Through sanctions, “the countries that created and controlled the existing global financial system in the mid-20th century, receiving global rent or seigniorage in the process, have dealt the most devastating blow to their own system. The world is gradually entering a new monetary order, and the dollar, ironically, is becoming a victim of geopolitics,” writes Alexander Losev in a Valdai Club article.
The unparalleled sanctions on Russia — and on Cuba, Iran, Venezuela, and Afghanistan — are driving many nations to reconsider their currency policies. “Central banks are beginning to [question] if putting all their eggs in one basket” is a good idea, says Dr. Gal Luft, the director of the Institute for the Analysis of Global Security.
“Control over global finances is one of the pillars of America’s might,” Losev acknowledges. “But every time the United States weaponizes the dollar’s leading role … the rest of the world starts looking for alternatives.”
The explosive inflation rate in the United States also drives countries away from the dollar. And in 2021, the Chinese yuan ranked fourth in its share of international transactions. The share of the dollar is decreasing.
