De-dollarization is apparently here, “like it or not,” notes The Independent Media Institute (IMI).
Until recently, the global economy accepted the U.S. dollar as the world’s reserve currency and the currency of international transactions. The central banks of Europe and Asia had an insatiable appetite for dollar-denominated U.S. Treasury securities, which in turn bestowed on Washington the ability to spend money and finance its debt at will. Should any country step out of line politically or militarily, Washington could sanction it, excluding it from the rest of the world’s dollar-denominated system of global trade. But for how long?
After a summit meeting in March between Russia’s President Vladimir Putin and China’s President Xi Jinping, Putin stated, “We are in favor of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa, and Latin America.” Putting that statement in perspective, CNN’s Fareed Zakaria said, “The world’s second-largest economy and its largest energy exporter are together actively trying to dent the dollar’s dominance as the anchor of the international financial system.”
A new global monetary system, or at least one in which there is no near-universal reserve currency, would amount to a reshuffling of political, economic, and military power: a geopolitical reordering not seen since the end of the Cold War or even World War II. But as a look at its origins and evolution makes clear, the notion of a standard global system of exchange is relatively recent and no hard-and-fast rules dictate how one is to be organized.
When the USSR collapsed, the United States declared a new world order and launched a series of new wars, including against Iraq. The currency of the New World Order was the petrodollar-weapondollar.
Forget price manipulations; Iraq was not allowed to sell its oil at all, nor to purchase needed medicines or technology. Hundreds of thousands of children died as a result. Several authors, including India’s Research Unit for Political Economy in the 2003 book Behind the Invasion of Iraq and U.S. author William Clark in a 2005 book, Petrodollar Warfare, have argued that Saddam Hussein’s final overthrow was triggered by a threat to begin trading oil in euros instead of dollars. Iraq has been under U.S. occupation since.
It seems, however, that the petro-weapondollar era is now coming to an end, and at a “‘stunning’ pace.” After the Putin-Xi summit in March 2023, CNN’s Fareed Zakaria worried publicly about the status of the dollar in the face of China’s and Russia’s efforts to de-dollarize. The dollar’s problems have only grown since. All of the pillars upholding the petrodollar-weapondollar are unstable:
+ The United States is no longer the dominant manufacturer and China is catching up in science and technology as well.
+ The United States does not seem to be an attractive development model for Global South countries anymore and is not able to compete with China’s Belt and Road Initiative deals in Africa and other parts of the developing world.
+ The United States has sanctioned so many countries (Russia, Iran, Venezuela, Cuba, and China) that they are beginning to achieve a critical mass by trading with one another.
+ U.S. military power is no longer seen as supreme after its lack of success in bringing about a regime change in Syria and its withdrawal from Afghanistan.
+ While the United States may have succeeded in dramatically reducing Russian gas sales to Europe by — if Seymour Hersh’s widely believed February report is eventually vindicated — blowing up Nordstream, it has been unable to convince India or China to go along with its plans in this regard: both countries are purchasing Russian energy and reselling it as well.
+ After watching the United States steal Russia’s reserves and Venezuela’s gold and force the sale of Venezuela’s oil company CITGO, even U.S. allies are reluctant to hold assets in dollars or keep their assets in the United States lest they be seized. Saudi Arabia will be trading with China in yuan instead of dollars, has canceled its U.S.-backed war on Yemen, made peace with Iran, and hosted Syria’s President Bashar al-Assad at the Arab League summit in May 2023.
But what will replace the dollar?
Currency systems reflect power relations in the world: they don’t change them. The Anglo gold standard and the American dollar standard reflected imperial monopoly power for centuries. In a multipolar world, however, we should expect more diverse arrangements.