The US dollar has been losing its undisputed dominance in global trade, with its market share decreasing from over 70% to less than 60% in the past 25 years. In 2001, the share of global reserves held in US dollars was 73%, but this year it is down to 58%. While the US dollar is not on the verge of collapsing, it is in a gradual decline, and de-dollarisation has accelerated due to Washington’s addiction to sanctions.
The West’s response to Russia’s aggression in Ukraine marked a major turning point in the movement against the US dollar. As a result of Washington imposing sweeping sanctions on Moscow, freezing Russia’s US dollar reserves, and removing major Russian banks from SWIFT, more countries across the Global South are seeking alternatives to the US dollar. China has long wanted to see its own currency gain greater traction in international trade, and since February 2022, China has greatly benefited from the acceleration of de-dollarisation with a host of countries completing trade settlements with China in yuan instead of US dollars this year.
The GCC members are not the key drivers of this movement away from the dollar, but they are responding to de-dollarisation pragmatically. Saudi Arabia’s Minister of Finance Mohammed al-Jadaan spoke about the Kingdom’s openness to improving trade by trading in non-dollar currencies, and in 2022, Saudi officials announced that they were considering selling oil to China in yuan. However, policymakers in Gulf nations prefer to avoid the Chinese currency due to Beijing’s currency controls and manipulation of valuations.
The de-dollarisation trend appears unstoppable, and the question is about when, not if, the hegemony of the US dollar will end. With the Global South seeking a new trading system in which they are shielded from the US dollar’s hegemony as well as Washington’s weaponisation of it, demand for the US dollar will decrease over time regardless of America’s opposition to this trend. Regardless of how de-dollarisation pans out in upcoming years, policymakers in Gulf countries recognise that US power in the world, which is more about its currency’s status than its military might, will decrease as demand for the US dollar goes down.