreign exchange reserves are still held in U.S. dollars. Still, with growing interest in alternative currencies, the Trump administration wants to ensure that the dollar retains its reserve currency status, and it has been taking steps to preserve that role.
“Dollar dominance is essential,” Mr. Bessent told CNBC in June.
The Treasury secretary noted that Venezuela and Iran, which briefly had a license to sell oil, were allowed to invoice their crude exports in dollars. He even suggested that Russia would return to the dollar system after the war in Ukraine ended.
The Trump administration has also been considering expanding its dollar swap lines to more countries to encourage broader use of the greenback. With a currency swap, the United States purchases another country’s currency, giving that nation more dollars for handling transactions. The goal is to ensure that American allies have sufficient supplies of U.S. dollars, reducing the need for them to conduct business with renminbi or other currencies.
The move to whittle down the sanctions list is likely to intensify the lobbying campaign as clients look for ways to be removed from a blacklist that can cripple their businesses.
During Mr. Trump’s first term, lobbyists with ties to his administration earned millions of dollars representing countries and companies that wanted to be removed from sanctions lists.
The Treasury Department last month unveiled a new “reconsideration portal” to streamline requests for sanctions list removals.
Claire O’Neill McCleskey, a sanctions consultant and former Treasury Department official, noted that the efforts to modernize the sanctions program began in 2024 under the Biden administration, which had ramped up the use of sanctions drastically after Russia’s invasion of Ukraine.
“It also reflects the fact that OFAC, which has limited resources, is rolling out fewer new sanctions under the Trump administration than under the Biden administration, when the pace of new Russia rollouts was relentless,” Ms. McCleskey said, referring to Treasury’s Office of Foreign Assets Control.
Amid the efforts to modernize the sanctions program, there has been an exodus of staff from Treasury’s sanctions office this year. John Hurley, the under secretary for terrorism and financial intelligence, which oversees the sanctions program, left early this year.
Despite the effort to streamline the sanctions program, financial warfare remains a critical tool for U.S. diplomacy. This month, the Trump administration reimposed sanctions on Iran after the cease-fire faltered.
The Treasury Department this week imposed sanctions on Iran that aim to disrupt the weapons procurement network of the Islamic Revolutionary Guards Corps and its illicit shipping and sanctions evasion network.
Mr. Trump has expressed reservations about the heavy use of sanctions because of their potential to lead to a shift away from the dollar.
In negotiations with lawmakers, the White House has been pushing for guarantees that the president retain the authority to suspend or decline to impose sanctions to maintain the ability to negotiate with adversaries.
Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said it was unlikely that scaling back the sanctions program would prevent a longer-term shift away from the dollar.
“They still haven’t really articulated what policies they are going to use to reduce the use of alternative payments systems away from the dollar,” Ms. Ziemba said.
