[News] Is the Reign of the Dollar Coming to an End?

[Anti-Imperialist News]

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*Is the Reign of the Dollar Coming to an End?: The Twenty-Fifth 
Newsletter (2024)*


Jiang Tiefeng (China), /Stone Forest/, 1979.

Dear friends,

Greetings from the desk of Tricontinental: Institute for Social Research 
<https://thetricontinental.us11.list-manage.com/track/click?u=6a79324d3b4acfde1e7e546c6&id=3e3045c407&e=d206d0a40d>.

In early June, a rumour 
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began to circulate – which was widely reported 
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in the Indian press as true – that the government of Saudi Arabia had 
allowed its petrodollar agreement with the United States to lapse. This 
agreement 
<https://thetricontinental.us11.list-manage.com/track/click?u=6a79324d3b4acfde1e7e546c6&id=4ee27ef8e1&e=d206d0a40d>, 
made in 1974, is quite straight-forward and fulfils various needs 
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of the US government: the US purchases oil from Saudi Arabia, and Saudi 
Arabia uses that money to buy military equipment from US arms 
manufacturers while holding the income from the oil sales in US Treasury 
Bills and in the Western financial system. This arrangement to recycle 
oil profits into the US economy and the Western banking world is known 
as the petrodollar system.

This non-exclusive arrangement between the two countries never required 
the Saudis to limit their oil sales to dollars or to recycle their oil 
profits exclusively in US Treasury Bills (of which it holds 
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a considerable $135.9 billion) and Western banks. Indeed, the Saudis are 
free to sell oil in multiple currencies, such as the Euro, and 
participate in digital currency platforms such as mBridge 
<https://thetricontinental.us11.list-manage.com/track/click?u=6a79324d3b4acfde1e7e546c6&id=17cef7437a&e=d206d0a40d>, 
a trial initiative of the Bank of International Settlements and the 
central banks of China, Thailand, and the United Arab Emirates (UAE).

Nonetheless, the rumour that this decades-long petrodollar agreement had 
come to an end reflects the widespread expectation that a seismic shift 
in the financial system will overturn the rule of the Dollar-Wall Street 
regime. It was a false rumour, but it carried within it a truth about 
the possibilities of a post-dollar or de-dollarised world.

Xu Lei (China), /Map of the Mountains and Seas/, 2003.

The invitation extended to six countries to join the BRICS bloc last 
August was a further indication that such a shift 
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is underway. Among these countries are Iran, Saudi Arabia, and the UAE, 
although Saudi Arabia has yet to finalise its membership. With its 
expanded membership, BRICS would include the two countries with the 
largest and second largest gas reserves in the world (Russia and Iran, 
respectively) and the two countries that accounted for nearly a quarter 
of global oil production (Russia and Saudi Arabia, all figures as of 
2022). The political opening between Iran and Saudi Arabia, brokered by 
Beijing in March 2023, as well as the signs that the US allies UAE and 
Saudi Arabia seek to diversify their political linkages, demonstrate 
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the possible end of the petrodollar system. That was at the heart of the 
rumour in early June.

However, this possibility should not be exaggerated, as the Dollar-Wall 
Street regime remains intact and significantly powerful. Data from the 
International Monetary Fund shows 
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that, as of the last quarter of 2023, the US dollar accounted for 58.41% 
of allocated currency reserves, which is far more than the reserves held 
in euros (19.98%), Japanese yen (5.7%), British pound sterling (4.8%), 
and Chinese renminbi (short of 3%). Meanwhile, the US dollar remains 
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the main invoicing currency in global trade, with 40% of international 
trade transactions in goods invoiced in dollars despite the fact that 
the US share of global trade is just 10%. While the dollar remains the 
key currency, it nonetheless faces challenges around the world, with the 
share of the US dollar in allocated currency reserves declining 
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gradually but steadily over the last twenty years.

Three factors are driving de-dollarisation: the US economy’s lack of 
strength and potential that began with the Third Great Depression 
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in 2008; the aggressive use of illegal sanctions 
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– especially financial sanctions – by the United States and its Global 
North allies against one quarter of the countries in the world; and the 
development and strengthening of relations between countries of the 
Global South, especially through platforms such as BRICS. In 2015, BRICS 
created the New Development Bank (NDB), also known as the BRICS Bank, to 
navigate a post-Dollar-Wall Street regime and to produce facilities to 
further development rather than austerity. The creation of these BRICS 
institutions and the increased use of local currencies to pay for 
cross-border trade created an expectation of hastened de-dollarisation. 
At the 2023 BRICS summit 
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in Johannesburg, Brazil’s President Luiz Inácio Lula da Silva repeated 
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the call to increase the use of local currencies and perhaps create a 
BRICS-denominated currency system.

There has been a vibrant debate about de-dollarisation amongst those who 
have worked in the BRICS institutions and in the large countries that 
are interested in de-dollarisation, such as China, about its necessity, 
prospects, and the difficulties of finding new ways to hold currency 
reserves and invoice global trade. The most recent issue 
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of the international journal /Wenhua Zongheng /(文化纵横), a collaboration 
between Tricontinental: Institute for Social Research and Dongsheng, is 
dedicated to this topic. In the introduction 
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to ‘The BRICS and De-Dollarisation: Opportunities and Challenges’ 
(volume 2, issue no. 1, May 2024), Paulo Nogueira Batista Jr., the first 
vice president of the NDB (2015–2017), summarises his considerable 
reflections 
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on the importance of moving away from the Dollar-Wall Street regime and 
on the political and technical difficulties of such a transition. BRICS, 
he correctly asserts, is a diverse group of countries with very 
different political forces in charge of the different states. The 
political agendas of its members – even with the new mood 
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in the Global South – are particularly diverse when it comes to economic 
theory, with many of the BRICS states remaining committed to neoliberal 
formulas while others seek new development models 
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One of the most important points raised by Nogueira is that the United 
States ‘will in all likelihood use all the many instruments at its 
disposal to struggle against any attempt to dethrone the dollar from its 
status as linchpin of the international monetary system’. These 
instruments would include sanctions and diplomatic threats, all of which 
would dampen the confidence of governments that have weaker political 
commitments and are not backed by popular movements committed to a new 
world order.

Hung Liu (China), /Sisters/, 2000.

De-dollarisation was moving at a very slow pace until 2022, when the 
Global North countries began to confiscate Russian assets held in the 
Dollar-Wall Street financial system and anxiety spread across many 
countries about the safety of their assets in the North American and 
European banks. Though this confiscation was not new (the United States 
has done this before to Cuba and Afghanistan, for instance), the scale 
and severity of these confiscations operated as a 
‘confidence-destroying’ measure, as Nogueira puts it.

Nogueira’s introduction is followed by three essays by leading Chinese 
analysts of the current shifts in the world order. In ‘What Is Driving 
the BRICS’ Debate on De-Dollarisation?’, Professor Ding Yifan (senior 
fellow at Beijing’s Taihe Institute 
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charts 
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the reasons why many Global South countries now seek to trade in local 
currencies and to offload their reliance upon the Dollar-Wall Street 
regime. He emphasises two factors that put into question whether or not 
the dollar will be able to continue to serve as an anchor currency: 
first, the weakness of the US economy due to its reliance upon military 
spending over productive investment (the former of which accounts for 
53.6% 
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of total world military spending) and, second, the US’s history of 
breach of contract. At the close of his article, Ding reflects on the 
possibility of the Global South countries accepting the Chinese renminbi 
(RMB) as their reference currency, since China’s manufacturing 
capabilities make the RMB valuable as a way to buy Chinese goods.

Yet, in his essay 
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‘China’s Foreign Exchange Reserves: Past and Present Security 
Challenges’, Professor Yu Yongding (member of the Chinese Academy of 
Social Sciences 
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is cautious about the possibility of the RMB supplanting the dollar. For 
the RMB to become an international reserve currency, Yu argues, ‘China 
must fulfil a series of preconditions, including establishing a sound 
capital market (especially a deep and highly liquid treasury bond 
market), a flexible exchange rate regime, free cross-border capital 
flows, and long-term credit in the market’. This would mean that China 
would have to eschew its capital controls and begin to offer RMB 
treasury bonds for international buyers. RMB internationalisation, Yu 
argues, ‘is a goal worth pursuing’, but it is not something that can 
take place in the short run. ‘Distant water’, he writes poetically, 
‘will not quench immediate thirst’.

Xu De Qi (China), /China Flower/, 2007.

So, where do we go from here? In his article 
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‘From De-Risking to De-Dollarisation: The BRICS Currency and the Future 
of the International Financial Order’, Professor Gao Bai, who teaches at 
Duke University in the United States, concurs that there is a pressing 
need to overcome the Dollar-Wall Street regime and that there is no easy 
way forward at this time. Local currency use has expanded – such as 
between Russia and China as well as between Russia and India – but such 
bilateral arrangements are insufficient. Increasingly, as a recent 
report 
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from the World Gold Council shows, central banks around the world have 
been buying up gold for their reserves and thereby driving up its price 
(the spot price for gold is over $2,300 per ounce, far above the $1,200 
per ounce price where it hovered in 2015). If no immediate currency is 
available to supplant the US dollar, Gao argues, then the Global South 
countries should establish a ‘reference value for settlements in their 
local currencies and an exchange platform to support such settlements. 
The great demand for such a valuation provides an opportunity for the 
creation of a BRICS currency’.

The new issue of /Wenhua Zongheng/ provides a clear and thoughtful 
assessment of the problems with the Dollar-Wall Street regime and the 
need for an alternative. The wide array of ideas that are on the table 
reflect the diversity of discussions taking place within policy circles 
around the world. We are keen to summarise these ideas and test their 
technical feasibility and their political viability.

Irene Chou (China), /The Universe Is My Mind/, 2002.

It is important to note that two of the BRICS countries have elected 
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new governments this year. In India, the far-right government led by 
Prime Minister Narendra Modi returns to power, but with a much-reduced 
mandate. Given that the Modi government has put forward a policy of 
‘national interest’, it is likely that it will continue to play a role 
in the BRICS process and to use local currencies to buy goods such as 
Russian oil. Meanwhile, South Africa’s ruling alliance, led by the 
African National Congress (ANC), has formed a government with the 
right-wing Democratic Alliance, which is committed to US imperialism and 
is not keen on the BRICS agenda. With the likely entry 
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of Nigeria into the BRICS bloc, BRICS’ centre of gravity on the African 
continent might shift northward.

During the hard years of struggle against the apartheid government in 
South Africa, ANC member Lindiwe Mabuza (known as Sono Molefe) began to 
collect poems written by women in the ANC camps. Guerrilla fighters, 
teachers, nurses, and others sent in poems that she published in a 
volume called /Malibongwe/ (‘Be Praised’), which referred to the 1956 
Women’s March in Pretoria. In her introductory essay, Mabuza (1938–2021) 
wrote that in struggle ‘there is no romance’; there is ‘only pounding 
reality’. That phrase, ‘pounding reality’, merits reflection today. 
Nothing comes from nothing. You have to pound reality to make something, 
whether a new political opening in places such as India and South Africa 
or a new financial architecture beyond the Dollar-Wall Street regime.

Warmly,

Vijay

Website <www.eltricontinental.org>

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Tricontinental: Institute for Social Research · Shadipur · New Delhi, 
NCT 110008 · India
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