The Russian decision, a reaction to the imposition of a new range of sanctions, was widely interpreted as a sign of economic weakness when in fact it was the latest of a series of developments which are sounding the death knell of the U.S. dollar as the world's de facto reserve currency.
This originated from the decision of President Richard Nixon to enter into a bargain with the House of Saud which involved the United States guaranteeing the security of the Saudi state in return for the Saudis selling oil in dollars. The arrangement, which was made possible due to Saudi dominance within the Organisation of Petroleum Exporting Countries (OPEC), ensured the survivability of the U.S. dollar as the de facto global reserve currency.
A Saudi Arabian decision to sell oil in different currencies including the Chinese Yuan, the Japanese Yen and Euros will have far reaching ramifications in terms of American domination of the global economy.
Having a world reserve currency such as the U.S. dollar is objectively a useful international financial device. For one, it offers lower exchange rate risk and aids sovereign states in conducting critical transactions such as settling payments for exports and imports of goods and services between nations.
If blame has to be apportioned for the drift away from the dollar, then a substantial degree of fault must lie with the policies of successive U.S. administrations which have consistently weaponised the dollar. The antipathy shown to its main global competitors in both military and economic power have prompted the circumstances which have pushed Russia and China into an alliance of interests which has only hastened the coming to being of a multipolar world order and the trend of de-dollarisation.
The less other nations trade in dollars, the more pressure will be brought to bear on the American economy which has a frankly unmanageable level of sovereign debt.
The United States has arguably got into this predicament because of its failure to provide consistently sound moral leadership, as well as its failure to focus on promoting meaningful economic development around the world. Instead, it has opted to be partisan in global affairs and is solely concerned about maintaining a coercive form of hegemony through regime change wars and the aforementioned strategy of imposing sanctions and seizing foreign reserves of nations (including gold reserves) in regard to which it has contrived an adversarial relationship.
A decision not to renew the U.S.-Saudi pact would represent the latest chapter in a sharp descent in American power and prestige. It is widely believed that the respective decisions by the United States to destroy Saddam Hussien of Iraq and Muammar Gaddafi of Libya were to an extent based on the threats by each leader to undermine the U.S. dollar. Hussein sought to sell Iraqi oil in Euros, while Gaddafi planned to launch an African Dinar, a currency that would be backed by gold and valuable resources.
It is clear that much of the world has tired of U.S. global policy, and it is up to the people of the United States who are facing formidable internal problems to pressure for change to the unchanging policies of the political class and policymakers which has caused a great diminution in American influence and moral authority on the global stage.
© Adeyinka Makinde (2024).
Adeyinka Makinde is a writer
based in London, England.
