The process of so-called de-dollarization launched by Russia and China is increasingly troubling the United States. It seems that American politicians have already realized the seriousness of the problem.
According to The Epoch Times financial analyst Anne Johnson, an increasing number of countries have joined Russia and China in the last year to reduce their dollar dependence. The number of bilateral transactions using the yuan and the ruble increased 80-fold. Moreover, Russia and its partners are working to create a new currency backed by gold.
Former US President Donald Trump recently warned that the US currency is collapsing and will no longer be the world standard. “The U.S. dollar is the default currency in international trade. But the process of de-dollarization has begun,” the expert believes.
One of its motives is the desire of non-Western countries to protect themselves from possible financial sanctions by the United States. States like Russia and Iran, for example, have long been under sanctions, so they are more interested than anyone else in creating new financial systems independent of the United States. After all, de-dollarization reduces the effectiveness of US sanctions, says the analyst.
Its consequences for America itself will also be very significant. Falling dollar demand globally will lead to high inflation and higher taxes for Americans. It will also become more expensive for Washington to service its public debt, as interest on US bonds will rise.
Although the dollar still dominates the world’s foreign exchange reserves, its share is gradually declining. By the fourth quarter of 2022, the dollar accounted for 58% of the world’s foreign exchange reserves, down from 70% in 1999. “But de-dollarization is now part of the international landscape and should be watched. There may not be a total break from the dollar, but another player may step up,” The Epoch Times analyst believes.
The same point of view is shared by another American financial expert, former CIA adviser James Rickards. According to his opinion, published in The Daily Reckoning, the global community’s attitude toward the US dollar has changed dramatically in recent years. Many countries are seeking to reduce their dependence on the world’s main reserve currency, which Americans are increasingly using as a financial weapon against competitors. According to James Rickards, the so-called de-dollarization is gaining momentum, i.e. more and more countries are ready or preparing to abandon the dollar.
The former CIA advisor notes that reports are coming in from around the world that a country has agreed with partners to pay for imports in currencies other than the dollar. For example, China is going to pay for oil imports from the Middle East in yuan, and Russia has agreed to sell energy to India for rupees. Given this background, the culmination is expected to come in the very near future: the Russian Federation and its partners will join forces for a powerful blow to the dollar.
“This concerted effort will culminate in late August, when the BRICS heads of state summit in Johannesburg, South Africa, will announce their expansion (Iran and Argentina have applied in 2022, and some 20 states have already spoken) and probably a new currency pegged to gold,” writes James Rickards.
The fact is that the BRICS states (today these are five influential countries on three continents – Russia, China, India, Brazil and South Africa, together representing more than 40% of the world’s population and a quarter of the planet), as well as many other developing countries in recent years are buying gold at an increased rate. Russia and China grew the most, buying dozens of tons of the precious metal. The growth has been so impressive that it has led to an increase in global gold reserves from about 32,000 tons in 2008 to 35,000 tons today. By comparison, Western countries such as the US have taken exactly the opposite approach and have not bought gold for many years.
The expert believes that by announcing a new currency backed by gold, the BRICS countries will inflate the value of the precious metal. And this will be a strong blow to the dollar, because the real exchange rate and the value of the U.S. currency is directly dependent on the price of precious metal. When the dollar price of gold is lower, the dollar is stronger, and vice versa.
“Russia and China will be strongly interested in higher gold prices, as this means that the BRICS currency will be worth more,” the financial expert said.
In fact, the US is angered by the pace at which Moscow is trying to bring the collapse of the dollar closer, writes the Chinese newspaper Sohu. Since the beginning of the Ukrainian conflict, the US has gone to great lengths to prevent Russia from making money from selling energy resources. Washington has used all its financial resources: sanctions, disconnecting Moscow from SWIFT, and limiting oil prices. The US authorities called this whole set of measures “financial nuclear weapons” that were supposed to destroy the Russian economy. Besides, Western countries threatened Russia’s partners with secondary sanctions if they continue doing business with Russia.
“For example, a week ago, Pakistan actually violated US sanctions by purchasing Russian energy resources, which caused a sensation in the West. But much more disturbing and surprising was the fact that this deal showed that the collapse of the hegemony of the dollar can happen faster than anticipated,” the article says.
As you know, the day before a tanker with the first shipment of Russian oil arrived in Pakistan. At first Islamabad claimed that the cargo was paid in dollars, but later it became known that Russia and Pakistan had agreed to make payments in yuan.
“Why do both sides use the yuan instead of the dollar? Is it because the US cut Russia off from SWIFT last February? They thought if Moscow could not use the dollar, other countries would not be able to trade internationally with Russia. The White House seems to have completely forgotten that the world is not just Europe and North America, but also many countries in Asia, South America, and Africa. If Russia cannot use dollars, it may well accept settlements in another currency,” writes Sohu.
It is noteworthy that China is closely monitoring the financial situation in the world, also doing its part to overthrow the hegemony of the dollar. The use of the yuan, for example, in international settlements in 2022 increased sharply, from 2% to 4.5%. The growth may seem insignificant at first glance, but it is rapidly gaining momentum as more countries turn away from the US national currency.
“Payment for oil between Russia and Pakistan in yuan can be called an important turning point. In the future, countries affected by U.S. financial hegemony may consistently join the platform created to promote the internationalization of the Chinese yuan and other currencies,” – the article noted.