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Contesting Dollar’s dominance

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An exchanger counts U.S. dollars banknotes at a currency booth in Peshawar, Pakistan .
| Photo CreditREUTERS

TThe fact that the multipolar international system has begun to emerge is supported by clear trends in global geoeconomics. There Trade is important within the Global South; currency swap arrangements; trade in national dollars without the dollar; steps towards oil and gas trading in national currencies; regional organisations promoting such arrangements; the establishment of special accounts to internationalize national currencies; and the creation of financial communications systems. Is Is this irreversible multipolarity? Can Should the dollar hegemony of America be challenged?

Countries Outside the West They say they are working in a multipolar environment and are creating alternate currency exchanges to lessen their dependence on dollars. Trade Kriege against China Since 2018, there have been China Follow this path. The Russia-Ukraine This development has been hampered by war since Russia Trades in oil and commodities in ruble or national currencies in a similar model to the rupee-rouble trading of earlier years.

Economic Diversification

The Steady but uneven growth of the ‘emerging economies’ Economic diversification is possible only if this base is met. For The combined GDP of, for example, is China, India, Russia, South Africa, Indonesia, Brazil, Iran Turkey It is higher than that of the G7.

Inter-Asian Trade between countries is driven by high levels of consumption. Asian countries. India’s trade with Asian The number of countries is greater than that with the West. China’s trade with Asian Over the last few decades, the number of countries in the world has doubled. This is despite the fact that their trade with the United States has fallen. West. The UAE, Iran, Turkey, Indonesia, Sri Lanka, Myanmar, Thailand, Malaysia Indonesia Trade in local currencies and regional partners Bilateral Currency swaps between ASEAN countries China, Japan, South Korea Are $380 billion rising SimilarlyThe South African Many people use rand. African countries. The Latin American Countries are moving toward greater inter-regional commerce.

With Emerging economies are able to trade in national currencies, despite the dollar’s high exchange rate. Asian Central banks control more than $400 billion in local currency swap lines, and they also trade amongst each other. Since 2019, India Paying Russia For fuel, oil, and minerals, on an informal basis. It A local currency trade was established with the UAE. Japan, Turkey, Korea South Asian countries. In July 2022. Reserve Bank Of India The Reserve Bank of India (RBI), unveiled a rupee settlement scheme for international trade. It allows special vostro accounts in designated countries. Indian Internationalisation of the rupee is possible with banks

China The development of the Renminbi Clearing and settlement services were offered to participants in cross border yuan trade and payments in 2015. The Internationalisation of the yuan is underway International Monetary Fund It was given by him Special Drawing Rights Status in the currency exchange. Russian The technology has been adopted by banks. China-based Cross-Border Interbank Payment System International payments are exempted from SWIFT’s international system.

The BRICS’s New Development Bank Encourages investment and trade in national currency by disbursing upto 50% of its loans in that currency since 2015. Other Regional groupings like the Shanghai Cooperation Organization Eurasian Economic Union Partner-countries and the Regional Comprehensive Economic Partnership They are establishing processes to facilitate trade, investments and settlements using national currencies. The The process of creating a shared payment infrastructure and linking national systems for the transmission financial information is underway.

The petrodollar is seriously threatened by moves to trade oil and natural gas outside of the dollar zone. This Any move can reduce the U.S. dollar monopoly that it has enjoyed since the 1970s. But Many oil producers, refiners, buyers and sellers such as Russia, India, China, Venezuela Iran Although the initial trading of hydrocarbons was initiated in national currencies, it is still not fully operational. India’s vostro accounts enable rupee payments for Russian Crude oil and, as D. Subbarao said, India You can save as much as $4 billion per month on forex outgo China Use the yuanruble route Russian Oil since 2020 China is currently in discussions with Saudi Arabia The Gulf Countries that trade oil in the yuan

What This is how it works

What These trends are they worth it? FirstDespite speculations, there is no movement towards de-dollarization. The The problem for national currencies is their inability to be fully converted. ThusDespite multiple currencies being circulated and alternative trade systems emerging, the dollar still holds the majority. Further These countries have trillions of dollars in reserve currency and will be exposed by the dollar boat. SecondThe dollar is the world’s most widely used currency. It makes up 60% of global currencies, with the euro making up 20%, the euro making up 20% and the yen making up 5.8% and 3% respectively. To To make an alternate system work, it takes more effort and is not sustainable. ThirdThe diversification of national currencies in trade has been increasing. Trade Buying food and oil in national currency gives access to countries that are not part of the Collective. West Options that weren’t available before. In The contemporary international system, the nation states of the Global South Are determined to choose their own allies In This environment is one where geopolitics and geoeconomics merge, and new supply chains as well as alternate currency chains enable dual/multiple circulation. This The material basis for the multipolar system is

Anuradha Chenoy Is Adjunct Professor, Jindal Global University, Haryana

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