RT – The US dollar’s status as the world’s major reserve currency, which it held for decades, could come under threat, according to Anne Korin from the Institute for the Analysis of Global Security.
“Major movers” such as Russia, China, and the European Union have a strong “motivation to de-dollarize,” Korin, the co-director at the energy and security think tank, told CNBC.
“We don’t know what’s going to come next, but what we do know is that the current situation is unsustainable,” she said, adding “You have a growing club of countries — very powerful countries.”
She explained that when the greenback is used or transactions are cleared through an American bank, entities are subject to US jurisdiction — even if they have “nothing to do with the US.”
As an example she pointed out to Washington’s unilateral withdrawal from the Iran nuclear deal in 2018 and the following restoration of sanctions on the Islamic Republic.
“Europe wants to do business with Iran. It doesn’t want to be subject to US law for doing business with Iran, right?” she said. “Nobody wants to be picked up at an airport for doing business with countries that the US isn’t happy that they’re doing business with.”
As a result, countries have a “very, very strong motivation” to shift away from using the greenback, she said.
Korin noted if the dollar declines in influence, other currencies, particularly Chinese yuan, could fill the role traditionally played by the greenback.
Yuan-denominated oil futures (petro-yuan) could serve as an early warning sign for the dollar’s waning dominance, she said. “I think it’s a canary in the coalmine. Look, 90% of … oil is traded in dollars. If you have a sort of a beginning to crumble away (at) the dominance of the dollar over oil trade, that’s a nudge in the direction of de-dollarization.”
She added that while the petro-yuan may be a “necessary” condition for the international abandonment of the dollar, it’s “not sufficient” to make it happen on its own.