By Kunal Bose
In a recent interview with The Times of India, Edward Fishman, the author of ‘Chokepoints,’ a book that shows in detail on how the US Administration has gone on to weaponisethe dollar, has cited an interesting simile on the impossibility of doing business across borders sans the American currency. It is like someone intends to travel around the world without a passport.
While the likes of former US President Barack Obama were circumspect in using the dollar to achieve certain goals, the present incumbent in the White House is absolutely no holds barred in weaponising dollar – sanctions are all about that – to achieve his geopolitical goals. As President Trump has held the world economy into hostage by weaponizing the US dollar, decades of work on globalisation have been upended, leaving every other nation in pain, including India. The US citizens are not spared either the pain of Trump’s outrageous foreign policy initiatives by way of high inflation and eroded standard of living.
For the US, as its President has made it happen, the weaponised dollar is the most potent economic chokepoint. The dollar happens to be the single most traded currency in the foreign exchange market across the world, accounting for approximately 90 per cent of all foreign exchange transactions. Whether it is spot, forward or swap market, the dollar is the dominant currency in one leg of transactions.
Exasperated by the US resorting to this particular chokepoint to fulfil its political and economic interest, some of the affected countries made attempts to promote alternatives to dollar, but with only limited success so far. An exception is India-Russia trade which is done nearly 96 per cent in rupee and rouble. With a number of banks on either side involved in trade, transactions have become seamless. In the meantime, non-cash barter trade, countertrade and reciprocal arrangement continue to grow and now account for anything between 20 and 30 per cent of global trade. Beijing aggressively continues to promote renminbi as a substitute for dollar, but the progress is slow.
The dollar chokepoint available with the US sharpened under Trump Administration is now used with vengeance against Iran, supplemented by the most brutal deployment of military power. The joint US-Israel assault ‘Operation Epic Fury’ claimed thousands of Iranian army men and civilian lives, besides wreaking considerable damage to strategic assets, infrastructure and urban centres.
The US-Israeli combine may have been able to kill the former Iranian Supreme Leader Ayatollah Ali Khamenei, senior members of the National Security Council, and the heads of the Islamic Revolutionary Guard Corps (IRGC), but the people of that beleaguered country, as Trump hoped, did not rise in revolt against the regime. Trump in his first term terminated the nuclear deal with Iran in 2018that President Obama concluded in January 2016 requiring Iran to dismantle parts of its nuclear infrastructure. In exchange, the US and its allies started phasing out nuclear related sanctions. The process was peaceful.
What Obama did was a well-calibrated use of chokepoint dollar in which was embedded economic sanctions. The delusional Trump in his belief that being the commander in chief of the world’s most powerful military with Israeli intelligence in tow, he could erase a very rich civilization in mere days, thought of using the conventional chokepoint along with air invasion of Iran to achieve, as Fishman says, “an end to Iran’s missiles, its support for proxies like Hamas and Hezbollah and… even regime change.” Trump has achieved nothing except for causing human miseries on a large scale and inviting global scorn.
In the process, however, the war has alienated many allies and caused collateral damages to countries in the region with US military bases. Saudi Arabia, a close ally of the US where a large number of Americans support air and missile defence operations, has come under attack both by Iran and Houthis, backed militarily by Tehran. Impact of the US-Israeli attack on Iran in terms of purchasing power erosion and steep rise in fuel costs is worldwide.
Widespread protests in France often resulting in violent clashes between protesters and police are a fallout of the West Asian conflict. In other countries too, popular anger over inflation in daily necessities caused by high fuel prices – Brent oil is around $115 a barrel – is brimming over. Then, what was the provocation for Christine Lagarde, president of European Central Bank to tender her resignation at this point? Certainly, her decision to quit ahead of the term end is linked to ECB battling inflation risks from the Iranian War driven oil shock. Unarguably, outside their own countries, the two most unpopular politicians are Donald Trump and Benjamin Netanyahu.
Forced by circumstances of war and as an act of defence, Iran has been compelled to activate its own chokepoint – the Strait of Hormuz – through which in normal times will transit nearly a quarter of the oil and LNG that the world will consume. The US made frantic attempts to end the blockade to let merchant ships to sail through the Strait, which has Iran on the north and Yemen on the south with mines laid all over. In a kind of tactical contest, the US was able to escort merchant ships out of the Persian Gulf for a few days.
But Iran soon regained control of the Strait by using low-cost drones, missiles and targeting defiant vessels. Notwithstanding its owning two major chokepoints – the dollar and technology (AI chips designed by Nvidia, military aviation technology, etcetera) – their indiscriminate use, most notably imposition of sanctions on countries buying oil from Russia, the proceeds of which are allegedly fund the invasion of Ukraine, has led to unintended and dire consequences. What, however, remains largely inexplicable is Washington weaponising its economic power against its allies in recent times. That, according to Fishman, has “instilled fear around the world and created incentives to diversify away from the US economy. If this continues, it will damage not only American geoeconomic power, but also American companies, which depend on foreign markets for their bottom line.”
So true. US companies from Boeing to Tesla to Procter & Gamble to Coca-Cola do multibillion dollar business in China and India. China perhaps is the only country which took serious note of the US sanctioning Russia following its annexation of Crimea and began building alternatives to the dollar-denominated financial system. Furthermore, Beijing has shown rare diplomatic skills in using its chokepoints rare earths and raw materials for medicines to extract revenge on America. (IPA Service)
