Over the last decade, America’s adversaries have engaged in a de-dollarization push. Russia, China, Iran, and several others have been attempting to weaken the greenback’s stranglehold on global commerce. But what has this entailed exactly? And has it been a successful pursuit for these allies?

Nations have launched independent measures to curb their dependence on the Federal Reserve Note. Moscow ended trade in U.S. dollars at Russian seaports, mandating these areas to use the ruble rather than the buck. The Kremlin also required that half of its exports be exposed to the euro. Because it has routinely been penalized with U.S.-led sanctions, particularly on its enormous energy sector, Iran has been shifting away from the dollar by seeking agreements that are a hybrid between the rial and another foreign currency.

China has potentially done a lot more than other trading partners. Most notably, Beijing has launched the digital yuan, which would increase the yuan’s prevalence in global trade by facilitating cross-border transactions denominated in the renminbi. Should the yuan become even more prevalent, its international reserve currency representation could eat into the dollar’s hegemony. And it is not only America’s foes that have fired multiple salvos in this war on the dollar.

Before exiting his position as European Union Commission President Jean-Claude Juncker, he demanded the euro possess a stronger role in the international monetary system, explaining in his quasi-State of the Union address in September 2018:

“[The euro] is now the second most used currency in the world with 60 countries linking their currencies to the euro in one way or another. But we must do more to allow our single currency to play its full role on the international scene.”

That said, has any of this led to success?

According to the International Monetary Fund (IMF), the U.S. dollar share of global foreign reserves slumped to a 25-year low during the fourth quarter of 2020. In fact, since the euro was launched in 1999, U.S. dollar assets in central bank reserves declined to 59%. Other currencies, such as the loonie, the Swiss franc, and the Australian dollar, have increased. With the pressure building and the U.S. Dollar Index (DXY), a measurement of the greenback against a basket of currencies, continuing to fall, can more be done? That is what China and Russia are hoping to achieve moving forward.

The Red Dragon and the Red Menace

Although the United States remains the world’s leading superpower, Russia and China repeatedly sidestep the American empire. Despite numerous sanctions placed on both countries, Moscow and Beijing are second-guessing Washington and the world’s largest economy.

Let’s take a look at some of the measures these countries have taken over the years.

Don’t Be Crude!

In June 2012, Russia and China signed an “unprecedented” $270 billion crude oil agreement. The deal would see Moscow supply China with oil for the next 25 years. It was the first attempt for Russia to improve bilateral relations and to diversify its energy base. China, meanwhile, sought to reduce its independence on U.S. and Middle Eastern oil.

“Essentially, this is a new era of cooperation which means that in our cooperation with our strategic partners we shift from purely raw supplies to full-fledged cooperation in the engineering and manufacturing sphere,” Putin said at the time.

This allowed Russia to begin operating a new oil pipeline in China’s northeastern region. Moscow is now attempting to construct an enormous natural gas pipeline to China. However, Saudi Arabia has been threatening the partnership by attempting to become China’s top supplier. Even Iraq is making a play at feeding Beijing’s insatiable appetite for energy. Still, energy arrangements are spawning powerful alliances in the region.

Currency Swap Agreements

In 2014, Moscow and Beijing established a three-year currency swap deal worth roughly $24.5 billion. The purpose behind the deal was to enable each state to gain access to the other nation’s currency without purchasing these currencies on foreign exchange markets. The agreement was extended by another three years in 2020. Market analysts called this a “breakthrough moment” for the regional de-dollarization push. Considering that the Bank of Russia slashed its dollar holdings in half by $101 billion, “breakthrough” might be an understatement.

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In 2019, months before the coronavirus pandemic, Moscow and Beijing agreed to replace the greenback with national currencies for international settlements between the two countries. Officials also launched a plan to produce an alternative payment mechanism to the U.S.-controlled SWIFT network when conducting commerce in rubles and yuan. These efforts have resulted in Russia acquiring one-quarter of the world’s yuan reserves, while the Kremlin approved the country’s sovereign wealth fund to start investing in Chinese state bonds and the yuan. Does this make it inevitable that this friendship can dethrone the dollar?

Not quite, says Jeffery Frankel, an economist at Harvard University, telling the Nikkei Asian Review that America’s liquidity, economic size, and influence are enough to allow the buck to remain king.

Hit the BRICS?

Is it possible that this crusade began in 2006 when Brazil, Russia, India, China, and South Africa founded BRICS?

Although the mandate of this powerful group of emerging markets is to “promote peace, security, development, and cooperation,” was it designed to challenge the dollar’s international reserve status unofficially? Indeed, since these countries were the hardest hit by the COVID-19 public health crisis, it is unlikely that de-dollarization is at the top of the agenda. However, for years, the BRICS have presented multiple public policy pursuits that would make it appear that ditching the buck was a priority. Here are just some of the mechanisms they employed.

In July 2014, the BRICS members founded the BRICS Bank, which later became the New Development Bank. The purpose was to mobile funding for infrastructure and sustainable development. The BRICS Journal of Economics even explored “the existing systemic barriers to intra-BRICS national currency use … in currency swaps and trade finance.”

In 2015, ministers from BRICS nations launched consultations for a payment system that would compete with the SWIFT system, similarly to what China and Russia have recently been working on. Then, Russian Deputy Foreign Minister Sergey Ryabkov noted in an interview about the importance of “a global multilateral payment system that would provide greater independence, would create a definite guarantee for BRICS.”

In March 2021, ahead of a two-day bilateral meeting between Moscow and Beijing, Russian Foreign Minister Sergei Lavrov expressed the importance of enhancing technological independence and the initiative of turning to their own currencies to replace the dollar. But, as every Republican and Democratic administration weaponizes the greenback, more nations are becoming fed up.

The End of an Era?

For the last 200-plus years, the world has been dominated by two currencies: the British pound sterling and the U.S. dollar. So, what will monopolize the global economy over the next century or two? Perhaps instead of a single currency to wield immense influence, it will be a blend of currencies, including the yuan and the ruble.

Either way, does it matter what rules the world when a fiat currency still dominates it? Until a currency backed by something tangible, like gold and silver, comes into existence, the post-Bretton Woods System will remain intact one way or another. As the saying goes, you can slap lipstick on a pig, but it is still a pig. And that is the state of the global monetary system today: worthless pieces of paper that is backed by nothing except faith and trust in the government.

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