Martin Wolf (OpinionMarch 30) predicts that a new era of currency disorder is on the horizon, with no credible alternative to the US dollar as the world’s dominant currency.
But the way the Biden administration has imposed sweeping economic sanctions on Russia would hasten the move by many non-western countries to reduce their reliance on the dollar for cross-border trade, investment and finance.
The de-dollarization of bilateral trade is already under way, albeit slowly, among the Brics and several emerging markets. The de-dollarization would get a big boost if Saudi Arabia decides to price some of its oil sales to China in yuan instead of dollars. If that happens, India, Indonesia, Turkey and a host of other emerging economies will be the next to knock on Saudi Arabia’s door and seek similar arrangements in their own currencies. Such moves would also open up new opportunities for conducting bilateral trade and investment in local currencies.
Through the frequent and unchecked weaponization of the dollar to advance foreign policy objectives, Washington is pushing emerging markets and developing economies to redouble their efforts to de-dollarise trade, sign bilateral currency swap agreements and diversify investments into alternative currencies.
Even though moving away from the dollar-centric global financial system will be a protracted process, it is a prudent one. Geopolitical reasons aside, reducing dollar exposure also makes economic sense for emerging markets to reduce their financial vulnerability to the vagaries of US monetary policy.
Of course, the transition to a multipolar currency system will be disorderly and unlikely to happen overnight, but it is worth pursuing.
New Delhi, India