We need to be cautious of rising expectations in this arena. We must be on guard that the ultimate and extreme steps in our Iran nuclear sanctions, taken after eight years of building international support for tougher action, do not become a starting point when we confront each new crisis. We know that foreign policy and security threats will always exist and it is critical that we have scalable options at our disposal.

Secondary sanctions prompt particular concerns. Unlike primary sanctions, which focus on activities of U.S. individuals and companies, secondary sanctions generally are directed toward foreign people. These measures threaten to cut off foreign individuals or companies from the U.S. financial system if they engage in certain conduct with a sanctioned entity, even if none of that activity touches the United States directly. As a result, they are viewed, even by some of our closest allies, as extra-territorial attempts to apply U.S. foreign policy to the rest of the world.

The risk that sanctions overreach will ultimately drive business activity from the U.S. financial system could become more acute if alternatives to the United States as a center of financial activity, and to the U.S. dollar as the world’s preeminent reserve currency, assume a larger role in the global financial system. Global norms are hard to reshape, existing alternatives are not well positioned to fully fill the role of U.S. markets and the U.S. dollar, and there are many factors that will continue to make the United States the most attractive financial system in the world. But our central role must not be taken for granted. If foreign jurisdictions and companies feel that we will deploy sanctions without sufficient justification or for inappropriate reasons — secondary sanctions in particular — we should not be surprised if they look for ways to avoid doing business in the United States or in U.S. dollars. And the more we condition use of the dollar and our financial system on adherence to U.S. foreign policy, the more the risk of migration to other currencies and other financial systems in the medium-term grows. Such outcomes would not be in the best interests of the United States for a host of reasons, and we should be careful to avoid them. (Emphasis added.)