Bottom Line Up Front: Former Russian ambassador Grigory Logvinov laid out the harsh truth of dollar dominance in a Belarusian TV interview this morning. In short, despite steady anti-dollar rhetoric, the dollar is so far proving difficult to dislodge as the world reserve currency.
Logvinov is the deputy secretary general of the Shanghai Cooperation Organization (SCO), a central Asian economic and security alliance founded by China in 2001.
The SCO accounts for about 40% of the world’s population. They’re in the process of adding Iran as a full member and recently admitted Saudi Arabia as “dialogue partner”.
In other words, they’re an up-and-coming alliance that China plans to wield as an alternative to Western-dominated international organizations.
And that’s why Logvinov’s comments are not only important, but as close to reality as anything I’ve seen out of the Eastern axis.
Logvinov said that the SCO’s attempts at implementing a bilateral currency trade agreement “is far from simple because, unfortunately, the dollar is too deeply embedded as a global reserve currency.”
Last year, China started pushing hard for bilateral currency trade agreements, and they struck a deal with Brazil earlier this year.
So instead of transacting in dollars, China and Brazil, South America’s largest economy, will trade in each other’s currencies.
But according to Logvinov, the push towards bilateral currency trade agreements for more neutral countries are proving difficult.
And if China can’t do this in their backyard, then there’s some question as to how viable or how long the strategy will take. (It’s inevitable.)
Logvinov said that replacing the dollar as the SCO trade standard is “a fairly long path.”
In other words, the end of dollar dominance is not happening anytime soon, despite the steady anti-dollar rhetoric.
(But I will concede that U.S. politicians are doing more to cast doubt on the USD than China, which is really saying something.)
Until next time, be well and stay out front.
Always Out Front,
P.S. – We covered this topic in today’s Daily Situational Awareness intel brief. Try us out for a month for just one dollar here.