Sputnik Opinion
In-depth analysis of regional & global events provided by Indian & foreign experts - from politics & economics to sci-tech & health.

How US-led West's Anti-Russia Sanctions Chip Away At Dollar Dominance

© Sputnik / Nina ZotinaDollar banknotes
Dollar banknotes - Sputnik India, 1920, 13.03.2023
Washington and its US-led Western allies slapped economic sanctions on Russia after Moscow launched its special military operation in Ukraine in February 2022, driving friendly nations to search for alternative ways of trade.
The use of non-dollar currencies is on the rise in global trade, following the sanctions barrage against Russia. Countries like India are making payments in the UAE’s Dirham or Indian Rupee to purchase crude oil from Moscow, hurting the dollar's standing as the world's dominant currency, experts said on Monday.
Chairman of Dezan Shira & Associates, Chris Devonshire-Ellis, who has a prolific 30-year investment and business career in China, Russia, and other parts of Asia, says alternatives to trading in the US dollar are now being sought.
"What has happened to first Iran, and now Russia as a major economy in being cut off from the SWIFT banking network which was originally set up to monitor money laundering and drugs financing, has now been used for political purposes aimed at specific countries and their governments," Devonshire-Ellis told Sputnik.
He mentioned that this has made other countries around the world nervous that they too could be cut off from the global financing SWIFT network one day if they also run afoul of US policies. Subsequently, trust in the Brussels-based payment system has been eroded.
He reckons that New Delhi would play the role of Moscow's leading partner, urging its regional partners like Bangladesh to trade with Russia in local currency.
India's Russian imports have jumped by nearly 400% since last year, with crude oil being the largest contributor to this surge.
In this April 24, 2015 file photo, pumpjacks work in a field near Lovington, N.M. The United States may have reclaimed the title of the world's biggest oil producer sooner than expected - Sputnik India, 1920, 14.02.2023
Sputnik Opinion
Western Sanctions Aim to Pressure Nations to Ditch Trade With Russia and Follow US-Diktat: Experts
India purchased a record 1.6 million barrels of oil per day from Moscow last month, more than the combined quantity of crude from Iraq and Saudi Arabia, New Delhi's two largest suppliers before Russia.

"I think this will happen. India has already made suggestions to the UAE - with whom they trade billions of dollars every year, to switch to trading in Indian rupees and UAE dirhams. This will become more common between countries," Devonshire-Ellis added.

The pundit emphasized that it was not just about de-dollarization but about "a new working model of international finance".
"It's not de-dollarization. There are other issues such as the emergence of cryptocurrency transactions, and having digital financial assets backed by real assets such as gold. Russia is discussing such a system with Iran right now."
"New digital (crypto) currencies and a desire to depoliticize money is both a technical advance and a political advance," he noted.
According to him, the only real question is how fast these changes are going to occur.
He asserted that these shifts are at the very beginning of what will be a global transition to a new working model of international finance, one likely to prove more stable than the US dollar-based, debt-backed system reliant on one economy and its policies.
Meanwhile, Dr. Lekha Chakraborty, professor at the New Delhi-based National Institute of Public Finance and Policy, opined that the dollar would remain the significant global currency even if an alternative currency scenario emerged.

However, she acknowledged that the sanctions against Russia could "erode dollar dominance in the short term as the propensity of regional trade blocs using non-dollar currencies in world trade is on the rise".

"This Moscow-New Delhi economic diplomacy is an ad-hoc 'fuite en avant (escape forward)' given the geopolitical risks and macroeconomic uncertainties," she summed up.