Can China weaken the US dollar's influence in the Middle East? Despite the fact that China could potentially not be able to keep up wit...
Can China weaken the US dollar's influence in the Middle East?
Despite the fact that China could potentially not be able to keep up with the United States in certain areas,
. dollar anytime soon, trade with the yuan is about to start, which could hurt the U.S. economy.
The reason China got involved in the fight between Saudi Arabia and Iran in March was to try to bring the two sides together.
After this political success—it was able to make its economy stronger in the world—China wanted to weaken the US dollar.
In the past, Arab countries have tried to stop using the dollar and start using other coins instead.
During the last years of Saddam Hussein's rule, Iraq wanted to start selling the euro, which was the currency at the time.
In the 2000s, Libya also wanted to make a single currency whose value would be based on gold.
But there isn't a big movement that has been able to stop the dollar from being so strong. The economic pressure the world felt in 2007 and 2008 has stopped people from calling for less use of the dollar.
China's fast growth has changed this, though. China's leaders don't try to hide the fact that they want to weaken the dollar. This will make more people use the yuan, or renminbi, as some people call it.
Doing so will hurt the United States economic power, which, along with its military power, is what makes the country a world power to be reckoned with.
China wants to stop using the dollar in its economy because it will make it less likely that the US will place economic sanctions on other countries like it did on Russia, which caused Russia to buy more Chinese currency while he was away.
Because the United States is still losing power in the Middle East, Russia's attacks on Ukraine continue to change the politics of the area. This is because the sanctions the United States put on Russia forced countries in the area to join the war.
The war in Ukraine warned countries that the US can put sanctions on them at any time. Some countries, like some in the oil-rich Gulf region, chose to ignore the US and keep working with Russia and China anyway.
Because China is so strong in trade, the war has made it stronger in terms of economic growth in the area.
In the end, economic power means being able to buy things. The United States has been able to fight since the end of the Cold War because the US dollar is the currency that other countries save in.
If the dollar is used less, it means that the United States will have less power to fight.
The chance that the Yuan could be used in the Middle East
Some countries in the Middle East have started to trade in currencies other than the US dollar. This is because China has become a big trading partner with the countries in the region.
China has become a major trade partner in the Middle East, working with big countries like the United Arab Emirates (UAE), Saudi Arabia, Iraq, and Iran.
Take the UAE as an example. In the past 10 years, it has become less dependent on the US and more of a country that the world's big powers have to work with.
In March, the country helped TotalEnergies and the Chinese oil company make a big natural gas deal worth a lot of yuan.
It's not just because Total is a French company and France is a Western country. It's also because the UAE has opened a new chapter by being the first to use the yuan currency.
This has changed the area in a big way.
President Xi Jinping asked that this happen in December 2022, so Saudi Arabia is also reportedly talking to the Chinese government about the idea of selling them oil in yuan.
The US buys the most Saudi oil, and the price of oil is tied to the value of the US dollar. This is called the "petrodollar."
This has given the United States power in the Organization of Petroleum Exporting Countries (OPEC). This means that the United States' policies in the Middle East depend a lot on its relationship with Saudi Arabia.
Even after money, Saudi Arabia gets yuan when it trades, which it could use to pay for things that it imports from China. This will make the US dollar less strong.
Even though the Gulf countries say they won't sell oil for dollars, they are happy about this because it keeps the value of their money safe.
As China's economic power grows, and as ties with the U.S. in the Middle East get worse, the yuan will be able to be used more often.
In February, Iraq made plans to start dealing with China in yuan. This was because the country's central bank was running low on US dollars, which was a worry for an oil-dependent country.
China has already joined the U.S. and put a lot of money into the country's oil industry, which the U.S. gave up on after the war.
Not just the yuan has become a part of the business in the Middle East. India and the UAE talked about how the UAE will sell non-petroleum goods to India using Indian Rupees (INR) in January.
The Gulf Cooperation Council (GCC) thinks that the UAE is in the lead when it comes to wanting this change to grow its economy.
Sanctions and pressure from the U.S.
Countries will like the use of new money because the US uses the dollar to put political pressure on other countries. This is seen as part of US foreign policy by major international business institutions like the International Monetary Fund (IMF) and by some critics.
The sanctions that the U.S. put on Russia show that it uses the dollar as a way to force and punish other countries.
Just like Russia, US sanctions have hurt Iran's central bank a lot. He even promised to break the value of the country's currency because he thought it would help him trade with other countries while the US economy grew with the power of the dollar.
When countries have no other choice, the United States can use the dollar's situation to increase its military power.
Now, the countries where the U.S. is putting trade pressure on them have a choice.
After years of US sanctions, the Central Bank of Iran has made the yuan one of the main trade currencies.
Iran sells oil to China and gets yuan in return. Due to pressure from other countries, Iran wants to stop using the dollar and the euro for all trade with China and instead use yuan.
Some countries in the region have also said they want to make it harder for the US to fight over trade. Others see this as meddling because the US gives them political help.
A group that supports the government in Tunisia said that the country wants to join the list of countries called BRICS, which includes Algeria, Egypt, and Saudi Arabia and whose economies are growing quickly.
Even though it's not clear if this request will be granted, Tunisia's critics of the West and the IMF said they'd rather their country focus on ties with China and other countries whose economies are growing because they won't get in the way of their internal affairs.
Some experts think that the BRICS group was set up to make the United States less powerful and to help other countries use the dollar less. And it's possible that the countries will be able to reach these goals.
On April 13, the new President of Brazil, Lula da Silva, asked the BRICS countries to come up with a new currency that is the opposite of the US dollar.
He said, "Every night I ask myself why all countries trade with dollars." China and Brazil's representatives got up and left right away.
Even though it's just a rumor right now, this plan will encourage Middle East and North African countries to do business with different bills if they join BRICS.
The dollar challenge
Even though the dollar is having these problems, it is still very strong.
Most business is done in dollars, including commercial trade, foreign debt, and other types of business.
By 2021, almost 60% of the foreign funds will be in dollars. And 80% of the oil trade in the world is done in dollars.
If the yuan replaces the dollar around the world and in the Middle East, China will face a big problem.
Before it can become a foreign currency like the dollar, it has to convince the biggest banks in the country to put away the equivalent of 700 billion yuan.
Even though the yuan is not on the list of currencies whose value doesn't change quickly, this means that the dollar is better in terms of value.
China needs to change its currency strategy and show central banks that the yuan has the same status as the dollar when it comes to keeping its value. Then, it needs to make the yuan a currency that can be traded all over the world.
Even though the power of the world's foreign funds affects the currency of the most powerful country in the world.
In the 17th and 18th centuries, the most important money in the account was from Portugal, then Spain, and then the Netherlands and France.
Before the United States became the most powerful country in the world, Britain's pound was the cash that was most often kept in foreign accounts in the 19th and early 20th centuries. This money was used in the countries that Britain controlled.
The truth is that anything can happen and things can change in the future. Even though many countries can now use currencies from other countries, like the yuan and the dollar.
China sees a chance while America's military power is falling. This is because of how China's economy has grown over the past 20 years.
Many experts think that China's economy will be bigger than the US economy by the year 2050.
If China's economy becomes the most powerful in the world, people will talk about who should control the world's foreign funds.
Another option is that this will happen a year after the 100th anniversary of the founding of the Communist Party of China, which will be in 2049. President Xi Jinping has said that this is a step that the country will take to become a world power that can fight and be heard.
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