Catherine: Why did the US dollars dominance in the Middle East decline?

Source: Voice of Germany

Author: Cathrin Schaer

Iraq banned US dollar transactions, while Saudi Arabia and the UAE plans to abandon the US dollar for oil export settlement. At the same time, plans to establish a new currency to bypass the US dollar are also brewing.Why is there a trend of "going to the United States" in the Middle East?This should be started with the Ukrainian war.

----

Whoever wants to buy a car or buy a house in Iraq recently, I'm afraid I will be surprised.The Iraqi government has announced a new decree to prohibit individuals or enterprises from using US dollars.

Usually Iraqi people are used to using US dollars when purchasing large -scale products.Because Iraq's own currency Denar has devalued it seriously, if you want to buy a house or buy a car, people may have to carry a few hemp banknuts to pay.So they will choose to use the US dollar, as long as they are packed in a wallet.

For decades, the US dollar has become the best currency in the Middle East -if you do not have enough Diram (UAE currency), Danar, Rial (Saudi currency) or pound.

But this situation may soon be the past.In the past few months, the political circles of a number of Middle East countries have already stated, suggesting that the dominant position of the US dollar in the region may gradually weaken.

In Iraq, the U.S. government has been increasing the difficulty of entering the country in the country -they are obviously worried that too many US dollar cash will be smuggled to neighboring Iran.Promote support.The shortage of dollars has caused drastically fluctuating in Iraqi, which is linked to the US dollar.

This turmoil has prompted the Iraqi government to issue a US dollar transaction ban recently.In February this year, it was also due to the shortage of US dollars. Iraq said that it would use RMB settlement and trade between China without using the US dollar.

The Middle East country is looking for an alternative option

Earlier this year, the financial minister of Saudi Arabia said that the country holds a "open attitude" to the use of multiple currencies to settle its oil exports, including the use of euro and RMB.The UAE stated that it would cooperate with India to settle with India rupees.Last year, Egypt also announced a plan to issue RMB bonds. The country has issued government bonds that have been priced at the yen in the past.

In addition, some Middle East countries -Egypt, Saudi Arabia, the UAE, Algeria and Barin -have expressed their desire to join the BRICS countries.The emerging country organization consisting of the first letters of English names of Brazil, Russia, India, China, and South Africa will discuss the topic of creating a new currency to make a new currency for cross -border trade settlement in June-This is the news disclosed by Russia.

Since 2021, the UAE has joined a project that is run by the Bank for International Settlements in Switzerland.The project focuses on digital cross -border payment channels that may bypass the US dollar.Thailand, Hong Kong and mainland China have participated in the project.

Is it going to end in the US dollar?

These actions to find the US dollar alternative have recently aroused a lot of concerns, and they have also been on the news headlines.An article in February of the New York Times asked: Is the dominant position of the US dollar threatened?The Financial Times wrote in March: "Be prepared to welcome a world of polarization of currency." Bloomberg analyzed at the end of April that "de -US dollarization is being carried out at the speed of 'amazing'."

Bloomberg reported that the proportion of US dollars in foreign exchange reserves in various governments around the world is about 58%.This decreases significantly compared to 73%in 2001.In the late 1970s, the US dollar accounted for 85%of foreign exchange reserves.

However, most experts insist that the process of going to the US dollar is far less than that of these news headlines, including in the Middle East.

The dollar still rules the Gulf area

Since the 1970s, oil -producing countries in the Gulf area have been maintaining partnerships with the United States. The United States has provided security guarantee for the region, while Saudi Arabia and the UAE countries have exported oil.Except for Kuwait, most of the currencies of most Gulf countries are linked to the US dollar.

"A major indicator of the process of going to the US dollar is the decoupling of currencies of these countries", Hasan Alhasan, the Middle East Political Expert of the London Think Tank International Strategic Research Institute (IISS), "But so far, We haven't seen such a move yet. "

"The keywords here are 'declaration' and 'potential intentions'", Daniel McDowell, a professor of political science at Xuecheng University in New York, was asked if the statement of the Arab country's leader indicated whether the US dollar was in the Middle EastAnswered when he died.

"The publication statement is easy, but it is much more rare to take action." He said to Germany. "For the oil producer, such as Saudi Arabia, these statements and provocations are also a way to attract the attention of the United States.The "eyebrows to the eye" may promote American policy makers to pay more attention to the interests of the Gulf country. "

Mike Tonwell does not rule out the possibility of one day the dominance of the US dollar."All the empires have a day of collapse." He joked, but at present, "most of the remarks are symbolic and political. Any change we see is weak and slow."

Ukrainian war gives birth to the US dollar?

All experts interviewed in Germany agreed that there were two main factors that prompted the Middle East countries to threaten the use of other currencies.

First of all, Russia invaded Ukraine.Macorwell believes that sanctions are a very important part of the debate.His new book published this year is opposite: US financial sanctions and international rebounds against the US dollar (Bucking The Buck: us Financial Sanctions and the International Backlash Against the Dollar) pointed out: "The more the United States regards the US dollar as diplomaticFor weapons, the more its opponents need to transfer its international economic activities to other currencies. "

Alhasan also analyzed: "There are currently a large number of Russian funds flowing in the Middle East and Asian countries. This is basically a country that does not follow or does not implement the US and European sanctions."

But if the West further tightens sanctions against Russia and upgrades to the so -called second -level sanctions, it is more difficult to avoid sanctions to avoid sanctions.The second -level sanctions are targeted at a third party -including countries and enterprises that cooperate with the sanctions entity.Any entity who wants to continue to do business with the United States or the European Union will find it difficult for you to bypass the second -level sanctions.

"So the government who is concerned about US sanctions is increasingly considering how to plan for, although they are not ready or have no interest in getting rid of the US dollar." Macorwell analyzed.

Threat of oil trade

Alhasan also proposed the second factor that promoted the Middle East country to consider going to the US dollar.He explained: "I think there is a feeling that the United States is trying to rewrite the global oil market-in order to target Russia-and this is a strategic threat to Saudi Arabia."

In March of this year, Prince Abdul Aziz Bin Salman said that if any country tries to target RussiaIn the case, set the price limit for Saudi oil exports, so Saudi Arabia will no longer trade with the country.One day later, the Minister of Energy Algeria also concluded this statement, saying that it would be a dangerous precedent.

Professor Maria Demertzis, an expert in economic policy in Florence, Italy, believes that this is why this is also the reason for how long the sanctions are implemented and the process of de -US dollar.But all this is not an overnight thing. Even if some countries want to bypass the US dollar and replace the setting infrastructure dominated by the US dollar, it is difficult to add.

Bank as a weapon

"For example, if you are India and if you want to export products to Chile, you are likely to settle in US dollars. But the reason you do is not only because it is more convenient to use the US dollar to deny the product, but also because youThe infrastructure used for settlement is based on the dollar. "Demulqis analyzed that the so -called settlement is a legal behavior of" extracting funds from one account and depositing it into another. "

To complete this step, there must be a trustworthy infrastructure, and these are what the United States has been provided for decades.Any alternative has "major legal and political influence".Demolqi pointed out, "For example, will Chile accept India's legal framework? Even if the central banks of the two countries are going to settle bilateral settlement, it is a long process."

She explained that the United States and Europe frozen the Russian central bank's foreign exchange reserves within their jurisdiction. This operation has made the central bank a weapon and may damage the international financial system.And Alhasan believes that this has been transformed into "a real concern, that is, the United States and the European Union adopt unprecedented ways to use international trade and finance as weapons to deal with Russia."This is why the Middle East countries are "preparing for a more polarized world, and they hope that they can maintain their actions freely within and outside the US dollar."