At a time when the world is witnessing a new era of competition between the great powers with which the map of the global economy is being reshaped, the trend towards de-dollarization is gradually increasing, although this trend is not a new phenomenon in itself linked to all current developments.
Since the dollar replaced sterling as the global reserve currency (according to the Bretton Woods agreement at the end of World War II), many attempts to break the dominance of the US currency have emerged in different periods. For example, Latin American countries have sought to move away from the dollar in the eighties and nineties.
Venezuela, for example, in response to US sanctions, as well as Chile. The global financial crisis of 2007-2008 also fostered a similar trend around the world to abandon the dollar.
While these attempts did not show any effective effects in practice, however, the sequence of steps associated with abandoning the dollar in recent periods in light of the wide-ranging geopolitical changes presents the dominance of the dollar in front of a fateful challenge, and in a parallel line with the rise of China as an economic power, and the sanctions imposed on Russia finally and its consequences. different, and other related factors.
The aforementioned group of variables has reinforced the tendency of many countries to deal in national currencies, similar to the already engaging Russia and China in the ruble-yuan trade and the settlement of transactions between them in local currencies, as well as with a number of their trading partners around the world.
Other countries also continue to search for ways to build trade ties that avoid the dollar, the latest of which was announced in Latin America, while Brazil and Argentina, as well as the Russian Central Bank’s recent announcement of starting to set ruble prices against a group of foreign currencies, including the Egyptian pound, as exchange currencies. commercial, and many other related steps.
Low probability in the short term
The Atlantic Council in Washington, in a report issued earlier this year and entitled “The Top 23 Risks and Opportunities for the Year 2023”, spoke of a possibility linked to a number of countries – not just the United States’ opponents – moving away from the dollar faster than expected.
According to the report, concern about the future of the US dollar is a traditional debate that is usually raised, but it indicated that there is a possibility – albeit weak in the short term – that a group of countries, including Washington’s allies and opponents, will move away from the dollar.
Yet in practice, “the advantages of the dollar are still deeply rooted in the global financial system,” according to Josh Lipsky, director of the Atlantic Council’s Center for Geoeconomics and a former adviser to the International Monetary Fund.
While Lipsky believes that “there is nothing to worry about,” he notes that many countries would like to move away from the dollar even if it is not easy, while there is no clear alternative in the near term.
And he continues: This transformation is already happening gradually.. The dollar’s share of foreign exchange reserves is declining.. And countries all over the world, not only US competitors such as China but also countries such as India, Indonesia, Malaysia and South Africa, are investing in technologies such as Central bank digital currencies can make them less dependent on the dollar.
The unprecedented global sanctions regime quickly imposed on Russia in the wake of its “military operation” in Ukraine in February has increased the likelihood of a rapid departure from the dollar, perhaps to a probability of about 15 percent, according to the same source.
And Lipsky points out that if countries can find ways to get around the dollar, the impact of sanctions will be undermined over time. The next time an adversary violates another country’s borders, the American economic counterstrike may not be so painful.-
An alternative structure to the US dollar--
For his part, Dr. Tariq Al-Rifai, CEO of the Crome Center for Studies in London, said in exclusive statements to “Economy Sky News Arabia”: Historically, all major currencies did not remain major currencies forever. The US dollar itself became a global reserve currency after World War II. Having replaced the pound sterling.
He points out that there are many countries (especially Russia and China) and various other countries that see a danger to their economies due to the dependence of the global economy on the dollar, especially in light of the geopolitical developments that the world is currently witnessing, and therefore there is a tendency to rely on different currencies.
Al-Rifai continues: “However, many may expect that the next few years will witness a collapse of the dollar, and this is not true, because the change from one currency to another or a basket of currencies does not happen overnight, while it takes many years to establish the stability of the alternative currency or structure.” alternative to the dollar.
He refers to the “BRICS currency”, for example, and other attempts to get out of the hegemony of the dollar, including the adoption of the Chinese yuan, but the yuan is generally linked to the dollar and is not considered an independent currency, as well as currencies in the Gulf countries linked to the dollar.
And the CEO of the Crom Center for Studies in London added: “In the near future, we will see an expansion of trade exchange between other currencies away from the dollar..but this does not mean the end of the dollar in the near term..over five years or more, I expect that we will see a new entity for trade exchange.” in the world.”
Russia is leading efforts to break the dollar
For his part, the Russian affairs expert, head of the Russian-Arab Center, Musallam Shaito, believes that the elements of American domination of the world are represented in military bases and the dollar, and when Washington loses any one of them, it loses the second completely, and then Russia, for its part, does not want to confront the United States. militarily at the global level, but seeks to convince humanity of a multipolar world.
And Shaito continues, in exclusive statements to the “Sky News Arabia Economy” website, speaking about the primary Russian role in efforts to break the hegemony of the dollar, saying: The vision presented by the Russian leadership to the United States and NATO calls for an end to unipolarity, and this end is not only a political and security end, but an economic and financial end. , and ending control over the fate of the economy, other currencies, and financial transfers, as Russia considers the dollar to be the basis of the huge potential that Washington enjoys and the basis of hegemony, through that unsupported paper currency.
And he continues: “Therefore, Russia seeks political changes based on that, by working to encourage exchange in national currencies or exchange in commodities (…) Russia strives to form a multipolar world, based on international and regional organizations such as Shanghai, BRICS, and others, all of which are capable and effective organizations that have Vast economic and human capabilities in the world, consistent with Russia’s aspiration to get rid of this American hegemony, but it responds differently based on its capabilities and the extent of its connection to American hegemony.
On the other hand, the researcher at the New America Foundation, Barak Barfi, underestimates the impact of the trend towards dealing in local currencies among some countries on the position of the dollar and its dominance in the world.
And he points out, in exclusive statements to the “Sky News Arabia Economy” website, that “trading in local currencies is a challenge because these currencies need to be converted into hard currencies to buy goods from other countries… Therefore, if China settles its oil bills in rubles, it will not be able to use those Rubles with Malaysia, for example, to buy integrated electronic circuits… You should exchange the ruble for dollars and then use it to trade with Malaysia.”
Barfi believes that bilateral trade in local currencies does not pose great risks to the parties because they can renegotiate if necessary about the mechanisms used and determine the value.. while using the currency of a third country is more difficult because the two parties cannot control its fluctuations and they have to renegotiate based on factors they did not create. .. But this remains limited to bilateral transactions.