Dollar-free world gathers wind

17th January 2016 17th January 2016

Dollars and American wars are interlinked

Three significant moves in the first fortnight of 2016 signal a drive to end dollar hegemony and usher in a multi-polar world.

1. Iran-India oil payments in rupees

Iran and India have announced that they intend to settle all outstanding crude oil payments in rupees, as part of a joint strategy to dump the dollar and trade instead in national currencies.

The dollar dues — $6.5 billion equaling 55 per cent of oil payment — would be deposited in National Iranian Oil Co account with Indian banks. Sources said work was underway to amend the agreement with Iran to allow entire crude oil payment to be made in rupees. “Finance Ministry is moving a Cabinet note on withholding tax exemption on oil payments,” they said.

Since 2013, Indian refiners have been depositing 45 per cent of their oil payments to Iran in rupees with UCO Bank and withholding the remainder after a payment route through Turkey’s Halkbank was stopped under US and European sanctions.

This is truly a bold move by Iran, a country literally surrounded by American military bases. We shouldn't forget what happened to Iraq after it announced that it was dumping the dollar.

2. Russian sets own crude oil benchmark

Russia has taken a significant step to end the Wall Street oil price monopoly. Russia’s own crude oil benchmark future contracts will price oil in rubles and no longer in US dollars.

3. The AIIB is formally launched

The China-led Asian Infrastructure Investment Bank (AIIB) is formally launched this month which has 57-member countries and a war-chest of $100 billion. The move is an attempt to take the dependence away from US-controlled International Monetary Fund (IMF) and World Bank (WB) and unlike these institutions no country will have a veto in the new AIIB bank.

It’s also worth adding that IMF has already found its hands forced and accepted yuan as a reserve world currency.

Going back to Iran, last year the Islamic republic moved to stop all mutual settlements in dollars with foreign countries.

Both Iran and Russia are committed to do trade in their own countries and there are plans afoot by the central banks of the two countries to set up a joint bank. (That’s why US has been so keen to limit Iran’s rise in the past).

Meanwhile, the de-dollarization moves in the world are beginning to pick up momentum.

The historic energy agreement between China and Russia is already known. The two countries have decided to settle their oil and gas payments in yuan and ruble. The advent of a petro-yuan on the hydrocarbon market could be a game-changer towards a multipolar world.

There are even rumours of backing the ruble with gold. This would actually be a sensational move, explaining the reasons why Moscow and Beijing have been buying so much gold in the last year, breaking several records.

The geopolitical role of the petrodollar continues to be the most important existential factor for Gulf countries, and for Washington as it’s poised to surmount an astonishing 20-trillion-dollar debt in 2017.

The petrodollar-system is also deeply tied to the dollar and its hegemony as the world reserve currency. Eurasian integration depends on a gradual decline in the penetration that the dollar has in their economies. Giving up the US dollar as the world's reserve currency means sinking the US’ ability to finance wars and allies without restraint. A clear benefit to much of the planet suffering the consequences of American foreign policy.

The US has failed in it’s attempt to divide and hinder the Eurasian integration with the MENA (Middle East and North Africa). The multi-polar world is advancing and Beijing, Moscow and Tehran widely understand that their dependence on the dollar is simultaneously Washington’s major lifeline.

The shift in global reserve currency is not a new phenomenon. About every century since the Renaissance, the global reserve currency has shifted—Portugal, Spain, The Netherlands, France and Britain have dominant currencies at different times.

As for Asia, since the dawn of civilization, except for the last 250 years, Asia had half the world’s wealth and two centres of gravity—China and India. With Asia esteemed to possess two-thirds of global GPD in 2050, because of favourable demographics, de-dollarization moves would only gather pace.