Nowhere has that been more evident than in Russia, where the US has brought unprecedented financial pain to bear on Vladimir Putin’s regime in response to the invasion of Ukraine. The Biden administration has imposed sanctions, frozen hundreds of billions of dollars of Moscow’s foreign reserves, and, in concert with Western allies, all but ousted the country from the global banking system.
A month later, the Association of Southeast Asian Nations agreed to boost the use of member currencies for regional trade and investment. And South Korea and Indonesia just weeks ago signed an accord to promote direct exchanges of the won and rupiah.Brazilian President Luiz Inacio Lula da Silva lashed out at the dollar's dominance while visiting Shanghai in April.
About 88% of all global foreign-exchange transactions, even those not involving the US or US companies, are in dollars, according to the most recent data from the Bank for International Settlements. Because banks handling cross-border dollar flows maintain accounts at the Federal Reserve, they're susceptible to US sanctions.
"Countries have chafed for decades under US dollar dominance," said Jonathan Wood, principal for global issues at consultancy Control Risks."More aggressive and expansive use of US sanctions in recent years reinforces this discomfort – and coincides with demands by major emerging markets for a new distribution of global power.
For one, there's little sign any other currency could provide the same level of stability, liquidity and safety, they say. What's more, the vast majority of the US's advanced-economy allies, making up more than 50% of the global gross domestic product, have shown little urgency in pivoting from the greenback.
Pakistan is looking to pay for Russian crude imports in yuan, the country’s power minister said last month, while earlier this year the United Arab Emirates said it was in early-stage discussions with India on ways to boost non-oil commerce in rupees.