The United States dollar (USD) could suffer another huge blow that could send it down the drain as heads of the Shanghai Cooperation Organization (SCO) member states have made a landslide decision to conduct the majority of transactions in national currencies instead of the American dollar, following Iranian President Ebrahim Raisi’s proposal to ditch the dollar eventually.
Raisi warned against the world’s dependency on USD in global exchanges and pointed out the importance of de-dollarization to form a just international system, during a speech at the July 4 virtual 23rd SCO summit that was held after Iran gained full-fledged membership in the bloc.
“Based on the experience of the past decades, it is now obvious that militarism and the dominance of the dollar form the bases of the Western domination system,” the president stressed. “Therefore, any attempt to shape a fair international system requires the removal of this instrument of dominance in intra-regional relations.”
Prime Minister Narendra Modi chaired the meeting where Russian President Vladimir Putin, Chinese President Xi Jinping and Pakistan Prime Minister Shehbaz Sharif were also in attendance apart from Raisi. Another summit attendee, China’s Xi, has also called for an increase in the use of national currencies in trade between members of the SCO. Xi pointed to a variety of financial instruments that members should focus on to expand mutual economic ties.
“It is necessary to ramp up cooperation in sovereign digital currency and work on the establishment of an SCO development bank,” Xi stated, volunteering to provide its partners with access to Chinese markets and share its experience.
Moreover, Russian President Vladimir Putin revealed that Russia-China trade and economic cooperation already has over 80 percent of settlements between them that are currently made in rubles and yuan. Putin added that the trade volume between Russia and co-SCO countries reached a record $263 billion in 2022 and even went up by 35 percent in the first four months of 2023.
“The share of the ruble in Russia’s settlements with the SCO countries exceeded 40 percent,” the Russian president said. (Related: DE-DOLLARIZATION: China now uses the yuan for cross-border transactions more than it uses the US dollar.)
When Raisi visited Indonesia back in May, he and his Indonesian counterpart Joko Widodo declared they would stop using the dollar in their bilateral trade at a televised presser in Jakarta. They claimed they are now set to use the Iranian national currency, the rial and the Indonesian rupiah to replace the conventional U.S. dollar in their economic relations.
The recent movements of the said “influential” countries are already paving the way to a quicker USD demise. According to reports, the U.S. dollar’s share in global reserves fell ten times faster last year than over the past two decades. The fall accelerated after other countries saw Russia’s USD and Euro-denominated assets frozen abroad and Moscow cut from the SWIFT global financial messaging system.
In fact, U.S. Secretary of the Treasury Janet Yellen has recently admitted that the dollar’s role as the world reserve currency could diminish due to Washington using its leverage over the global financial system to pursue its geopolitical goals through sanctions.
The weaponization of the dollar drives central banks away from USD
In yet another event on May 23-25, Iran was hard at work in the promotion of the collapse of the USD. When Tehran hosted the 51st Annual Summit of the Asian Clearing Union (ACU), members of the said payment arrangement between the central banks agreed to move away from USD.
The meeting was attended by the Bangladesh Bank, Royal Monetary Authority of Bhutan, Reserve Bank of India, Central Bank of Iran, Maldives Monetary Authority, Central Bank of Myanmar, Nepal Rastra Bank, State Bank of Pakistan and Central Bank of Sri Lanka as well as representatives from Afghanistan and Belarus and the governor of the Russian central bank.
Iran’s First Vice President Mohammad Mokhber emphasized that steering away from the American dollar is not a voluntary choice anymore. “In fact, it is a response to the weaponization of the dollar. The weaponization of the dollar during the past few decades has forced nations to reduce their reliance on the currency,” Mokhber said, pointing out that the U.S.’s influence around the world is seriously threatened by the dollar’s decline. He said Iran is prepared to improve its financial and economic links with other countries, especially ACU member states.