U.S. dominance and control over the world financial system is under increasing pressure from Russia and China

Myth No. 3: The United States can continue to control the world financial system.

Although not without controversy, the extraterritorial provisions of US-led sanctions provide the backbone to freezing Iran out of the global economy. (That is, the ability to impose harsh penalties on non-US firms for conducting significant business or transactions with Iranian companies.) China’s Bank of Kunlun, for example, was sanctioned by the United States in 2012 for facilitating “significant transactions” and financial services to designated Iranian banks.

The effectiveness of these provisions, however, relies in part on the structure of the international financial system; imposing tougher sanctions for a better bargain rests on the premise that this structure will remain intact. The truth, however, is that major shifts in international banking severely undermine the prospect of maintaining a robust sanctions regime. For example, some of the hardest-hitting rounds of sanctions came in 2012, when the Belgium-based company of  SWIFT—the world’s largest financial messaging system—cut off Iran as part of EU sanctions. This move froze Iranian’s access to international markets, devastating its trade and commerce.

This sudden move underscored to other countries the inherent risks in relying on a single access point to international banking, and encouraged them to take a number of moves to mitigate those risks. China, for example, is on schedule to launch an alternative to SWIFT, possibly by the end of 2015. Known as the China International Payment System, it is designed to process cross-border renminbi transactions, in a welcome alternative to the patchwork system of processing Chinese currency payments—making the renminbi a more global currency. The system will provide a legitimate alternative to SWIFT.

Russia recently launched its own alternative to SWIFT for domestic payments, as part of a larger move to get away from Western dominance of the international financial system—specifically citing fears of exclusion from SWIFT stemming from Western sanctions over the escalating crisis in Ukraine.