Washington's "eager-to-act" sanctions could cause countries to distance themselves from the dollar, predicts think tank.

• According to Gal Luft of the Institute for the Analysis of Global Security, central banks are beginning to doubt the wisdom of relying on the U.S. dollar.
• He stated that the United States has been overly eager to use sanctions and economic penalties.
• The energy market is facing a "double whammy" with the Covid pandemic and the Russia-Ukraine war, according to Luft.

The U.S. has been "extremely trigger-happy" with imposing harsh economic measures, and central banks may opt to diversify their foreign reserve holdings rather than relying heavily on the U.S. dollar, as stated by the co-director of the Institute for the Analysis of Global Security.

According to Gal Luft of the Washington-based think tank, central banks are starting to question if relying solely on the dollar and putting all their resources into one basket is a wise decision.

He stated that the United States has been overly eager to use sanctions and economic penalties.

The White House did not respond to a CNBC request for comment.

Russia's central bank reserves have been effectively frozen and SWIFT disconnected by the U.S. in recent weeks, according to Luft.

One in 10 countries globally is subject to U.S. sanctions, according to him.

As a result of the cumulative effect, the dollar's role in portfolios of central banks is diminishing, according to Luft.

After a Wall Street Journal report, Saudi Arabia is in accelerated talks with China to use yuan instead of dollars for oil purchases.

Washington has been able to run large deficits due to oil being typically priced in U.S. dollars, as stated by him on Monday's CNBC's "Street Signs Asia".

Governments are increasingly seeking to distance themselves from the U.S. dollar due to sanctions, according to Luft.

The American political class is unaware of the consequences of their actions, according to him.

He stated, "It's like a group of children playing with guns and not considering the consequences of their actions, without taking into account the overall effect."

You are imposing restrictions on both sides while simultaneously requesting that countries purchase your Treasury bonds and fund your debt, which is an unsustainable situation, he stated.

‘Heart attack’ in energy

The senior advisor to the U.S. Energy Security Council, Luft, discussed the uncertainty in global energy markets.

The situation is dire as the Covid pandemic and the Russia-Ukraine war, which could escalate, are causing a heart attack on top of a heart attack.

"The combination of the two is truly a double whammy," he remarked.

The past two years have seen oil prices fluctuate dramatically, dropping during the pandemic and rising following Russia's invasion of Ukraine in February.

According to Luft, there is a shift happening in the global energy, financial, and geopolitical systems, leading to the emergence of a "new world order."

"The transition from one world order to another is always painful, but it's necessary for the world to transform," he stated.