Editor’s Notes: In this compelling discussion, Professor Jeffrey Sachs joins Glenn Diesen to explore the shift from traditional diplomacy to what he describes as “economic coercion”—the use of financial tools as a form of warfare. Sachs critiques the U.S. strategy of “regime change” through economic means, highlighting how sanctions are often used to destabilize nations like Venezuela and Iran to serve geopolitical and corporate interests. He further warns that this aggressive “weaponization” of the dollar is inadvertently accelerating the rise of a multipolar world and alternative global payment systems. Ultimately, Sachs argues that by overextending its economic reach, the U.S. is on a path toward dethroning the dollar as the world’s primary reserve currency. (Feb 11, 2026)
TRANSCRIPT:
Economic Statecraft and the Decline of Diplomacy
GLENN DIESEN: Welcome back. We are joined by Professor Jeffrey Sachs to discuss economic statecraft and how it might be used excessively and coercively. So thank you for coming on.
Economic statecraft can be a very effective tool of governance, that is using money, trade, finance and access to markets as an instrument of influence and facilitating cooperation. But economic statecraft, it feels, has begun to replace diplomacy. And we see economic statecraft almost exclusively now in a coercive form.
What do you see being, I guess, the long-term risks of relying on this economic coercion as opposed to having negotiated multilateral solutions?
Economic Statecraft as a Tool of Coercion
PROFESSOR JEFFREY SACHS: Economic statecraft is a euphemism. It is coercion. You could call it war by economic means. So economic statecraft, if you just hear the term, could suggest that you’re using economic tools for promoting development or promoted cooperation or supporting trade or stabilizing the economy.
No, the way that the term is used right now is rather cynical. It means using economic tools by the US to crush other economies. This is a very strange use of the term in my view, and it’s a very pernicious set of policies.
I have a personal resentment about it because my whole life is my career is aimed at trying to help economies to be more productive, more prosperous, to help people’s well-being. But economic statecraft in quotation marks, as our Treasury Secretary Scott Bessent used the term recently in an interview that he gave in Davos, meant, and he said it proudly, to crush the Iranian economy in order to bring people out onto the streets with the idea of fomenting regime change.
So this is quite a remarkable use of economic power. It is warfare, it aims at destruction. It doesn’t even transfer well-being. It’s not extraction or appropriation. It is not aimed at enriching the United States. It’s aimed at crushing other economies.
And if you’re in the line of activity that I am, of economic development, and you know how hard it is and how many years and how much effort it takes of everyday people to create economic prosperity and well-being, to escape from poverty, watching the deployment of these instruments to bring people to impoverishment, to misery, to health crises, to rising infant and child mortality, to measured reductions of years of life expectancy. It’s terrible.
Now, having said all of that, it is now a very common tool, if you want to call it that, again, a euphemism, an instrument of American power. And I find it deplorable, as I’ve explained, but it’s used pervasively.
The Unique Nature of American Imperialism
And I think, Glenn, to put it in context, we have to understand something unique about the American imperium, about American imperialism. In American imperialism, unlike the British Empire or the French empire of the 19th century, America rules indirectly.
America has rarely done what Trump says he wants to do, which is just take over territory. We’ve done that for a lot of islands and military bases. But generally it hasn’t been the United States invading in order to directly rule an overseas territory. It’s been the US invading to impose a puppet regime in an overseas territory. And this idea is regime change.
So a core of American foreign policy is regime change. Just to say that’s an extraordinarily unusual kind of foreign policy for most countries. In most of history, you dealt with other countries as they were. You didn’t dream of overturning their government and running their country. You had to address their country either through diplomacy or deterrence or some other way.
But the US mentality that started in the 1890s when the US overthrew the kingdom of Hawaii and then when the US created the pretext for war with the diminished and disappearing Spanish empire in order to claim the Philippines, Puerto Rico and Cuba. In 1898, the idea came to the United States that it would create an overseas empire by controlling the governance of overseas territories by regime change, overthrowing governments.
And you could say that it that idea came naturally because creating the continental United States was dozens of regime changes, but against indigenous populations or war with Mexico and so forth during the 19th century.
But for the overseas empire that started at the end of the 19th century, then the US practiced this under the Roosevelt corollary of the Monroe Doctrine, where Theodore Roosevelt basically declared, we will be the policeman of the Americas. And what that meant in practice is we will determine who is in government in the Americas.
And when a government arises that threatens American land holdings, for example, that wants to do land reform, as Jacobo Árbenz wanted to do in Guatemala in 1954, well, the company United Fruit picked up the phone, called its law firm Sullivan and Cromwell. They called their old associate John Foster Dulles, who at the time happened to be the US Secretary of State. He picked up the phone and called his brother Allen Dulles, who was the CIA director. And they overthrew Árbenz. So it was a regime change operation.
If you count the number of these operations, it’s amazing there have been dozens in the Americas alone.
And in one of my favorite books of recent times by Lindsey O’Rourke, a student of John Mearsheimer and now a professor at Boston College, she wrote in 2018, I think it is a book called “Covert Regime Change” where she counted 64 covert regime change operations by the United States between 1947 and 1989, the Cold War era.
Economic Statecraft as Regime Change
I mention all of this because this is where economic statecraft, so called, plugs in. Economic statecraft can itself be a regime change operation. Because you can squeeze an economy to the point where a government collapses. It’s not so hard to do.
More often you can squeeze an economy to the point where the government doesn’t collapse, but it is fragile. And then you push it over through a CIA operation. You bring people out onto the streets. You do what came to be called in the last 30 years color revolutions because they often were CIA operations that operated under a banner of a color in the flags that were being waved or the Rose Revolution or the Orange Revolution in Ukraine in 2004, 2005 and so forth.
What these are are instigated regime change operations often softened up by economic means that have weakened the regime. So we have to understand that the so-called statecraft is part of a broader strategy of empire. But the American empire is rule through puppet governments rather than through directly changing the map to put the US flag on it.
Though Trump, because he’s especially vulgar, seems to want to do that as well. So he wants to put aside the covert part because that’s nothing to hide. He wants to do overt regime change and at the same time maybe Canada and Greenland and other places under the US flag. But typically it’s not that.
The Case of Venezuela
So when we come to recent events, both Venezuela and Iran have been targets of US regime change operations in which economic means played a very direct role. And in the case of Venezuela, the US has been aiming to overthrow the left-wing government that has been in power for a quarter century in Venezuela.
America is absolutely at a government level, always aiming to overthrow so-called left-wing regimes because left-wing regimes threaten American extortion by US companies or plunder by US mining companies or big oil like ExxonMobil and Chevron and so forth that operate in poorer and weaker states.
So the US has been out to overthrow the Chávez-Maduro government that has been in power in Venezuela for a quarter century. In 2002 they tried the direct route, which was a CIA engagement with a local coup attempt by a part of the Venezuelan military. The coup took place. The US said that’s great because. And then within a day the coup failed because Hugo Chávez, who was the president, had popular support and he was back in the presidential palace within a day after that.
The US then used economic means. These accelerated, interestingly, by the curse of natural resources that occurred in the late years of the first decade of this century when the US Geologic Survey officially determined that Venezuela’s petroleum reserves were the largest in the world.
And that set in motion on the Venezuelan side a determination to essentially make those reserves owned by the Venezuelan nation and by the lead Venezuelan company, the state oil company, PDVSA. And it put Venezuela on a warpath with the United States because there is ExxonMobil, there’s Chevron, these are powerful companies that pay for the presidents, that pay for the Congress, and that suddenly are being pushed aside by this so, quote, unquote left-wing regime.
So in 2014, the United States worked to try to make a color revolution in Venezuela. People came out on the streets. If you think that’s spontaneous, I have some more stories to tell you. But this is what color revolutions are. The CIA is all over these operations.
Other US institutions like the National Endowment for Democracy, the National Democratic Institute, the National Republican Institute and so forth, work with the local media, work with groups that they create or that they fund to foment unrest. That’s a standard playbook for such covert operations. They’re not very covert, but they’re called covert because the US role is denied.
Well, the government cracked down on these protests, no doubt. There are local protesters, by the way, because people ask that have many objections or disgruntlements with the government, no doubt. But the organization, the financing, the busing in of people, the mass media, that doesn’t happen spontaneously.
And so the US played its role. There was the crackdown. And then part of the game is, oh, when the crackdown comes now we put on even more overt sanctions. So Obama declared an emergency, that Venezuela represented an emergency to US national security. Can you imagine? We were so threatened by Venezuela, it was so dangerous. That’s what Obama declared in 2015. He started the escalation of the sanctions.
Then Trump came in in 2017, Trump being Trump, said, I don’t get it, why don’t we just invade? And he had a dinner with Latin American presidents on the margin of the UN General Assembly in September 2017. And I’ve spoken with two presidents that were there at that dinner at some length. And they described exactly the scenario, both of them separately to me.
And basically the scenario was that the presidents assembled and then Trump said, why don’t I just invade Venezuela? And they were shocked by this. And they explain, Mr. President, maybe that wouldn’t be such a great idea. Maybe it would be a little complicated. There might be a backlash. It could result in chaos, it could result in millions of refugees, it could result in big loss of life in Latin America. There’s a lot of anti-Americanism, anti-US sentiment. It would stoke that.
So they tried to talk him down from this and Trump said, okay, I’ll just crush the Venezuelan economy.
The Mechanics of Economic Sanctions
So what began was a ratcheting up of punitive economic measures. Confiscating Venezuela’s foreign exchange reserves, freezing Venezuela’s accounts, designating PDVSA as an entity under sanction so that other companies couldn’t do business with Venezuela.
And the US tools are varied and many. And we have a number of emergency acts, especially the International Emergency Economic Powers Act, the IEEPA which gives the executive branch essentially unbridled authority to impose a very wide range of financial sanctions, cutting off the economy from the dollar-based payment system.
So for most of the world doing international business involves using dollars as the medium of exchange and doing it through international banks that facilitate the payments and settlements of an international transaction. And because these are dollar-based transactions, ultimately they involve dollar accounts of US banks held with the US Federal Reserve.
And so the US can impose a blockade, a choke point on payments for international trade, for example on Venezuela’s ability to receive dollars for the oil that it exports or the ability of PDVSA, the oil company, to pay for repairs for operations in the oil fields.
So Trump imposed extraordinarily comprehensive and very tough sanctions on Venezuela. And between 2016 and 2020, oil production collapsed by about three-quarters. That’s the physical flow of oil. And since that’s Venezuela’s essential, essentially only export, the Venezuelan economy collapsed, the currency collapsed, the inflation soared, the ability to make imports collapsed, the standard of living collapsed, and according to the data of the International Monetary Fund, for example, the national output per person fell by about two-thirds between 2016 and 2020.
That’s worse than a war. That is a cataclysm. That’s not a downturn, that is a destruction of the economy.
Of course, Trump did many other things that were seemingly farcical but were not treated as farce. He named a different president. Suddenly one day the White House said, no, Mr. Maduro is not president, it’s Juan Guaidó. So we all scratched our heads. Who’s Juan Guaidó? Oh, he’s in the national assembly and the US just picked him out. Said he’s the legitimate president.
And you might think this is a comic book, this is a joke. But it had two implications. One is that the US used its economic sanctions to say they now belong to Mr. Guaidó. And this could hold from the US unilateral point of view. The US said in the IMF it’s Mr. Guaidó that gets to appoint the executive director and so forth. So the US by using its power, just declared a different president.
And the second point was about 60 other countries basically vassals of the US, that means Europe and others, said, oh yes, Mr. Guaidó is president now in a way you can’t even imagine.
Okay, fast forward to this past year. Trump just decided now we’re going to invade. We’ve crushed the economy, we put on the sanctions, we’ve weakened the regime, we’re just going to invade. And all of our so disheartening mainstream media like the New York Times says, well, there’s so much unhappiness about the Maduro regime and people are suffering and they don’t explain one word about what the root causes are.
I don’t know whether they’re just utterly ignorant, utterly bought out, whether the reporters, God knows who they work for. But the point is they don’t understand or tell the story.
The Case of Iran
Iran is the same story, of course, played out in a very different context. But the US has been imposing comprehensive economic sanctions on Iran for now, actually decades. But when Trump came in to power again in the second term, one of the first actions was to take extra steps to crush the Iranian economy.
And the Treasury Secretary, Scott Bessent, who is there I think mainly because he is willing to use the US treasury to crush other countries, invoked the emergency operations mechanisms. Trump gave the order that Venezuela constituted an emergency. And as Bessent explained in an interview to Fox Business on January 20, just a few weeks ago in Davos, Trump ordered the crushing of the Iranian economy.
And OFAC, which is the part of the US treasury that operates the sanctions, went to work to basically bring down the Iranian currency by cutting off Iran from any remaining dollar-based transactions internationally. And you tell banks all over the world if you do any business directly or indirectly with Iranian entities, we will sanction you. You may be 5,000 miles away just facilitating a trade transaction, but we’re coming after you. And that’s how extraterritorial sanctions by the US are enforced.
And what Bessent says in this interview is quite remarkable. He says, we went out to crush the economy and by December it worked. The currency plummeted, the dollars ran out, there were shortages of dollars and people came out onto the streets because of this. Bessent says, and then he says this is all moving in a very positive way. So the cynicism of it is extraordinary.
Of course. Go to the New York Times, go to the Washington Post, go to the Wall Street Journal. What is the narrative there? That people came out onto the streets to protest the corruption and mismanagement of their regime.
And what is amazing for me Glenn, is that even after the US Treasury Secretary explained it, for those people who know the Wizard of Oz, when the dog Toto pulled the curtain aside and exposes the wizard as some old guy speaking into a megaphone, even after the game is exposed, no mainstream medium reported it.
Nobody had an article saying oh, this is why people came out onto the streets. This is the reason for the protests. This was a US game, this is a US regime change operation, not even noted, even after it’s explained gleefully with that grin on the face of the Treasury Secretary, not discussed.
The Infrastructure of US Economic Power
So that’s the background as I see it. This is regime change top to bottom. This is economic instruments and the US has them because of the role of the dollar in the international system and the fact that the US alone of any country essentially controls the IMF because it alone has the veto.
And I like to remind people the World Bank is on 18th Street in Pennsylvania Avenue, one block away from the Executive Office of the President, two blocks away from the White House and three blocks away from the Treasury. And the IMF is one block further on. And so it is the row of US international power to crush other governments.
The Consequences of Economic Coercion in a Multipolar World
GLENN DIESEN: Yeah, this isn’t without consequences anymore I think. Well after the Cold War of course America was the only game in town. So without any alternatives one can do this economic coercion quite efficiently and without that much consequences.
But it seems that as this multipolar world emerges there’s a dilemma because on one hand it is more incentive to use this economic coercion to prevent the rise of rivals. On the other hand the economic coercion comes with consequences because now there’s alternative centers of power that offers access to technologies, to industries, the supply chains, physical transportation corridors, as you said, the banks, the currencies, alternatives to SWIFT.
So it seems it can be a very self-destructive process as the US goes into hyperdrive and new alternatives are set up by organizations such as BRICS. But I guess that belongs to a different day.
The Rise of Parallel Financial Systems
PROFESSOR JEFFREY SACHS: Well Jeff, if I may just say not to keep us too long, but these alternatives are moving faster than people realize. And one of the reasons is that it is not technically difficult to have settlements in a non-dollar basis.
But the point is the following. If you are a Russian enterprise or an Iranian enterprise or a Venezuelan enterprise and you say I want to settle in rubles or in renminbi or in some other currency, you cannot go to your bank to do that. Even though for the bank it would be very straightforward to have a correspondent account, not in dollars, but in these other currencies.
And the reason is that even if you make the transaction in rubles or in renminbi, the bank is still vulnerable to the US reach if it also deals in its normal business with dollars. And that’s because the sanctions could still be imposed on that bank.
So what is needed is not sophisticated technical fixes because that’s not so hard to do the plumbing. But it’s institutions that are completely separated from the dollar system so that they’re not subject to US sanction. So what’s being set up is a parallel system of settlements. It can’t go through the main banks, but in non-dollar currencies it has to be in distinct institutions.
In Russia there is a new set of digital institutions that have nothing to do with the banks but can affect trans-boundary settlements almost in real time. It’s better than SWIFT in many ways. And that has emerged in the last couple of years.
China has determined we’ve got to move forward because otherwise we are constantly under the gun of the United States. We’re constantly threatened. Chinese banks don’t want to be cut off from the US settlement system, the SWIFT settlement system. So China is creating an alternative system and non-dollar new institutions are arising to operate under the Chinese interbank payments system.
The Future of the Dollar’s Dominance
So my view is this will move faster than people think. I would think that in 10 years from now, maybe an extra 25% of global transactions will be settled in non-dollar currencies because technically it’s absolutely feasible with new digital settlements. It’s even more efficient than SWIFT to do it.
But the challenge is it requires setting up a wholly new set of institutions because any institution that has at least some dollar business can’t do that non-dollar business, except under the shadow of potential US sanctions.
The bottom line for me is that the US use of the currency as a weapon, which has gone into overdrive across the world, will not be sustained. It won’t end immediately, but within the next five or ten years the US imperial itself will have dethroned the US dollar by misusing it, by abusing the privilege of being the issuer of the key currency.
And we will have a very significant proportion of global settlements in non-dollar currencies. And then the reach of US sanctions will fall decisively because the US won’t be able to impose its will extraterritorially. In other words, it may still be able to prevent US businesses from doing business with a targeted country, but it won’t be able to stop third countries from doing business with that targeted country.
GLENN DIESEN: Well, interesting times indeed. It seems this is an all or nothing moment where the US can either break its rivals or destroy itself in the process. So, as always, I know you have a busy day there in Greece, so thank you very much for giving us the time.
PROFESSOR JEFFREY SACHS: Of course. Pleasure to be with you. Thanks.
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