Dedollarization is accelerating, under the effect of the war in Ukraine, the all-out sanctions imposed by Washington and China’s comeback in the Middle East, explains the director of Gulf State Analytics. Former unconditional allies of the United States, the Gulf countries, whose currencies are pegged to the greenback, are no exception to the trend.
The dollar is not about to collapse, but it is in decline. Not so long ago, one could not have imagined that the American currency would lose its undisputed preponderance on the world market. Today, this is no longer the case.
Over the past twenty-five years, the market share of the dollar has fallen from over 70% to less than 60%. In 2001, the share of reserves [de change] held in dollars was 73%. This year, it is only 58%.
The invasion of Ukraine in February 2022 and the Western reaction to Moscow’s aggression led to an acceleration in the rejection of the dollar. Imposition of heavy US sanctions against Russia, freezing of Russian reserves of dollars, withdrawal of major Russian banks from Swift [réseau mondial de transmission d’informations relatives aux virements bancaires] : more than ever, dedollarization is underway.
“A guarantee against US sanctions”
By waging an all-out financial war against Russia, Washington has enticed more countries in the South to look for alternatives to the dollar. China has been waiting for a long time to see its own currency gain more prominence in international trade. For years, Beijing has been trying to increase adoption of its currency across the globe.
“China’s proactive policy of promoting trade and investment in yuan − also known as the ‘internationalization of the renminbi’ − began during the global financial crisis of 2007-2008, explains John Calabrese, lecturer at the Middle East Institute (Washington). Chinese officials then became convinced that the use of the dollar as the main currency [dans les échanges internationaux] could make their country more vulnerable to international market fluctuations.“Since February 2022, China has benefited greatly from the acceleration of dedollarization.