Argentina abandons the dollar in favor of the yuan for trade with China:
Argentina will aim to pay for the bulk of its monthly imports from China in yuan rather than US dollars, Economy Minister Sergio Massa announced on Wednesday. Buenos Aires and Beijing signed a currency swap agreement last year, aimed at stemming the outflow of foreign currency from Argentina’s central bank.
China is currently Argentina’s second largest trade partner after Brazil, and the second biggest destination for Argentinian exports. Argentina’s total imports from China was around $13.5bn in 2021, according to the United Nations database on international trade.
Massa said that Buenos Aires will pay the equivalent of $1 billion in yuan for Chinese goods and services this month, with $790 million of monthly imports paid for in yuan each month thereafter. The currency swap agreement, expanded and finalized earlier this year, also allows Argentinian exporters to make settlements in yuan or dollars, to help balance the flows of foreign currencies in the central bank.
Even the neoclown Robert Kagan warned of the potential consequences for the neoliberal world order if the USA were to abuse its privileged position, which it generally avoided doing between 1945 and 2020.
The success of the order, however, also depended on the United States abiding by some basic rules. Chief among these was that it not exploit the system it dominated to gain lasting economic advantages at the expense of the other powers in the order. Put simply, it could not use its military dominance to win the economic competition against fellow members of the order, nor could it treat the economic competition as a zero-sum game and insist on always winning.
The Jungle Grows Back, Robert Kagan, 2019
The decision to weaponize the dollar in lieu of challenging Russia directly in a military context may prove to be one of the more catastrophic errors in the history of empires. Astute historians such as Victor Davis Hanson have for some time been wondering exactly when, and where, the Imperial USA’s Syracuse moment of imperial overstretch would take place; in The Father of Us All, published in 2010, VDH argued that the Iraq War was not likely to be a serious candidate for the Moment.
Athens’s disastrous 415 B.C. expedition against Sicily, the largest democracy in the Greek world, may not prefigure our war in Iraq. (A hypothetical parallel to democratic Athens’s preemptive attack on the neutral, distant, far larger, and equally democratic Syracuse in the midst of an ongoing though dormant war with Sparta would be America’s dropping its struggle with al-Qaeda to invade India).
However, it increasingly appears that the attempt to control Russia using the leash of the dollar reserve system may have marked that long-anticipated Moment, as dropping its economic neutrality and putting pressure on the rest of the participants in the global economy in order to pressure Russia into withdrawing from Crimea and the Donbass, then doubling down on that mistake by financing the Kiev regime’s war appears to have been even more devastating to the neoliberal world order than an invasion of India.
UPDATE: The Global Times expresses China’s belief that de-dollarization is not merely desirable, but inevitable.
One of the most direct reasons behind the global de-dollarization trend is that the US has been increasingly weaponizing US dollar hegemony to impose economic sanctions as well as political repression. For instance, key Russia banks have been excluded from the SWIFT system, a service that facilitates global transactions among thousands of financial institutions.
What’s perhaps more surprising – and potentially worrying for Washington – is how expensive and scarce offshore US dollars are becoming. As the US Federal Reserve’s aggressive interest rate hikes hit global financial systems, an increasing amount of foreign capital flowed back to the US, leading to a global US dollar shortage. The US’ interest rate hikes and the resulting shortage of US dollars serve as another important factor driving more countries to push for a quicker pace of de-dollarization.