The global response to the dollar’s weaponisation
Peter McGahan
Monday 5th May, 2025.
PART six in this series of articles: The Global Shift Away from the US Dollar
Last week, I covered how the dollar was used as a weapon and ‘geopolitical tool of compliance, punishment and hierarchy’, and this week I’ll turn to the exodus which followed and is following. If freezing $300 billion in a country’s sovereign assets was the warning shot, the world has since responded, not in protest, but in action. (I remind you again to leave any political bias aside to capture what this means to your present, and future finances, and the source of conflict).
Middle Eastern elites, who’ve had their money parked in London, Zurich, or Manhattan, started looking at those safe havens with fresh eyes. If Abramovich’s billions could vanish, what was stopping the same from happening to them?
That message travelled fast.
China didn’t wait for the world to change. It started changing it. In the years following 2022, Beijing accelerated its development of the digital yuan (e-CNY) and scaled up its Cross-Border Interbank Payment System (CIPS), a rival to the US dominated Western SWIFT system that allows global payments in renminbi, without touching the dollar or Western banks.
Russia, already bruised by earlier sanctions, had learned the hard way in 2014. By 2022, Moscow was ready. It launched its system for transfer of financial messages (SPFS), its own SWIFT alternative, added more gold reserves, and turned toward non-dollar trade with India, China, and Turkey.
In a move that would've been completely unthinkable a decade ago, Saudi Arabia and the UAE joined BRICS+. These two were once bedrocks of the petrodollar system. Now? They’re signing oil deals in yuan, entertaining digital settlements via mBridge (I wrote about three weeks ago), and crucially sending a signal: the world’s energy heartland is no longer dollar-loyal.
Turkey, India, and China ramped up gold purchases and trimmed their dollar exposure.
Argentina, Brazil, and South Africa expanded trade in local currencies or yuan.
African and Southeast Asian central banks began repatriating gold from London and New York vaults, just in case.
These nations are the “creditors of the future.” And they’ve decided they don’t want those assets exposed to political weather from Washington or Brussels.
BRICS is well down the line in developing its shared payment platform to bypass SWIFT and the dollar.
It’s New Development Bank lends in local currencies, freeing borrowers from dollar-denominated debt traps. For example, I’ve been travelling through India. I’m in remote areas as well as big cities. I’ve been here for four months of the last 24. I’ve talked to the very progressive, educated young professionals, studied their economy, and watched the mind-blowing infrastructure. Mind-blowing. Mind-blowing. Thousands of kilometres of roads and bridges in remote areas.
One of the funders of the BRICS new development bank is China. The loans however are made in rupees, not dollars, and so countries don’t need to worry about ‘dollar bullying’ through interest rate fluctuations. Think about what that means to India in the coming years.
Think also, about the countries which are now allowed to develop, dollar free, and when their wages follow, and the goods you are buying so cheaply now start to rise in price, your currency begins to fall, and the cost rises further?
BRICS and other countries are now floating the idea of creating a new type of reserve currency which would be used in trade and finance, like a global currency, backed not by political promises, but by real-world goods like gold, oil, gas, food. (You were wondering why certain unpopular wealthy people were buying up farmland in the USA?)
Or, it might be built like a Special Drawing Rights (SDR)-style basket, combining national currencies (like the yuan, rupee, rand, real, and rouble) into one stable “unit currency.”
If such a currency takes off, it would compete directly with the US dollar. It would also mean countries wouldn’t need to keep mountains of dollars in reserve.
They wouldn’t be vulnerable to US interest rate hikes or sanctions or the dollar soaring in price and their interest rate payments with it. It’s a way out of what’s been called the “dollar debt trap”, where countries borrow in dollars, can’t print
their own repayment currency, and end up having to slash spending or sell national assets to pay it back.
Germany and France have also expressed quiet concern over the long-term implications of using dollar-based enforcement tools.
Next week I will cover how China’s Belt and road scheme impacts the dollar.
If you have a question you would like me to answer on the impact of the dollar, I am happy to do so. And, for a complimentary factsheet summarising this comprehensive series on dedollarisation, please email info@wwfp.net and you’ll receive one when the series is completed.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
