‘America using the dollar as a weapon’
The French government has hit out against the hegemony of the dollar in international transactions after the country’s largest bank, BNP Paribas, was fined $9 billion. Moreover, starting on January 1, 2015, the bank will not be able to carry out dollar-based transactions for one year. BNP was punished for helping such counties as Iran, Sudan, and Cuba to process $30 billion in transactions which are illegal under US law, since they breach US sanctions.
Michel Sapin, the French finance minister, called for a “rebalancing” of the currencies used for global payments, saying the BNP Paribas case should “make us realize the necessity of using a variety of currencies.”
RT:The finance minister of France said there's a need to rebalance the currencies involved in global trade. Is this a developing conflict between allies?
Robert Oulds: There is a lot of concern about the dollar as the current major global reserve currency, for even France to be saying that is very significant. We know that other countries in recent history questioned international payments and the pricing of commodities such as oil in dollars, wanting to move away to a new global reserve currency, which might be a different country’s currency or a different system of international payments as well.
RT:There's talk about stepping away from the dollar inside the BRICS as well. Why these countries?
RO: Emerging economies are pretty much unhappy with American domination, of setting the prices of goods, such as oil, in dollars. They are also very concerned about how America has for many decades really debased the value of the dollar, pushing its value down, and that is good for American exporters but less good for those countries who wish to export products to the US. The US has a massive trade deficit, it has many deficits, but the major significant one is a trade deficit, and so it harms countries such as China who wants to sell more goods of better value to the US. So America’s manipulation of the currency is one of the concerns they have. Plus there is also another issue. It has been said that the dollar is backed by the Pentagon. Usually the currency will be backed by a Central Bank, which was supporting their currency with its foreign currency reserves, even items such as gold and other things of great value. But the US does defend the dollar with its full military force, it has been seen on a number of occasions where countries that have been arguing that they should move away from using the dollar as a currency for oil and other trade, then found themselves subject to US sanctions, and even in some cases military force. So there is a great deal of concern about not just why America wounded its economy, it has enormous deficit which now reaches 17 billion dollars of debt but that is why the US foreign policy is very active around the world, which some people do not like.
RT:Do you think the US is using the dollar as a tool to put pressure on other countries, such as sanctions for example?
RO: Well, mixing trade with politics creates imbalances, but it is not just about America using the dollar in the sense of a weapon, in sanctions against Iran or even against Russia, trying to restrict these nations access to the US dollar. But it is much more than that. It is also about countries that question the use of the dollar as a global reserve currency finding themselves in a situation where they are not really favored by Washington anymore. So it is really not just about the dollar as a weapon, it is also about defending the position of the dollar because in recent history America has a massive trade deficit. If it wasn’t for the demand for dollars created by its position of being the global reserve currency the American economy would be in even greater difficulty. America would sink economically. Of course it now goes through a period of economic growth and job creation, reissuing the industrial products with more goods made in the US rather than off-shoring the production of commodities and the shale gas revolution in America which is being a big help to its economy. But underpinning all of that is the demand for dollar as a global reserve currency, if that was to cease America would be in a great deal of difficulty.
RT:There's talk about the diminishing role of the dollar, but it's still a strong currency. What will it take to actually move away from it?
RO: Yes, it is still the strongest currency as currently there is a system where the dollar is the strongest currency supported in a sense by other currencies, pound, euro, yuan and yen. But there are calls for the creation of a new global currency or moving away to another one of those currency countries such as the yuan, or yen perhaps, or the system of special drawing rights where countries can trade and then demand a payment in a number of different currencies. This system has already existed; it just needs to be expanded. What are actually emerging at the moment are countries moving away from the dollar. Instead of making payments in one of the established currencies, they are just using their own currencies to trade. That is currently the trend we are seeing. For the moment the US dollar is the strongest currency, it is still the reserve currency but there are growing reasons for the world to move away from the US dollar, which is partly backed by the military force of the US.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.