Not only Russia and Ukraine: these 11 countries have just said goodbye to the dollar forever
Since 1971, when President Richard Nixon dropped the gold standard, the US dollar has not been backed by precious metals. Instead, everyone has put their faith in the credit of the US government, but not everyone.
That move started talk about a de-dollarization of the global economy, especially in recent years among BRIC countries (Brazil, Russia, India and China), among others, who have discussed creating a single currency and payment system among the members. However, no other currency, not even the euro launched in 1999, has been able to sustain a challenge to the greenback as the world’s reserve currency.
That may be changing with President Donald Trump shaking things up through his on again, off again aggressive policy on tariffs. He has expressed a desire to weaken the US dollar while maintaining its dominance.
He has made clear that he will take action on countries that attempt to trade using alternative currencies, threatening 100% tariffs. But he may not be able to have his cake and eat it too.
“The blowback of US tariffs onto the US domestic economy leaves the dollar naked,” says Chris Turner, head of currency strategy at ING, in a note. The US dollar is down around seven percent since Trump’s inauguration experiencing some of its steepest drops around his tariff announcements.
This has traders selling off dollars to shelter their wealth in Japanese yen, Swiss francs and to a lesser degree the euro pointed out Turner. But there is a group of 11 countries that has already decided to stop using the US dollar altogether.
These 11 countries have said goodbye to the dollar forever
The Commonwealth of Independent States (CIS), which consists of Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine, is striving to expunge US currency from being used for transactions within their respective borders and between each other. The eleven members of regional intergovernmental organization are working to reduce the influence of the US dollar while strengthening their own at the same time.
Last week, Russian President Vladimir Putin hosted the leaders of the other countries in the Commonwealth of Independent States. As GPF’s Ekaterina Zolotova recently wrote, an emphasis on economic cooperation and conciliation could revitalize the post-Soviet organization. pic.twitter.com/ybCAKaywrK
— Geopolitical Futures (@GPFutures) October 18, 2024
It’s been reported that they have decided to abandon the use of US currency in cross border commercial transactions and to ban the circulation of banknotes within their borders. To that effect, in 2024, 85% of transactions between CIS member states were conducted in national currencies.
Currently 95% of transactions between Russia and China bypass using US dollars and are conducted in rubles and yuan according to Russian President Vladímir Putin.
Were more countries to hop on the bandwagon, that would mean a weakening of the effectiveness of US financial sanctions against foreign adversaries explained economist Gary Hufbauer. He pointed out to Newsweek that it would mean higher interest rates in the US as well.
Is this the end of the US dollar?
The US dollar is not going anywhere in the short-term, but “diversification away from the dollar is a growing trend,” said Joyce Chang, chair of Global Research at J.P. Morgan. She sees from her institution’s analysis that “the factors that support dollar dominance remain well-entrenched and structural in nature.”
This opinion is concurred by other experts. Currently the US dollar is the preeminent reserve currency in the world representing 57% of global foreign exchange reserves. When it comes to exports, the US dollar is currently used in 54% of invoices and a whopping 88% of foreign exchange transactions according to the Atlantic Council’s Dollar Dominance Monitor.
But experts warn that “Trump’s actions will erode the factors supporting the dollar’s dominance.” And while “the damage is unlikely to be immediately fatal… the risk, and probable pace, of terminal decline has increased.”
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