By Ted Snider
May 10, 2023:
Clearing House -- "
Anti War" -- On March 20, Chinese
President Xi Jinping met with Russian President Vladimir Putin in Moscow. In his
the Russian media preceding the meeting, XI enthused that "China-Russia trade
exceeded 190 billion U.S. dollars last year, up by 116 percent from ten years
ago." Though it has reached 190 billion US dollars, it is no longer all being
traded in US dollars. In his
article in the
Chinese media, Putin said that "the share of settlements in national currencies"
of all that trade "is growing." 65% of that massive China-Russia trade is now
being conducting in their Russian and Chinese currencies.
Though the US sees Russia and China as the largest threats to its position in
the world, it is not just America’s enemies that are fleeing the dollar. Its
closest friends have hinted at it too. Following his meetings with XI in China,
French President Emmanuel Macron likely stunned and angered the US by
calling for Europe to reduce its dependency on the "extraterritoriality of
the US dollar."
These calls for a flight from the US dollar are not merely economic, they are
geopolitical. They are calls to reshape the world order by challenging US
hegemony and advocating multipolarity. The monopoly of the dollar has not just
assured US wealth: it has assured US power. Most international trade is
conducted in dollars, and most foreign exchange reserves are held in dollars.
That dollar dominance has often allowed the US to dictate ideological alignment
or to impose economic and political structural adjustments on other countries.
It has also allowed the US to become the only country in the world that can
effectively sanction its opponents. Emancipation from the hegemony of the dollar
is emancipation from US hegemony. The flight from the US dollar is a mechanism
for replacing the US led unipolar world with a multipolar world.
As the US has recently demonstrated in Cuba, Venezuela, Afghanistan, Iran and
Russia, the monopoly of the dollar allows it to be very powerfully and quickly
weaponized. Countries’ funds can be held hostage, and countries can be coerced
and starved into falling in line by sanctions. Recent demonstrations of that
power have awoken many countries to their own vulnerability.
US Treasury Secretary Janet Yellen recently said that
"There is a risk when we use financial sanctions that are linked to the role of
the dollar that over time it could undermine the hegemony of the dollar.” She
explained that “Of course, it does create a desire on the part of China, of
Russia, of Iran to find an alternative.”
And that’s just what it’s done. But Yellen is still missing the larger effect
of US dollar warfare. It is not just China, Russia and Iran that are now seeking
to escape the pressure. America’s enemies, but also its friends and everything
in between, are considering taking flight from the dollar.
China and Russia are doing it. NATO ally France is calling for it for Europe.
Nonaligned countries are also either talking about it or already doing it.
India is a growing economic power. And, like China, India has massively
increased its trade with Russia. India and Russia have now begun discussions on
a free trade agreement between India and the Russian led Eurasian Economic
Commission. The two countries are now
engaged in “advanced negotiations” for a new bilateral investment treaty.
Russia has expressed interest in using “national currencies and currencies of
friendly countries” for trade. India, too, “has been keen on" moving toward
leaving the dollar behind by "increasing the use of its rupee currency for
trade with Russia.” And India has recently begun purchasing some Russian oil in
US dollar hegemony has also been threatened right in America’s backyard.
Brazilian President Luiz Inácio Lula da Silva has
proposed escaping dollar control by "creat[ing] a Latin American currency."
While in China for meetings with XI, Lula
asked, “Who decided the dollar would be the [world’s] currency?” He then
answered his own question. In March, Brazil and China escaped the US dollar by
each assigning one of its banks to conduct their bilateral trade in the
Brazilian real and the Chinese yuan.
Pakistan is now also trading with China in its own currency. Iran and Russia
have taken flight from the dollar and are now settling
trade in rials and rubles. They recently announced that
they have circumvented the US financial system by linking their banking systems
as an alternative to SWIFT for trading with each other. Saudi Arabia has
said that it sees “no issues” in trading oil in currencies other than the US
Robert Rabil, Professor of political science at Florida Atlantic University,
says that the United Arab Emirates, Egypt and Israel have all made some movement
away from the US dollar.
The Eurasian Economic Union has agreed on
"a phased transition" from settling trade in "foreign currency" to "settlements
Perhaps more surprisingly for the US was the
decision at the March 30-31 meeting of the finance ministers and central
bank governors of the Association of Southeast Asian Nations (ASEAN) to reduce
reliance on the US dollar. ASEAN is made up of Indonesia, Thailand, the
Philippines, Singapore, Vietnam, Cambodia, Laos, Malaysia, Myanmar and Brunei.
The meeting produced a joint statement to "reinforce financial resilience . . .
through the use of local currency." But what must have been most unsettling for
the US was the explanation given for the decision by Indonesian President Joko
Widodo. Widodo said that the move is necessary to protect from "possible
geopolitical repercussions." What did he mean by that? "Be very careful," he
explained. "We must remember the sanctions imposed by the US on Russia."
Yellen was right. Widodo said that US sanctions on Russia exposed just how
vulnerable countries are if they rely on US dollars and US foreign payment
systems. He said that using ASEAN’s Local Currency Transaction system to trade
in local currencies would help address the need for Indonesia to prepare itself
for the possibility that the US could similarly sanction it.
The EEU and ASEAN are not the only organizations mapping their flight from
the US dollar. BRICS is a massive international organization whose primary
purpose is to balance US hegemony in a new multipolar world. Comprised of
Brazil, Russia, India, China and South Africa, it represents 41% of the world’s
population. BRICS, too, is talking about conducting trade in the currencies of
its members or even in a new BRICS’ currency.
suggested that “the BRICS bank have a currency to finance trade between
Brazil and China, between Brazil and other BRICS countries” so that countries
are not compelled “to chase after dollars to export, when they could be
exporting in their own currencies.” Russian State Duma Deputy Chairman Alexander
Babakov also recently
said that BRICS is working on creating its own currency.
A BRICS currency could challenge the dollar beyond the borders of BRICS.
"Because each member of the BRICS grouping is an economic heavyweight in its own
region, countries around the world would likely be willing to do business" in
the currency, suggested a
report in the Financial Post.
One such region is Africa. In July, the Russia-Africa summit will be held in
St. Petersburg. Olayinka Ajala, senior lecturer in Politics and International
Relations at Leeds Beckett University and the author of "The Case for
Neutrality: Understanding African Stances on the Russia-Ukraine Conflict," told
me in a recent correspondence that a "main focus of Russia and China at the
moment is to get African countries to support the proposed BRICS currency." He
says that "this will be a major topic in the upcoming conference." Ajala
explains that "Africa is a consuming continent, meaning they import lots of
goods and services." He says that "with a population of over 1.2 billion, if
Russia and China are able to convince African countries on the need to ditch the
dollar, it will be a huge blow to the US."
From Africa to Southeast Asia and Latin America, from Russia and China to
India, Iran and Saudi Arabia, countries are mapping their course for a flight
from the US dollar. As a mechanism for transition from US hegemony to a
multipolar world, the economic effects would be great, but the geopolitical
effects could be even greater.
Ted Snider is a regular columnist on US foreign policy and history at
Antiwar.com and The Libertarian Institute. He is also a frequent contributor to
Responsible Statecraft and The American Conservative as well as other outlets.