The de-dollarization trend seems to be unstoppable, as countries of the world have been striving to reduce their dependence on the greenback, concludes a Washington, DC think tank, blaming the development on the US' weaponization of its currency.
The think tank noted that the process of "de-dollarization" is gaining steam, with the countries of the Global South looking for alternatives to the greenback. The US scholars refer to world statistics indicating that the share of global reserves held in US dollars has contracted from 73% in 2001 to 58% in 2023.
The trend has gained momentum since the Biden administration's decision to slap sweeping sanctions on Russia and unplug it from the global financial system, according to the scholars. Washington's move has rattled many emerging economies, prompting them to seek alternatives, they say.
Last month, Treasury Secretary Janet Yellen admitted that Washington's policy of imposing sanctions on its rivals around the world could weaken the greenback's dominance.
"There is a risk, when we use financial sanctions that are linked to the role of the dollar, that, over time, it could undermine the hegemony of the dollar," Yellen told CNN on April 16.
She went on to say that Washington’s economic warfare "does create a desire on the part of China, of Russia, of Iran to find an alternative" to the US currency.
At the same time, the Treasury secretary argued that the weaponization of the dollar is "an extremely important tool" and that it "[wouldn't] be easy for other countries to find an alternative with the same properties."
Challenging Yellen's stance, the think tank drew attention to the fact that the dollar's use as a "blunt instrument of statecraft" is giving both US allies and rivals "an opening to look for alternative settlement mechanisms."
To illustrate their point, the scholars referred to Russia and France selling their natural gas in Chinese yuan. China and Brazil have also shifted to financial settlements in yuan, while BRICS countries are kicking off a discussion on establishing a unified currency. "And the list goes on and on and on," the DC think tank highlighted.
Whether the US wants it or not, the de-dollarization trend is underway, and the only way out for the US is to participate in the global restructuring of the monetary system "by consensus" with the developing world, the scholars insist. Otherwise, the US will face "the unmanaged decline of the US economic hegemony," which could lead to disastrous consequences.