The world continues to chisel away at the dollar’s reserve status.
In the first of the two most recent examples of how non-western nations plan to avoid the weaponized dollar, late last week Argentina made a loan repayment to the International Monetary Fund worth the equivalent of $2.7 billion “without using dollars” on Friday, using Chinese yuan and special-drawing rights notes instead, Reuters reported.
The operation is expected to deplete Argentina’s $1.65 billion in SDRs, according to a central bank source, “with yuan making up the difference.” While Reuters’ take home message here is that the “use of yuan underscores how desperate the country’s dollar position has become”, an alternative conclusion is that when it comes to international obligations – at least as far as the IMF is concerned – the yuan is as good as the greenback, an observation that will make China quite happy.
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But wait, there’s more.
Indian refiners have also begun paying for some oil imports from Russia in Chinese yuan, Reuters also reported citing “sources with direct knowledge of the matter” as Western sanctions force Moscow and its customers to find alternatives to the dollar for settling payments.
In other words, it is the weaponization of the dollar that is forcing the world to find alternative to – drumroll – the dollar, something we have been warning would happen ever since Russia was effectively blacklisted and targeted by the entire dollar-based monetary platform.
And just in case there is still some confusion about the long-term viability of the petrodollar, China has also switched to the yuan for most of its energy imports from Russia, which overtook Saudi Arabia to become China’s top crude supplier in the first quarter this year.
“Some refiners are paying in other currencies like yuan if banks are not willing to settle trade in dollars,” said an Indian government source.