Balaji Srinivasan, former CTO of Coinbase, recently shared his insights on the global economy and the future of the U.S. dollar on social media. He discussed the concept of dedollarization, suggesting that China and other countries are moving away from U.S. debt and investing in gold instead. He argued that this shift could potentially lead […]
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Analysts: Confiscation of Russian Assets in the US Would Supercharge De-Dollarization
Analysts are pondering the effects of the approval of the Rebuilding Economic Prosperity and Opportunity (REPO) Act by the U.S. House. The execution of seizures for over billion of Russian assets held in U.S. institutions would “supercharge” the de-dollarization efforts of several nations. This is due to the possibility of having their assets seized […]
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Russian President Putin Discusses Dedollarization — Calls US Dollar Weaponization a ‘Grave Mistake’
Russian President Vladimir Putin says the U.S. dollar is the main weapon used by the United States to preserve its power across the world. However, he stressed that when “the political leadership decided to use the dollar as a tool of political struggle, a blow was dealt to this American power.” He called it a […]
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India’s De-Dollarization Push Flounders as Oil Suppliers Cite Rupee Repatriation Concerns
The Indian Oil Ministry recently acknowledged that the country’s push to pay for oil with rupees has failed because suppliers are not sure if they will be able to repatriate their funds. The decision is intended to help diminish India’s reliance on the U.S. dollar when settling its cross-border obligations.
High Transactional Costs of Converting Rupees
The Indian oil ministry recently informed a standing committee of parliament that the country’s attempt to have oil producers accept payment in the local currency has failed. The ministry cites the perceived high cost of converting the rupee to other major currencies as one of the reasons for the policy’s failure.
The oil suppliers, including the United Arab Emirates’ ADNOC, have also highlighted possible challenges that may arise when repatriating the generated revenues, the ministry added.
According to a report in the Economic Times, some oil producers believe the rupee’s weaknesses versus the U.S. dollar make it a less-than-ideal payment method.
“During FY 2022-23, no crude oil imports by oil PSUs were settled in [the] Indian rupee. Crude oil suppliers (including UAE’s ADNOC) continue to express their concern on the repatriation of funds in the preferred currency and also highlighted high transactional costs associated with conversion of funds along with exchange fluctuation risks,” the country’s oil ministry said.
The report also added that the Indian Oil Company (IOC) paid a premium over and above the prevailing price, illustrating the extent of India’s de-dollarization failure. Furthermore, the country’s oil ministry stated that the Indian conglomerate Reliance Industries Ltd and oil public sector undertakings (PSUs) still have no agreement to pay in rupees with any supplier.
Since July 11, 2022, the Reserve Bank of India (RBI) has permitted oil importers to pay with rupees and exporters to be paid in rupees. The decision is intended to help diminish India’s reliance on the U.S. dollar when settling its cross-border obligations. India’s regional rival China has already established agreements with some oil-producing countries that allow it to pay via its currency, the yuan.
Despite India’s failed goal of paying for oil with rupees, its de-dollarization policy has still achieved some success in certain non-oil trade transactions.
What are your thoughts on this story? Let us know what you think in the comments section below.
Indonesia Expands De-Dollarization Efforts With National Task Force Formation
Indonesia’s central bank has established a national task force to expand the use of local currency with partner countries. Malaysia, Thailand, Japan, and China are already trading with Indonesia using local currencies. In addition, Singapore and South Korea have signed cooperation agreements to build a local currency transaction framework with Indonesia, according to the central bank.
Indonesia’s De-Dollarization Efforts
Bank Indonesia (BI), the Indonesian central bank, announced on Tuesday that it has “formed a National Task Force to expand the use of local currency transactions (LCT) in Indonesia with partner countries.” The Memorandum of Understanding (MoU) concerning the National LCT Task Force was signed on the sidelines of this year’s ASEAN Summit in Jakarta on Tuesday.
Besides the central bank, the Coordinating Ministry for Economic Affairs, Coordinating Ministry for Maritime Affairs and Investment, Ministry of Finance, Ministry of Foreign Affairs, Ministry of Industry, Ministry of Trade, Ministry of State-Owned Enterprises, Financial Services Authority (OJK), and Indonesia Deposit Insurance Corporation (IDIC) also participate in the LCT project.
The announcement details:
Currently, LCT Corporation has been implemented between Indonesia and several neighboring countries, namely Malaysia, Thailand, Japan, and China. Meanwhile, Singapore and South Korea have also signed cooperation agreements to build an LCT implementation framework with Indonesia.
Indonesia recently ramped up its de-dollarization efforts. In April, Bank Indonesia Governor Perry Warjiyo stated that Indonesia is following the lead of the BRICS economic bloc (Brazil, Russia, India, China, and South Africa) to shift away from using the USD in international trade and financial transactions.
The BRICS nations recently wrapped up their summit in Johannesburg. The economic group invited six countries to join as new members. At the conclusion of the summit, the BRICS leaders agreed to encourage the use of national currencies in international trade and financial transactions.
Indonesia is a member of the Association of Southeast Asian Nations (ASEAN), along with Brunei, Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. In May, the leaders of the ASEAN nations agreed to push the use of local currencies for economic and financial transactions.
What do you think about Indonesia’s de-dollarization efforts to set up a national task force to focus on the use of local currencies instead of the U.S. dollar? Let us know in the comments section below.
JPMorgan Analyzes De-Dollarization Risk, Potential for Chinese Yuan to Displace US Dollar as Reserve Currency
JPMorgan has provided an analysis of the risks of de-dollarization and the potential for the Chinese yuan to displace the U.S. dollar as the world’s reserve currency. The global investment bank says the renminbi could assume “some of the current functions of the dollar among non-aligned countries and China’s trading partners.”
JPMorgan on De-Dollarization and Chinese Yuan
JPMorgan’s Global Research published a report on Thursday titled “De-dollarization: Is the US dollar losing its dominance?”
Alexander Wise, who covers Strategic Research at JPMorgan, described:
The risk of de-dollarization, which is a periodically recurrent theme throughout post-war history, has returned into focus due to geopolitical and geostrategic shifts.
JPMorgan outlined two scenarios that could erode the status of the U.S. dollar as the world’s reserve currency. “The first includes adverse events that undermine the perceived safety and stability of the greenback — and the U.S.’s overall standing as the world’s leading economic, political, and military power,” the global investment bank detailed. “The second factor involves positive developments outside the U.S. that boost the credibility of alternative currencies — economic and political reforms in China, for example.”
The report also discusses alternative currencies to the U.S. dollar. “A candidate reserve currency must be perceived as safe and stable, and must provide a source of liquidity that is sufficient to meet growing global demand,” Wise noted.
Regarding whether the Chinese yuan (renminbi) could displace the USD, the analyst detailed: “With China’s growing centrality in global commerce, one might naturally expect the renminbi to assume a greater role in the global economy over time, but this transition would likely occur over the course of decades.” He added:
Relaxing capital controls, opening markets, implementing measures to promote market liquidity, bolstering the rule of law, reducing appropriation and regulatory risk, and promoting Chinese government bonds as an alternative safe asset — these could all cement China and the renminbi as a credible alternative to the U.S. and the dollar.
The report also discusses de-dollarization in oil markets, stating: “More oil sales are now being transacted in non-dollar currencies such as the renminbi.” Natasha Kaneva, head of Global Commodities Strategy at JPMorgan, pointed out: “The U.S. dollar, one of the key drivers of global oil prices, appears to be losing its once powerful influence.”
Jahangir Aziz, head of Emerging Market Economics Research at JPMorgan, stated: “Overall, we find that the importance of the dollar has declined significantly from 2014 to 2022.”
Regarding whether de-dollarization is imminent, JPMorgan said: “While marginal de-dollarization is expected, rapid de-dollarization is not on the cards.” The global investment bank continued:
Instead, partial de-dollarization — in which the renminbi assumes some of the current functions of the dollar among non-aligned countries and China’s trading partners — is more plausible, especially against a backdrop of strategic competition.
“This could over time give rise to regionalism, creating distinct economic and financial spheres of influence in which different currencies and markets assume central roles,” JPMorgan concluded.
Do you agree with JPMorgan’s analysts about de-dollarization? Do you think the Chinese yuan could displace the U.S. dollar as the world’s reserve currency? Let us know in the comments section below.
Venezuelan President Nicolas Maduro Calls for De-Dollarization of the Global Economy
Nicolas Maduro, the president of Venezuela, has called to de-dollarize the global economy due to the difficulties the current system brings to emerging countries affected by U.S. sanctions. In a message directed to the BRICS leaders, Maduro called to establish alternative settlement systems using national currencies.
Venezuelan President Nicolas Maduro Reinforces the Need to Create a De-Dollarized Economic System
Nicolas Maduro, President of Venezuela, has called for creating an emerging economic system away from the dominance of the U.S. dollar. In a message sent as part of Venezuela’s participation in the BRICS leader summit, held recently in Johannesburg, Maduro stated the reality of the geopolitical situation of the last years has reinforced the need for the de-dollarization of the world economy.
Maduro said this had to be done due to the “indiscriminate use and abuse of the U.S. dollar as a tool for waging an economic war against the free people of the world.”
Venezuela has been the target of economic sanctions that have affected the sale of oil and other operations of PDVSA, the state-owned oil company, and have blocked U.S. nationals from financing or purchasing the petro, the Venezuelan cryptocurrency asset.
The Damages and a New Way
These “imperialist” sanctions and economic warfare measures, Maduro stated, have touched at least 28% of the world population in 30 nations. “The damage to our economies and development models is undeniable,” Maduro explained, detailing that these measures affected the human rights situation in each of these countries.
Talking to the leaders of the nations of the BRICS group, integrated by Brazil, Russia, India, China, and South Africa, Maduro called for configuring a new financial system to allow BRICS countries and its allies to settle transactions with “new physical and digital tools.”
He mentioned a basket of currencies as one of the tools to reach this objective. Maduro also referred to the need to create new sources of financing to contribute to the recovery and growth of emerging economies. Furthermore, he offered Venezuela’s experience in countering the effects of sanctions on the BRICS bloc to “dismantle the financial and commercial domination system.”
Venezuela presented an official application to be part of the BRICS bloc on August 1, but it was not selected amongst the new six nations invited to be part of the group starting next year.
What do you think about Nicolas Maduro’s call to create a new de-dollarized alternative financial system? Tell us in the comments section below.
Indian Official: De-Dollarization Remains Distant, Rupee Should Become Dominant Currency
India’s oil and gas minister says de-dollarization is a long way away. The official emphasized his desire to conduct all transactions in rupees, expressing his wish for the Indian currency to become “the lead currency in the world.”
Indian Official on De-Dollarization
India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri stated in an interview with CNBC on the sidelines of the B20 Summit in New Delhi on Friday that de-dollarization is a long way off.
Puri explained that he expects the U.S. dollar to maintain its dominance in global trade. Commenting on factors that could dethrone the USD as the world’s reserve currency, he opined:
I don’t know what kind of change [the dollar needs to] be affected but I don’t see it … It’s not so easy.
The minister further shared that he does not see the Indian rupee challenging the U.S. dollar as a major global currency, even though it is being used in some oil transactions alongside the Chinese yuan and the Russian ruble. Nonetheless, he stressed:
I would like to be able to transact everything in rupees … I wish the Indian rupee should be the lead currency in the world. But I’m also a realist.
A growing number of countries are moving away from settlements in U.S. dollars. The BRICS nations (Brazil, Russia, India, China, and South Africa), for example, are encouraging the use of local currencies in international trade and financial transactions.
While acknowledging a growing de-dollarization trend, the Indian minister questioned: “The main point is that … there are arrangements, but the transactions which are taking place, how many percent is coming in rupees?” He noted: “We heard about decoupling. But these international arrangements, trading arrangements, payment arrangements, these have been in place for a long time.”
Do you agree with the Indian official about de-dollarization? Let us know in the comments section below.
Russian President Putin to BRICS Leaders: Irreversible Process of De-Dollarization Gaining Steam
Russian President Vladimir Putin said at the BRICS summit that “A balanced, irreversible process of de-dollarization of our economic ties is gaining steam.” The Russian leader stressed: “We oppose hegemonies of any kind and the exceptional status that some countries aspire to, as well as the new policy it entails, a policy of continued neo-colonialism.”
Putin Participating at BRICS Summit
The leaders of over 40 countries are currently attending the 15th BRICS Summit in Johannesburg. All leaders of the BRICS nations (Brazil, Russia, India, China, and South Africa) are attending in person, except Russian President Vladimir Putin who took part via videoconference. South Africa is the host of the BRICS summit this year.
Addressing other BRICS leaders, the Russian president said in his remarks at the summit on Tuesday: “From year to year, the BRICS countries are increasing their potential … the five partner states, with a total population exceeding 3 billion, account for a greater share in global GDP than the so-called Group of Seven [G7] in terms of purchasing power parity. Over the past decade, BRICS countries have doubled their investment in the global economy, and their total exports have reached 20 percent of the global total.”
Noting that “The partner countries are successfully implementing their Strategy for BRICS Economic Partnership 2025 [BRICS Strategy],” Putin stressed:
In particular, they are strengthening five-sided cooperation in such areas as diversification of supply chains, de-dollarization and the transition to national currencies in mutual transactions, digital economy, support for small and medium-sized businesses, and fair technology transfer.
The BRICS Strategy “defines a development path of BRICS and sets the framework for cooperation of its members in accordance with current economic trends and conditions,” the economic bloc previously explained.
Putin also emphasized the importance of shaping a multipolar world order. “Importantly, we are all united in our commitment to shaping a multipolar world order with genuine justice, based on the international law and in keeping with the key principles set forth in the UN Charter, including sovereignty and respecting the right of every nation to follow its own development model,” he said, adding:
We oppose hegemonies of any kind and the exceptional status that some countries aspire to, as well as the new policy it entails, a policy of continued neo-colonialism.
On Tuesday, Putin also told the BRICS Business Forum, one of the key events at the BRICS summit:
A balanced, irreversible process of de-dollarization of our economic ties is gaining steam, with efforts undertaken to develop efficient mechanisms of mutual settlements, as well as monetary and financing control.
“As a result, the share of the dollar in export and import transactions within BRICS is declining as it only equaled 28.7% last year,” the Russian president noted.
What do you think about the statements by Russian President Vladimir Putin at the BRICS summit? Let us know in the comments section below.
Dutch ING Bank Analysts: BRICS Expansion to Power De-Dollarization Across World Economies
Analysts of ING bank believe the de-dollarization trend that has been growing in the world might pick up momentum due to the possible expansion of the BRICS bloc. While the issuance of a BRICS common currency remains uncertain, according to some developing narratives, the Chinese yuan could become the de facto substitute for the U.S. dollar.
ING Bank Analysis: De-Dollarization to Gain Traction
A recent note issued by ING Bank revealed that the de-dollarization movement that BRICS countries have started is likely to continue to pick up steam. The catalyst for this probable growth will supposedly be the BRICS summit that will be held in Johannesburg this week, where the bloc integrated by Brazil, Russia, India, China, and South Africa will be considering adding more countries.
ING Bank analysts Chris Turner, Dmitry Dolgin, and James Wilson discussed this in a note last week, stating:
We suspect the subject of ‘de-dollarization’ might gain some traction this summer when senior leaders of the BRICS nations meet.
Several countries are seeking to be part of the BRICS group, from powerhouses like Saudi Arabia to countries facing economic hardships like Argentina and Venezuela. However, there is still no framework for adding new members, even though Brazilian President Luiz Inacio Lula da Silva has vowed that these topics will be discussed during the summit.
Chinese Yuan Set to Antagonize the U.S. Dollar
While there have been talks on issuing a BRICS bloc common currency, officials have offered contradictory statements. Nonetheless, the China-led bloc could rely on the Chinese yuan as part of its current de-dollarization strategy, as it has gained momentum in bilateral trade agreements between countries of the bloc, according to ING analysts.
For example, Brazil and Russia are already using the Chinese yuan to complete settlements to pay for various imports from China, and also Indian refiners have paid for Russian oil imports in Chinese yuan.
On this, ING analysts stated:
De-dollarization is seen mainly in the central banks’ international reserves, as the dollar is being pushed out by a variety of currencies, including the yuan. Looking at the long-term developments, the USD seems to be replaced mostly by Asian currencies, namely the CNY and Japanese yen.
However, the note explains that the Chinese yuan lacks attractiveness for bond investors due to “a relative lack of liquidity and lingering investor concerns over potential capital controls.”
What do you think about the expansion of the BRICS bloc and its effect on the de-dollarization processes developing? Tell us in the comments section below.