De-dollarization picks up steam: Iraq joins China, Brazil to dump US dollar

Iraq has joined the growing list of nations that has announced ban on doing business or personal deals in US dollars.
For decades, dollar has been the most preferred currency in Western Asia for transaction if an individual or an organisation does not have enough dirhams, dinars, riyals or pounds in hand.
A report by DW said that big-ticket purchases by Iraqis were usually done using dollars which has led to further devaluation of dinar.
Over the past few days, senior political leaders, in most parts of West Asia, have been persistently making statements, suggesting the dollar’s dominance in the region may fade.
Also Read: De-dollarization has begun, says Russia’s foreign minister Sergey Lavrov
The complete ban on use of dollars in Iraq comes within months after the country said that it would do business with China using yuan.
Dumping dollars
A few days ago, Saudi Arabia’s finance minister said his country was “open” to selling oil using currencies other than the US dollar.
The United Arab Emirates (UAE) has said it will trade with India in Indian rupees.
Egypt had last year announced to issue bonds in yuan.
Several Western Asian countries including Egypt, Saudi Arabia, the UAE, Algeria and Bahrain have said they want to join BRICS – Brazil, Russia, India, China and South Africa – nations who are expected to create a new currency to facilitate overseas trade.
Must Read: De-dollarisation: ‘If BRICS uses own currency for trade, it will end dollar’s hegemony,’ warns ex-White House economist
Russia has already said that during BRICS summit, the member countries will discuss the creation of its new currency.
Russia’s new non-dollar financial system with Islamic nations
As per Russian Deputy Prime Minister Alexey Overchuk, Moscow is in broad talks with Islamic nations about de-dollarization and the construction of a new financial system, completely different from the traditional hegemonies.
“Our relations with the countries of the Islamic world cannot but be influenced by the global shifts that are taking place and the global trends. We are talking about processes of de-dollarization and the creation of an independent financial system,” Overchuk had said during a recently held international economic forum Russia-Islamic World: KazanForum.
This indicates that Russia has been gradually seeking the construction of an alternative financial system that would enable them to transact with other countries without relying on SWIFT, the global banking linking system, and the US dollar, as the Group of the Seven (G7) intends to further restrict Russian access to the financial system.
Russia-Iran settle 80% trade using local currencies
Russian Deputy PM Alexander Novak last week said that Russia and Iran are gradually phasing out the usage of dollar in bilateral trade and informed that 80 per cent of Russia-Iran trade transactions are settled using national currencies – ruble (Russian currency) and rial (Iranian currency). Both the countries are also considering the usage of the Chinese yuan.
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“We discussed these issues in great detail today, and both the Ministry of Finance and the Bank of Russia were present, as were our Iranian counterparts. I believe approximately 80 per cent of our mutual settlements are in national currencies: rials and rubles,” Novak said after his meeting with Iranian officials earlier this month.
Countries that have shunned dollars
China and Russia are trading in local currencies. Also, Brazil has dumped dollar to settle trade in yuan with Beijing.
Brazil and Argentina too have discussed the creation of a common currency for the two largest economies in South America.
China is buying gas from UAE in yuan. Southeast Asian nations in ASEAN are de-dollarizing their trade, promoting local payment systems.
Check This: End overseas trade settlement in dollar, use your own currency: Brazil President Lula to BRICS nations
Kenya too has shunned dollars to buy Persian Gulf oil by settling payment in its own currency.
India too has been settling overseas trade with several countries in INR.
For the first time in almost five decades, Saudi Arabia said the oil-rich nation is open to trading in currencies besides the US dollar.
With inputs from agencies
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