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Is US financial hegemony nearing its end amid global de-dollarization?

By Al Mayadeen English
Source: Foreign Affairs
29 Dec 2022 12:46
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The Foreign Affairs op-ed effectively indicates that the US is well aware its financial and monetary hegemony is nearing an end.

US Treasury Department

Foreign Affairs published on Thursday an op-ed that explains why the "golden days of US sanctions may soon be over."

The piece is relevant insofar as it reveals the deep-seated American fear that the grounds of US imperialism are in fact beginning to crumble.

It effectively indicates that the US is well aware that its financial and monetary hegemony is nearing an end.

It begins with the frank admission that the US has historically relied on punitive measures, such as sanctions, to subdue other nations to the primacy and hegemony of the American dollar.

Several emerging powers, in particular China and Russia, have recently been revamping their monetary industries to circumvent the use of the dollar in a show of resistance against US imperialism.

Sanctions, which constitute an effective weapon for the US, are thus becoming less and less effective in impacting the economies of its rivals, which have set up new protective measures to circumvent US sanctions.

One of the examples that the op-ed cites is the US' removal of Iran from the SWIFT global messaging system in 2012.

The second example cited is that of sanctions imposed on Moscow after Crimea's accession in 2014.

The third is the war trade against Beijing which it says began in 2017, while in reality, it goes way back when the US suffered a financial crisis in 2007 and printed trillions in bail money to Wall Street bankers, which gave China a clear signal that the US in no way intends to repay its debt that China held in the form of bonds and treasuries.

It says that this trade war then spilled onto the tech sector with the sanctioning of purchasing semiconductors from China, as well as prohibiting the delivery of technologies from the US to China.

But it failed to mention that these punishing measures were linked to China's defiance of western sanctions against Russia.

All in all, it identifies these three particular episodes to be at the root of a new phenomenon, namely "sanctions resistance".

But it also failed to include the horrendous experiences suffered in Arab countries, such as Iraq, Libya, Yemen, as well as Syria although it continues to survive repeated aggression on the country.

At some point, the US seemed like it held all the power in the world to sanction whoever it wanted.

Former US President Bill Clinton even said himself that he worried the US was "in danger of looking like we want to sanction everybody who disagrees with us."

The report blames that "the pace of sanctions use has increased enormously" for inciting US adversaries to take measures to circumvent sanctions.

One of the measures that countries adopted to shield their economies is by establishing bilateral payment channels of currency swaps.

This allows them to bypass the US dollar by eliminating the use of a third currency.

For instance, China established currency-swap agreements with more than 60 countries, including Argentina, Pakistan, Russia, South Africa, South Korea, Turkey, and the UAE, worth a total of nearly $500 billion.

Likewise, in 2020, "China settled more than half of its trade with Russia" using their own currencies, the Yuan and the Ruble, to circumvent the use of the US dollar.

Another way US rivals have been developing protective measures to shield against sanctions is by creating non-Western payment systems. For instance, China's clearing house is the CIPS which in 2021 processed "a mere $12 trillion in transactions." Russia also developed the Mir payment, but it was blocked in a number of countries due to the conflict in Ukraine.

A third way of circumventing sanctions is through the development of digital currencies, the report states, citing China as an example as it issues to its citizens a digital form of the renminbi currency on their cell phones.

The report states that these currencies are safe, secure, and sanctions-proof.

It further says that China does not have the ambition to rival the hegemony of the US dollar.

This is true considering the socialist nature of China, which is far detached from militarism and commercial exploitation.

China can never develop such ambitions because it has itself been the target of imperialism for centuries.

But many strategists argue that in a few decades, about half of the world's output will be produced in Asia, which therefore makes the use of a digital currency potentially attractive to investors.

"The rise of a fragmented financial landscape threatens both US diplomacy and national security," the op-ed states.

It warns that countries that circumvent the use of the dollar will not be able to detect "illicit global activities" as effectively as the US does, undermining the fact that the US has itself the author of the biggest crimes against humanity, to date.

It says that "multilateral measures [instead of unilateral sanctions by the US], supported by Japan, the US, the countries of the EU, and other like-minded powers, will probably become the best alternative."

But Japan has already sold billions in US treasuries, threatening the stability of the US economy, and the EU is already realizing now that the US is no longer to be trusted - especially after the US failed to retract its green program subsidy and pushed the bloc to cut ties with Russia who used to provide over 40% of Europe's energy needs.

It concludes with a desperate call to establish an organization that would guarantee US rivals would be unable to circumvent sanctions.

In short, the op-ed written by Agathe Demarais clearly indicates that the unipolar world is transitioning to a multipolar world, where all countries will have the right to develop in their own way, at their own pace, and away from neocolonial and neoliberal exploitation.