Now is the time to ditch dollar
The US has employed economic sanctions on Russia and Iran in hopes of crippling them financially, making it more difficult for them to compete for trade in the region.
However, Russia and Iran are working together to ditch the dollar to weaken the effects of US sanctions. The two are working to develop a new financial transfer system to replace the US-controlled SWIFT. This system would circumvent third country sanctions.
The following is an article in this regard by staff writers of Iran's English language website of 'Fars news agency' under the heading: "Now is the time to ditch dollar."
The US administration has been using the dollar as a convenient weapon of choice to preserve its global economic and geopolitical position for many decades.
This has been evident through sanctions for Iran, Russia and Venezuela, and recently for China. During this process of reflection, Washington has weaponized the dollar anyhow, and this has prompted many countries to consider abandoning it as a medium of world trade.
Russia, Iran and China have been trading in national currencies to weaken Washington's ability to enforce illegal sanctions on nation states. The idea to ditch the dollar has also gained momentum in Europe since President Donald Trump came to office and waged trade wars.
Trump has waged tariff wars against Russia, the European Union and China. His assault on the global trading system has backfired and these countries have decided to move and diversify their trade away from the dollar in order to minimize the negative impacts of US tariffs.
Russia, which is subject to US sanctions, is selling oil in euros and China's yuan, and the proportion of its sales in those currencies has become significant in recent years. Venezuela and Iran, which are also under US sanctions, sell most of their oil in other currencies and have switched to non-dollar trading systems, even barter. Likewise, several commodity-producing countries want to follow through and join the club of non-dollar traders – from lending to exchange clearing, and through yuan, euro and ruble pricing.
This could include trading in derivatives such as oil futures and options, which is still dollar denominated. When this happens, and it will happen, as many nations are opposed to the US dollar as the world's reserve currency, the rest of the world market will follow suit to operate in a non-dollar environment.
The moment, therefore, is ripe for the world market to move trade out of the US currency and into other currencies in settlements. In today's multilateral world, it has become increasingly irritable for nations to purchase securities, goods and services in the US dollar. They want to opt for national currencies and ditch the greenback as a currency in their trade.
This has become the new policy for countries like Iran which has no access to dollar-dominated SWIFT transactions because of US sanctions. Removing the US dollar as an export and import payment currency has surely had its own difficulties for Iran as a pioneering state in the forced ditching of the US dollar, but at the same time, it has also made life easier for Iran, for those who want to buy the Iranian oil, and for those who are under Western sanctions.
They have largely quit the dollar as a transaction currency and replaced it with national currencies. Other commodity-producing countries could and should stop using the US dollar in global trade as well. They could use national currencies to reduce dependence on the greenback. This way, they can curb their exposure to dollar movement risks and the effects of US sanctions and trade wars, which typically feature cutting off their access to international trade and dollar-dominated transactions.
Thanks largely to the need for Russia and Iran to nullify the impact of sanctions, the ill-fated trade and tariff wars by the Trump administration on eurozone economies, the increasing demand for oil by China and others, and the growing concern on the legislation targeting OPEC producers, many countries hope to change trade policy and change the greenback's dominant position in the international monetary system.
Looking back, this long-overdue and vital transformation of the global monetary system won't happen overnight. But it is happening regularly and will most likely continue to happen.
US President Donald Trump’s trade wars, sanctions and economic terrorism against friends and foes have failed to transform themselves into something of value and substance, immediately or in the long run.
His tariffs promised to shower the United States with more jobs and affluence, but only brought financial loss and misery to businesses and households. His economic terrorism against Iran and others have only made them stronger. The most lasting consequences of his actions have also been the dismantling of global economy. The trade war has slowed down global growth, affecting the natural wealth of other nations and the local economies of household, neighborhood and community.
Strange enough, the disruptor-in-chief and sanctions hawks in US Congress refuse to press the pause button on their economic-war instincts and anti-multilateralism agenda. They use false claims to import some of their most odious ideas into the mainstream. And they enjoy being acknowledged and appreciated for all the wrong reasons.
Wrong and disruptive because their economic wars and sanctions against friends and foes plus the global nature of their growing trade tensions have been taken in by the Group of 20 finance leaders as well. They represent 19 of the world's largest developed and developing nations and the EU, and they are not treating the economic wars like any other issue or even less than that.
As it happens, the IMF has warned that the trade war could knock 0.5 percent from global GDP output in 2020. Netherlands-based investment bank ING has said the damage will make 2019 the worst year for trade.
Tell that to Trump and those still distracted by the memory of past glory in Congress with so much political interest directed elsewhere. They see no impact on US growth from the worsening trade conflicts and sanctions, claiming they have taken steps to protect consumers from disruptive agendas. These are the same households that Federal Reserve officials, including New York Fed President John Williams, say are “on the front line of the trade war”. They say a boost to inflation is right around the corner, and with a potential drain on confidence among businesses and financial markets.
No doubt the damage from the US sanctions and trade and economic policies has made 2019 the worst year for global trade and economy. It is still happening in plain sight and it has negatively affected the whole world. The destruction is not just happening elsewhere; it is now true of the US as well. The full impact of the tariffs and economic frictions have fallen on American consumers and businesses, a drain on the economy beyond the direct cost of the levies, which Goldman Sachs analysts say did cost 1.4 billion US dollars a month last year.
This should spare no evidence of the coming economic catastrophe. The dispute has reached beyond the world's largest economy as many other economies are also performing bad. This should deliver a rebuke of Trump's obsession with sanctions, tariffs and trade conflicts. It represents a symbolic condemnation of his decision and exerts political pressure on him to normalize the abnormal.
The reality of the situation is that Trump cannot go on forever threatening friends and foes with disruptive sanctions, tariffs and trade wars. The global unraveling has come. Trump is better off accepting it as a signal that his trade and sanctions plans are not sound, rebuild those plans, and set sail once more toward the coveted goal of global community, which is recognition of a rules-based international order.