By Camila Villard Duran
ANGERS – In a letter to Brazil’s largest banks, the US Treasury’s Office of Foreign Assets Control (OFAC) has demanded to know what steps they were taking to comply with the sanctions recently imposed on Supreme Court Justice Alexandre de Moraes under the Global Magnitsky Human Rights Accountability Act. President Donald Trump’s administration was delivering an unmistakable message: America calls the shots, and others must fall in line.
The decision to add Moraes to the US list of “Specially Designated Nationals” is unprecedented, given that he is neither an oligarch accused of corruption nor a human-rights abuser. Instead, Moraes has been targeted for overseeing criminal cases related to the January 8, 2023, insurrection in Brasilia, when supporters of then-President Jair Bolsonaro stormed the National Congress, the Supreme Court, and the presidential palace in a bid to overturn his election defeat.
While this may look like a technical compliance issue, Trump’s actions are an assault on the independence of Brazil’s judiciary. Sanctioning Moraes does more than restrict his personal finances; it indirectly pressures the institutions he represents. It also forces Brazilian banks to choose between upholding domestic court rulings – thereby incurring severe US penalties – and preserving access to global markets. Either choice risks undermining their legitimacy at home and abroad.
The OFAC letter also underscores the fragility of economic sovereignty. While the Magnitsky Act is formally a US statute, the dollar’s role as the world’s leading reserve currency extends its reach far beyond America’s borders.
Brazilian banks, like their counterparts around the world, rely on US banks to clear dollar transactions, and many maintain subsidiaries in New York and other major financial centers. Whether you want to export soybeans to Asia or issue bonds on Wall Street, the financial infrastructure you depend on is American. And this dependency means that disregarding OFAC is not an act of defiance but a step toward financial exile, if not outright ruin.
This is the paradox of sovereignty. Legally, Brazil’s courts can rule that US sanctions do not apply domestically, since under both constitutional and international law, foreign measures must be formally enacted to take effect. But economically, compliance is unavoidable, given that its trade and financial systems depend on dollar-based infrastructure beyond its control. In practice, monetary sovereignty ends at the edge of the dollar system.
The irony is striking. The United States once wielded the Magnitsky Act to confront authoritarian abuses abroad, most notably by sanctioning Russian officials implicated in the 2009 murder of tax adviser and whistleblower Sergei Magnitsky. Today, it is using the same law to intimidate a judge seeking to defend Brazil’s democratic order. By weaponizing foreign-policy tools to influence domestic legal processes, the Trump administration has effectively reduced Brazil’s sovereignty to a test of obedience.
Brazilian policymakers are in a difficult position. Routing Moraes’s personal financial transactions through domestic cooperatives is, at best, a temporary fix that does nothing to resolve the underlying issue. And longer-term alternatives, such as global payment systems built on blockchain technology, remain far from viable.
With Brazil still caught in the dollar’s gravitational pull, the current crisis underscores the urgency of investing in alternatives to the dollar-based system. As I argued in a recent policy paper, new technologies and platforms – from blockchain-based networks to instant cross-border payments – could make settlements more efficient and potentially challenge the dollar’s dominance.
For now, though, these initiatives are no more than fragmented pilot projects confined to “coalitions of the willing,” often excluding the developing economies that are most dependent on the dollar. Moreover, even the most advanced multi-currency platforms still revert to the dollar or the euro when local currencies lack sufficient liquidity, reproducing the very hierarchy they claim to challenge.
That said, these monetary innovations offer a glimpse of a future in which multilateral infrastructures are no longer controlled by a single government or private organizations operating under one country’s jurisdiction. But realizing such a future will require extraordinary diplomatic and technical cooperation, along with new governance frameworks. Until then, the dollar’s extraterritorial power will remain unmatched.
In that sense, the OFAC letter is more than a message to Brazilian banks; it is a reminder to all countries of the extraordinary power the US exerts through its control of the world’s financial infrastructure. To counter it, they must work together to develop credible alternatives, such as central bank digital currencies, interoperable instant-payment networks, and broader multilateral arrangements. Otherwise, their monetary sovereignty and political autonomy will be left at the mercy of American policymakers.
Camila Villard Duran is Associate Professor of Law at ESSCA School of Management.
9 September 2025
Source: countercurrents.org