Developing countries are accelerating the de-dollarization agenda by exiting the US dollar from trade and transactions. BRICS members Russia and Iran settled $214 billion in Chinese yuan in March, moving away from the USD. This comes after the geopolitical tensions rose, and the two countries were already facing sanctions and economic boycotts from the West.
De-dollarization is now fueled by the military conflict in the Middle East, as developing nations are tightening their dollar payments. China is benefiting from the ordeal, as BRICS members are using their local currency, the Chinese yuan, for cross-border transactions. The surge in local currency payments comes as Iran is taking measures to respond to the US and Israel’s aggression.
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Iran effectively closed the Strait of Hormuz in late February in response to the US-Israel attacks. The Islamic Republic announced that the sea trade route is closed to“unfriendly nations,”eventually shutting out the West. However, it allowed special passage to member nations China, Russia, and India. These BRICS countries paid in Chinese yuan for the passage, further strengthening the local currency during the crisis.
Apart from the Chinese yuan, Iran also accepted cryptocurrencies such as Bitcoin, with BRICS members during the war.“The Middle East conflict has acted as a catalyst,”saidDing Shuang, Chief Economist for Greater China and North Asia at Standard Chartered.“We are seeing the beginnings of a petroyuan that could eventually erode the dollar’s grip on energy trade,”he said.
BRICS member Russia has largely frozen payments in the US dollar since February 2022, but is vehemently paying in the Chinese yuan. The Putin administration is largely responsible for the advancement of the de-dollarization agenda to spread its wings around the globe, with strong support from the Xi Jinping administration.
Source: Watcher Guru
