The decision of Venezuelan government not to use dollar for international trade any longer, is not to be dismissed as a minor event. Behing every global conflict and turmoil, the moves by several countries, individually and collectively against the artificial supremacy of the dollar – as much as the US intransigent grip over it - form a crucial factor.
Countries like Russia, China and Iran are going ahead with the concept of abandoning the dollar ('de-dollarization'). Not for nothing does the US try to impose sanctions on countries including India against conducting any trade with them. Reports show that 23 countries, who together make up 60 per cent of global trade, support de-dollarisation. In addition to Russia and China, those including the European Union (EU) have already initiated moves to unseat dollar from the position of international trade currency. The decision of China that price of imported oil will henceforth be paid not in dollar but in yuan (renminbi), is part of this. By this time, yuan has expelled the dollar from trade transactions among Asia-Pacific nations.
Until the middle of the 20th century, monetary reserves were held in gold, and the currency for transaction was the British Pound. But then, by acquiring 70 per cent of the gold reserves, US established supremacy and by influencing the oil countries it hoisted the dollar to the position of transaction currency. The US was further able to re-inforce this upper hand through the formation of International Monetary Fund (IMF) and World Bank. Behind the US persistence to maintain its dominance in oil trade, there is this factor of the unimpeachability of the dollar – which is also the very foundation of US interests in the Arab world and elsewhere. And it is for this very reason that countries opposed to the hegemony of the dollar, such as Iran and Qatar, become isolated.
The fact is that through the dominance of the dollar, America has been enjoying for free the fruits of labour of other countries. When all transactions are conducted through the dollar, others are forced to depend on it. If countries one after the other abolish the dollar, it is not only the US economy that will weaken, but its political leverage too. Therefore, the policy of de-dollarisation will represent a paradigm shift in global power equations. But the US has so far been successful in preventing that. One reason for attacking Iraq and ousting Saddam Hussein was his decision that the price of export oil should be paid in Euro instead of Dollar. Also behind the liquidation of Libya's strongman Gaddafi was his determination to use Euro for all trade transactions. But now, the US diktat that all countries should be reliant on the dollar, has started facing opposition. The global power's use of the weapon of sanctions on an increasing number of nations to sustain its dominance, is becoming a setback to itself. In 2014, Russia started the debates on 'de-dollarisation'. One of the most important resolutions adopted at the Shanghai summit was that China would buy natural gas from Russia worth US 400 billion over next three decades, and the price for that would be paid in rouble and yuan. Forums such as BRICS (Brazil, Russia, India, China and South Africa) are contemplating a global dollar-free economic strategy. When on the one hand, America is tightening its grip by unilateral sanctions, on the other dollar is losing the soil under its feet. It was during 2012-2015 when US embargo was in force that Iran was compelled to find mechanisms for trade transactions without the dollar. Now when it is again faced with sanctions, not only are those mechanisms strengthening, but even European countries are also getting inclined to the same.
It had taken America a century to unseat British Pound and get the dollar accepted as medium of internationall transactions. Now before the dollar's supremacy completes three quarters of a century, that position is being challenged. By no means is dethroning the dollar an easy task. But indications have started appearing that it is not entirely impossible. One way for that is to have a de-centralized exchange system instead of a centralised one. A suggestion to use virtual currency is also being floated. The general perception is that the battle against dollar's hegemony will help purge world's economic picture and make it fair and rational. And with it, new equations will also evolve in global political equilibrium.