Last year was full of events that inevitably divided the world into two groups: those who still defend the use of the US currency as a global financial instrument and those who back the dollar. Worldwide tensions caused by economic sanctions and commercial conflicts launched by Washington force target countries to seek alternative payment systems other than the dollar. Here’s a look at countries that are moving toward the removal of dollar dependency and the reasons behind this decision. Which countries are dumping the dollar.
Which countries are dumping the dollar: China
Continued US-China trade and sanctions against China’s largest trading partners forced the country to remove its dependence on the dollar.
The Chinese government has not yet publicly announced this issue, but the China Banking Bank has consistently reduced its share of the US treasury. While China still holds the largest share of US foreign debt, it has reached its lowest level since May 2017.
In addition, instead of putting aside the dollar, China is trying to make its currency international. The yuan comes with the Japanese yen, the euro and the British pound in the IMF basket. Beijing has recently made efforts to strengthen Yuan, such as gold reserves, the opening of oil deals with the yuan, and the use of the currency in trading with international partners.
Which countries are dumping the dollar: India
India is the sixth largest economy in the world and is one of the largest importers of goods. Not surprisingly, the country is directly affected by global geopolitical conflicts and the sanctions imposed on its trading partners have hit it.
In 2018, due to US economic fines against Moscow, Delhi used the ruble to pay for Russia’s S 400 anti-aircraft defense systems. The country also paid the Iranian crude oil to the rupee. India signed an exchange deal with UAE in December to expand trade and investment without interfering with a third currency.
Which countries are dumping the dollar: Turkey
Turkish President Recap Tayyip Erdogan announced plans to put an end to US dollar domination through a new policy. The goal of this policy is to trade without dollars with its international trading partners. Next, the Turkish leader announced that Ankara is ready to deal with China through domestic currencies. Turkey also spoke about the possible replacement of the US dollar with another national currency in its dealings with Iran.
The reason for this was Turkey, it was political and economic. Relations between Ankara and Washington failed since the failure of the 2016 coup to overthrow Erdogan. Ankara considers Washington the mastermind of the coup.
In addition, Turkey tries to quit the US dollar in support of its own currency.
Lira has lost half of its value last year against the dollar. It has led to higher inflation and rising prices for goods and services.
Which countries are dumping the dollar: Iran
The triumphant return of Iran to the world trade scene did not last long. Shortly after Trump’s victory in the election, the United States abandoned the treaty, and the oil-rich country was again targeted by Washington’s massive sanctions, which threatened to penalize any country that violates the ban on trade with Iran. These punitive measures prevented trade with the Islamic Republic and hit the oil industry.
The sanctions have led Iran to seek alternative currency for the dollar in order to receive its export oil money. Iran made oil deals with India with rupees. He also wants to have a deal with Iraq. The two countries are planning to use the dinar to reduce their dependence on the dollar amid the US banking sanctions problems.
Which countries are dumping the dollar: Russia
Vladimir Putin said the US has a big mistake with “damaging trust in the dollar”. Putin has never wanted to curb a dollar deal or a ban on US currency use, but Russian Finance Minister Ason Sylonov said the country should withdraw its assets from the US Treasury in favor of other more secure capital such as rubles, euros and precious metals.
Russia has already taken steps to set aside the dollar for its economy, which is due to the heavy sanctions imposed since 2014. This country created a domestic payment system as a substitute for Swift, Visa, and MasterCard after the United States threatened to impose new sanctions on the country’s financial system.
Russia has already managed to relinquish the dollar from its dealings with foreign exchange swaps with several countries, such as China, India, and Iran. Recently, they have also offered to use the euro instead of the dollar in dealing with Europe.