Any move to de-Dollarize an economy must be done through various means such as increasing purchases in gold, trading in local currencies and move towards virtual currency such as various different types of cryptos. With delegates from 44 countries agreeing to create a global monetary system as the U.S. Dollar abandoned the gold standard in 1944 in the city of Bretton Woods, this led to fierce criticism across the world. This effectively made the U.S. dollar become the main international currency and the rate was set with the gold reserves of the United States, which at that time was almost 70% of all the world’s reserves.
This sparked fiery outrage as during his famous speech on February 4, 1965, the then French President Charles de Gaulle said: “The fact that many countries, accept as a principle that dollars are as good as gold, leads Americans to borrow for free at the expense of other countries. Because what the U.S. owes, pays, at least in part, with money that only they can issue. Given the serious consequences that could be triggered in the event of a crisis, we believe that measures must be taken in time to avoid it.”
However, it is only through Russia, more than 50 years later, that efforts are finally being made to de-Dollarize the world economy.
According to a statement by the Russian Ministry of Finance made on Tuesday, the Turkish Treasury and Finance Minister Berat Albayrak and Russian Finance Minister Anton Siluanov, signed an agreement two Friday’s ago for the use of domestic currencies in the payment and agreements between the two countries. Make little doubt, this is part of Russia’s long work towards de-Dollarizing its economy to negate the effects of sanctions and U.S. economic dominance.
The agreement aims to use domestic currencies in transactions between the two countries, to create an appropriate financial market and to increase the attractiveness of local currencies for domestic organizations.
An agreement with Turkish banks and companies for the use of the MIR debit card, designed as an alternative to MasterCard and VISA by Russia, to create the necessary infrastructure in Turkey to circumvent the U.S. Dollar and use local currencies instead. It is soon to be expected that correspondent bank accounts will be expanded
The agreement, on the other hand, aims to co-operate on the interaction of the national payment systems of the two countries and the possibility of further integration into these systems. In line with the agreement, it is also desirable to support the expansion of the use of correspondent bank accounts to increase transactions between the two parties.
This move comes at a critical junction as debates continue among experts whether Turkey will make a break from NATO or not. As Turkey’s relationship with Washington becomes increasingly adversary, Ankara has strengthening relations with its Black Sea neighbour Russia. This has led to cooperation in Syria and the sale of the Russian S-400 missile defense system that culminated into threats of sanctions from Washington if Turkey bought the Russian system. It appears that Ankara is defying NATO’s ridiculous demands that states should be hostile towards Russia rather than engaging in initiatives that increases friendship, peace and stability.
Because of U.S. sanctions, economic aggression, and trade wars, Washington hopes that because of the global dominance of the U.S. dollar, they can supress, oppress and weaken states through financial sabotage and hostilities. However, what was not envisaged is that Russia would take a lead role to help sanctioned states such as Venezuela and Iran to circumvent sanctions and create new economic alliances through the de-Dollarization of their economies.
It is for this reason that Russian President Vladimir Putin said in June during the International Economic Forum held in St. Petersburg that “After obtaining the status of the global reserve currency, the dollar has now become an instrument that helps the country that issues it to exert pressure on the rest of the world.” Realizing this trend, the BRICS group reduced their use of the U.S. Dollar in mutual trade by 20%.
As part of its move to de-Dollarize its own economic, Russia has rapidly increased its holdings in gold. Russia increased its gold reserves to $109.5 billion in September after increasing it by $7.5 billion in just a matter of a few weeks. It also increased its share of gold in its international reserves – estimated at 529.083 million dollars – by 20.7%, according to data published by the Central Bank of Russia.
Although Turkey is the latest state to move towards the de-Dollarization of its economy, it is only because of Russia’s efforts, as well as China’s, that Middle Powers like Turkey can confidently begin moving away from the U.S. Dollar. China and Russia established an investment fund in 2017 worth $10 billion, an important moving considering trade between these two powers increased by a third in the first eight months of 2017.
Significantly, in 2018, Russia placed its sovereign debt bonds valued at approximately one billion U.S. dollars, but to be traded in the Chinese yuan. This compliments China’s efforts to also establish the yuan as an alternative currency to the U.S. dollar for trading beyond the Chinese border. The creation of a multipolar international economic system reduces the threat of U.S. sanctions as experienced by China, Russia Iran, Venezuela and Iran.
The decreasing use of the dollar significantly weakens Washington’s ability to wage an economic war against those who do not submit to the U.S.’ demands for unilateralism. Replacing the dollar as the dominant global trading currency will allow for states under attack from U.S. sanctions to continue to function with little interruption despite experiencing the full force of Washington’s hegemonic aggression.
Although Turkey has just joined the initiative to weaken the global dominance of the U.S. Dollar, this might be one of the biggest blows for the North American country so far when considering Turkey is NATO’s second largest power and despite a current struggling economy, is still an emerging economic power. Although the Russian-led initiative to de-Dollarize the global economy has a long way to go to achieve its objective, it has made a powerful move by now trading in local currencies with key country Turkey.