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5/10/2023 Countries worldwide are dropping the US dollar: De-dollarization in China, Russia, Brazil, ASEAN By: Ben NortonRead Now
The global de-dollarization campaign is gaining momentum, as countries around the world seek alternatives to the hegemony of the US dollar. China, Russia, Brazil, India, ASEAN nations, Kenya, Saudi Arabia, and the UAE are now using local currencies in trade.
(Se puede leer esta nota en español aquí.)
The global de-dollarization campaign is gaining momentum, as countries around the world seek alternatives to the hegemony of the US dollar.
China and Russia are trading in their own currencies. Beijing and Brazil have also dropped the dollar in bilateral trade. The UAE is selling China its gas in yuan, through a French company. Southeast Asian nations in ASEAN are de-dollarizing their trade, promoting local payment systems. Kenya is buying Persian Gulf oil with its own currency. Even the Financial Times newspaper has acknowledged that a “multipolar currency world” is emerging.
When Chinese President Xi Jinping visited Moscow in March, his Russian counterpart Vladimir Putin revealed that two-thirds of the countries’ bilateral trade is already conducted in the ruble and renminbi.
“It is important that our national currencies are increasingly used in bilateral trade“, Putin said. “We should continue promoting settlements in national currencies, and expand the reciprocal presence of financial and banking structures in our countries’ markets”. The Russian leader added, “We support using Chinese yuan in transactions between the Russian Federation and its partners in Asia, Africa and Latin America”.
Just a week after Xi’s trip to Moscow, China announced that it had for the first time used yuan to buy liquefied natural gas (LNG) from the UAE.
The deal was negotiated between the state-owned China National Offshore Oil Company and the French company TotalEnergies, meaning European firms are now willing to conduct transactions in yuan. French media outlet RFI described the trade as a “major step in Beijing’s attempts to undermine the US dollar as universal ‘petrodollar’ for gas and oil trade”. The report quoted the chairman of the Shanghai Petroleum and Natural Gas Exchange, Guo Xu, who said the deal encouraged “multi-currency pricing, settlement and cross-border payment”.
On March 30, China and Brazil (the world’s most populous and sixth-most populous countries) announced they had come to an agreement to trade with each other in their local currencies, yuan and reais.
China’s media network CGTN reported, “The deal will enable China, the world’s second-largest economy, and Brazil, the biggest economy in Latin America, to conduct their massive trade and financial transactions directly, exchanging yuan for reais and vice versa instead of going through the dollar”. It noted that China is Brazil’s biggest trading partner, and in 2022 the two countries did more than $150.5 billion worth of trade. Brazil’s leftist President Lula da Silva has called for Latin America to develop a new currency for regional trade, which he calls the Sur.
Just two days before China and Brazil revealed their deal to trade in local currencies, the South American giant’s former President Dilma Rousseff officially assumed her new role as chief of the New Development Bank (NDB) in Shanghai.
The NDB, commonly known as the BRICS Bank, was created by the bloc of Brazil, Russia, India, China, and South Africa as an alternative to the US-dominated World Bank. Dilma, like her ally Lula, is a leftist from Brazil’s Workers’ Party. In a speech that Geopolitical Economy reported on in 2022, Dilma analyzed the US-China conflict as “a rivalry of two systems”, a struggle between neoliberalism and socialism. She condemned US sanctions and “dollar hegemony” and called for Latin America “to break with the Monroe Doctrine”.
Countries in Southeast Asia are also de-dollarizing.
The finance ministers and governors of the central banks of the member states of the Association of Southeast Asian Nations (ASEAN) met in Indonesia on March 28. According to the news website ASEAN Briefing, at the top of their agenda were “discussions to reduce dependence on the US Dollar, Euro, Yen, and British Pound from financial transactions and move to settlements in local currencies”. ASEAN is developing a cross-border digital payment system that would allow the use of local currencies in regional trade. ASEAN Briefing noted that Indonesia, Malaysia, Singapore, the Philippines, and Thailand agreed on this in November 2022. The media outlet added that Indonesia’s central bank plans on creating a local payment system as well. ASEAN Briefing wrote: Indonesian President Joko Widodo has urged regional administrations to start using credit cards issued by local banks and gradually stop using foreign payment systems. He argued that Indonesia needed to shield itself from geopolitical disruptions, citing the sanctions targeting Russia’s financial sector from the US, EU, and their allies over the conflict in Ukraine.
Indonesia is the fourth-most populous country on Earth, after the United States.
Another Southeast Asian nation, Malaysia, is publicly advocating de-dollarization.
Malaysia’s Prime Minister Anwar Ibrahim met with Chinese President Xi in Beijing on March 31, where the two leaders discussed plans to weaken US dollar hegemony and even create an “Asian Monetary Fund”. This is a frontal challenge to the US-dominated International Monetary Fund (IMF), which emerged from the 1944 Bretton Woods Conference that established the dollar as the global reserve currency. Anwar proposed the Asian Monetary Fund at the Boao Forum in China’s Hainan province. “There is no reason for Malaysia to continue depending on the dollar”, Anwar said, in comments reported by Bloomberg. The media outlet added that Malaysia’s central bank is developing a payment mechanism so the Southeast Asian country can trade with China using its own currency, the ringgit.
Bloomberg noted:
The Malaysian leader’s comments come just months after former officials in Singapore discussed what economies in the region should be doing to mitigate the risks of a still-strong dollar that’s weakened local currencies and become a tool of economic statecraft.
“Economic statecraft” is a roundabout way of saying economic warfare. The unilateral sanctions the United States has imposed on countries all across the planet, in flagrant violation of international law, are backfiring. Many nations are now seeking financial alternatives, afraid that they could be the next target.
And with the US Federal Reserve constantly raising interest rates, the dollar has become so strong that it is hurting the currencies of other countries, making imports more expensive. Even US ally India is hedging its bets on de-dollarization. Reuters reported that Russia’s largest oil producer, the state-owned company Rosneft, made an deal with India’s top refiner Indian Oil Corp, which is also state owned, to use the Dubai price benchmark in oil sales, as opposed to the Brent benchmark. The decision “to abandon the Europe-dominated Brent benchmark is part of a shift of Russia’s oil sales towards Asia”, it wrote. Reuters cited “Rosneft’s chief executive Igor Sechin, [who] said in February that the price of Russian oil would be determined outside of Europe as Asia has emerged as largest buyer of Russian oil”.
Several countries on the African continent are advocating de-dollarization as well.
In March, Kenya signed an agreement with state-owned companies in Saudi Arabia and the UAE to buy oil on credit, using the country’s local currency, the shilling. Kenya asked to do so because the African nation’s dollar reserves are running low, as it pays for more expensive imports.
One of the world’s leading newspapers, the Financial Times, acknowledged in an article in March that these historic developments are part of a transition to a “multipolar currency world“.
The chair of the Financial Times’ editorial board and US editor-at-large, Gillian Tett, wrote that “US banking turmoil, inflation and looming debt ceiling battle is making dollar-based assets less attractive”. She noted that the former Goldman Sachs economist who first popularized the term BRICS, Jim O’Neill, has stated that “the dollar plays far too dominant a role in global finance”.
AuthorBen Norton is an investigative journalist and analyst. He is the founder and editor of Geopolitical Economy Report, and is based in Latin America. (Publicaciones en español aquí.)
This article was republished from Geopolitical Economy Report.
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