In a year which saw the global geopolitical spiralling back towards cold war polarisation, with the nuclear arms race of the 1950s to 70s being replaced by the weaponisation of currencies, the global community is dividing into two camps, those nations that still support using the US$ as the principle medium for cross border trade, and those, led obviously by Russia and China (with enthusiastic support from Iran,)that favour the new methods of settling accounts through technological payment systems that need no reserve curencies, only a few trusted currencies.
The so called ‘trade wars’ being caused by economic sanctions and tariff disputes conflicts which are mainly being triggered by Washington as US organisations try to keep the bid for global economic hegemony (never a realistic ambition,) on track have forced countries that displeased The State department to seek alternative payment systems to those currently dominated by the US dollar.
As mentioned above, and as this page has reported many times, rather than simply dumping the dollar and adopting the UK£ or European unions Euro ( € ) and Japanese Yen, China is trying to internationalize its own currency, the yuan, which was recently included in the IMF basket of internationally traded currencies along with the currencies mentioned above. As well as launching a rival to the Petrodollar, an oil futures contract backed by gold and called rather unimaginatively, The Petroyuan, Beijing has this year, in collaboration with Russia implemented an electronic currency exchange system for settling cross border trades with international partners in the currency of the vendor’s home nation.
The escalating trade conflict between the United States and China, and the imposition of economic sanctions against Beijing’s biggest allies, Iran and Russia, have forced China to free itself of dollar dependency. And China’s ambition of supplanting the USA as the world’s biggest economy can never be achieved as long as the USA controls the reserve currency.
Russia, like China has been reducing its holdings in US Treasury Bonds at an accelerating rate for several years as well as collaborating with its ally in creating alternatives to dollar – based systems such as SWIFT ( Society for Worldwide Interbank Financial Telecommunication ) for settlements. President Vladimir Putin said in 2018 the US is “making a colossal strategic mistake” by “undermining confidence in the dollar.”Putin has never called for restricting dollar transactions or banning the use of US currency but his government has quietly been making bilateral agreements with trading partners to use alternative system. Russian Finance Minister Anton Siluanov announced earlier this year that the country planned to offload its holdings of US Treasuries in favor of more secure assets, such as the ruble, the euro, gold and rare metals.
The country has been forced towards de-dollarizing the economy because of the constantly growing burden of sanctions that have been imposed since 2014 over a number of issues. Ironically these sanctions have hit US allies that trade with Russia far harder than they have hit Russia itself, while the USA sells virtually nothing to Russia and so is immune to the adverse effects of its sanctions. Thanks to Russia’s development of an alternative to SWIFT, nations have a route to carrying out sanction busting trades that are invisible to the US security agencies.
Moscow has managed to partially remove the dollar from its export trade, signing currency-swap agreements with countries including China, India, Iran, Turkey, Pakistan, Kazakhstan and Australia. It is widely understood the EU has agreed that its member states can use alternatives to dollar denominated systems though no details of any that have are yet known. Russia has recently formally proposed a system using the euro instead of the US dollar in trade with European Union member states.
Sanctions have forced the Iranian government to seek alternative to the US dollar in payment for its oil exports. So ffar it has concluded deals for settlement of oil trades with India using the Indian rupee and with Pakistan using the UK£. It also negotiated a barter deal with neighboring Iraq. The partners are also planning to use the Iraqi dinar for mutual transactions to reduce reliance on the US dollar amid banking problems connected to US sanctions.
Late in 2018 Turkish President Recep Tayyip Erdogan announced a new policy of switching to non-dollar trading with his country’s international partners. Turkey’s leader also announced that Ankara is preparing to conduct trade through national currencies with China, Russia and Ukraine. It already trades with Eurozone member nations in Euros. Turkey has also discussed replacing the US dollar with national currencies in trade (mainly oil) transactions with Iran.
Relations between the USA and Ankara have been deteriorating for two years. Aware (and who isn’t) of the CIA’s involvement in the ousting of a democratically elected pro – Moscow government in Ukraine, since the failed military coup against him in 2016 President Erdogan has suspected Washington was behind the bid to topple his regime. Erdogan has also directly accused Washington of harboring exiled cleric Fethullah Gulen, whom Ankara blames for masterminding the coup.
The European Union has discussed switching payments on trades with Iran from the US dollar to the Euro after Washington threatened to sanction European firms trading with or working on projects in Iran, according to reports. This has become a realistic possibility as the US, having sanctioined a nation or organisation, insists that everybody else obeys those sanctions. A way around that will help EU firms to retain one of the world’s largest markets, which was opened for trade after the historic nuclear deal signed by Tehran and the P5+1 powers (China, France, Russia, UK, US, plus Germany) in June 2015.
India, with the world’s sixth-largest economy, and growing rapidly, is one of the biggest merchandise importers and exporters. As a nation with an economy dependent on trade, the country is more vulnerable than most to geopolitical conflicts and as a major trading partner of both Russia and China, is significantly impacted by economic sanctions that curtail its ability to trade. Thus the arrogant practice of the USA in applying sanctions to those nations which trade with counties it has sanctioned is particularly tough on India as well as being one of the policies that made Washington unpopular among emerging economies that trade with Russia, Iran and China.
Earlier this year, Delhi switched to ruble payments on supplies of Russian S-400 air-defense systems as a result of US economic penalties introduced against nations that trade with Moscow. The country was also obliged to switch to the rupee in purchases of Iranian crude after Washington reinstituted sanctions against Tehran. In December, India and the United Arab Emirates sealed a currency-swap agreement to boost trade and investment without the involvement of a third currency.
Taking into account that India is the third-largest country by purchasing power parity, steps of this kind could considerably diminish the role of the greenback in global trading.
Numerous other nations, large and small, are also making moves to render their international trade immune to US trade wars and sanctions. Australia, Brazil, Japan, South Africa, Nigeria, Thailand, Philippines, Egypt, Nigeria and Malaysia are all known to have been involved in non – dollar international trades and it is likely many more have too. Many people in the USA, on reading this and similar reports elsewhere, will immediately blame Donald Trump, but the problems began long before he burst on the political scene. If fact no particular blame can be attached to any particular president or administration.
The problem comes from the Deep State, Military / Industrial Complex, call it what you will, and the faceless manipulators in Washington that have based US foreign policy on military intervention in nations that tried to go their own way. Thus the US is seen as having abused is position as the holder of the reserve currency to impose policy on sovereign nations. There was bound to be a backlash sometime. 2018 looks like the year that backlash got serious.
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