The US is inadvertently undermining the dominance of its national currency, the dollar, by “abusing” financial instruments through sanctions, according to Paulo Nogueira Batista Jr., a prominent Brazilian economist and former International Monetary Fund (IMF) executive director. In an interview with RT, Batista stated that Washington’s actions are driving the rest of the world away from the greenback.
The economist pointed to the freeze on Russia’s Central Bank reserves, worth around $300 billion, as a prime example of this “abuse.” Following the escalation of the Ukraine conflict in 2022, the US and its allies removed most Russian banks from the SWIFT interbank messaging system and imposed transaction bans on key financial institutions. This effectively cut Russia off from the Western financial system, which is dominated by the dollar and euro.
Batista noted that 2022 marked a turning point in the de-dollarization process, which had been slowly gaining momentum. The scale of Russia’s frozen reserves and assets led to a significant shift away from US-linked financial institutions. As a result, major central banks, including China’s, have started to move away from US Treasuries.
The dollar’s share of global foreign exchange reserves has been steadily declining over the past four years. Russia has largely eliminated Western currencies in trade with CIS and BRICS nations, which have been doing the same with their other partners. According to Batista, while the greenback will remain an important global currency, its hegemony will gradually weaken as the move away from the dollar continues.
The trend is significant, given the dollar’s current status as a global reserve currency. The IMF has reported that the US dollar has hit a 30-year low in global foreign reserves. As countries increasingly diversify their reserves and reduce their reliance on the dollar, the global financial landscape is likely to undergo significant changes. The shift away from the dollar is expected to continue, with potential implications for international trade and finance.
