De-Dollarization And The Future Of Geopolitics

De-Dollarization And The Future Of Geopolitics
The US and its European allies have suffered unfavorable effects because of the Russia-Ukraine conflict and hasty Western sanctions against Russia. It has sped up the de-dollarization process, which involves undermining the once-dominant US dollar. The China-Russia partnership has been strengthened both economically and in other ways because of Western pressure and a supercilious crackdown on Russia, including the removal of the nation from SWIFT and the freezing of its dollar assets.

The yuan is currently the most traded currency in Russia. Last year, trade between the two nations hit a record high of $190 billion (about $580 per person in the US), with the majority of these payments made in the currencies of the two nations. In addition, when the war began, China and India emerged as Russia's two main consumers of cheap hydrocarbons, which has kept Russia afloat. Putin declared that he is in favor of adopting the yuan for settlements between Russia and nations in Asia, Africa, and Latin America at his recent meeting with President Xi.

Many nations are imitating China and Russia because of the US's immoral weaponization of the dollar, as seen with Russia and previously in the unilateral sanctions imposed on Iran under Trump. While India uses non-dollar currencies to settle oil imports from Russia, China and Europe are working to develop a SWIFT alternative. As an alternative to the standard petrodollar, Saudi Arabia is also considering the Petro yuan.

India and Malaysia also agreed to settle trade in Indian rupees on April 1, 2023, and India and the UAE are also discussing utilizing the rupee to settle non-oil trade. Additionally, Malaysia has renewed a long-standing initiative to establish the Asian Monetary Fund, a rival to the IMF. China has welcomed the Malaysian prime minister's statement that there is no justification for the nation to continue depending on the dollar.

But the most audacious goal of BRICS has been to completely replace the existing currency. The introduction of a currency backed by gold and other rare-earth minerals was under progress, according to Alexander Babakov, deputy chairman of the Russian State Duma. As no nation in the world now follows the gold standard, this would be a significant change. Additionally, the emergence of cryptocurrencies, which are being studied by numerous nations, including China, has reduced reliance on conventional fiat currencies.

Together, the aforementioned factors have caused a decrease in the amount of dollars held in reserves by central banks around the world, which has seen a steady decline from about 70% 20 years ago to less than 60% now. The economy is not as strong in America as it once was. Recent failures of three banks, along with rising food and fuel prices brought on by the conflict in the Ukraine, may indicate that things are only getting worse. The dollar has experienced its fair share of ups and downs, but probably never to this extent, especially exogenously.

The US Army War College produced a paper in 2017 that appropriately noted, "While the United States remains a global political, economic, and military colossus, it no longer enjoys an untouchable position versus state competitors." Concurrently, China will surpass the US in all areas, including the military, if left to its economic schemes. The world is already staring into a wildly unpredictable global abyss that will eventually compel a devastating US-China battle that would upend the existing global order.

This is what multibillionaire Ray Dalio says in his well-researched book. According to him, every empire experiences a rise, a peak, and a decay (America being in the latter). A financial bubble and internal economic weakness, which prompts more money printing, characterize the decline. Additionally, it is characterized by internal conflict between the rich and the poor as well as expensive exterior conflict, or both (sounds very familiar). He claims that this causes a revolution in that superpower that tries to redistribute riches and is typically violent in nature.

The empire is weaker and more vulnerable to a new rising power—in this case, China—because of the domestic disarray. There will eventually be a significant battle between China and the US, which would usher in a new great power and a new global order. This explains what Mr. Dalio has experienced with other empires throughout history, including the Dutch and British—the latter being involved in its final war as a king—including the Dutch.

The US is aware that it may become yet another casualty of history and major cycles. But it cannot possibly ride off into the sunset in peace, leaving China or any other rival power to fill the hole. Maybe this is an example of a prophecy coming true. As they say, "Something's gotta give." Defence Secretary Lloyd Austin claims that the recent $842 billion Pentagon budget proposal to Congress is motivated by "the severity of our strategic struggle with the People's Republic of China."

Simply put, the US believes that a battle with China or a bloc led by China and Russia is imminent. While the US continues to spread the myth that China wants war with the US, their actual behavior appears to be in direct opposition to this. For instance, it appeared to be a provocation when Nancy Pelosi was sent to Taiwan; perhaps the US wanted both of its archenemies to be engaged in conflict. This action has increased the number of Chinese naval vessels and military exercises near Taiwan and increased the likelihood of a direct naval confrontation between Chinese and American warships.

Similarly, if NATO and the US make the wrong move, they might become directly embroiled in the confrontation between Russia and Ukraine. While Putin has threatened nuclear reprisal if the issue worsens, Finland has joined NATO. The infamous Doomsday Clock is currently set at 90 seconds until midnight, which is the closest it has ever been to a worldwide catastrophe.

The major world powers will start competing for domination sooner rather than later. It's unclear if this means we are heading towards a new World War or anything else.

The writer is a student of Politics and International Relations at London Metropolitan University, in the United Kingdom.