Several major emerging economies are increasingly trading commodities without using the U.S. dollar, aiming to reduce their reliance on the American currency, the Wall Street Journal reports (link). Russia and Iran, facing U.S. sanctions and restrictions, have been selling oil in alternative currencies and finding buyers in countries like China and India. These nations are often willing to purchase these exports at lower prices. Additionally, countries like Brazil, the United Arab Emirates, and Saudi Arabia have taken steps to facilitate trade that bypasses the dollar.

Around 20% of the world’s oil is now bought and sold in currencies other than the U.S. dollar, according to JPMorgan Chase. In 2023, there were 12 major commodities contracts settled in nondollar currencies, a significant increase from previous years.

The tight connection between the dollar and global oil markets has existed since a 1945 deal between President Franklin D. Roosevelt and King Abdulaziz Ibn Saud. This relationship has allowed the U.S. to exert influence in global trade and finance. Recent events, such as U.S. sanctions against Russia and the potential for future sanctions, have prompted countries like China to reduce their dependence on dollar payments, particularly in trade. Oil plays a central role in this shift, with Russia redirecting oil to Asian buyers and selling it in currencies like the Chinese yuan…….More Here