United States is using economic sanctions as a tool to counter its adversaries for long time. In recent time, US has put sanctions on many firms, Individuals, banks and governments of countries like Russia, North Korea, Cuba, Venezuela, Iran, Lebanon and Syria to curb their economies. These sanctioned countries and their trade partners are facing troubles in stable and sustainable development of their economies. As a result of this, now they have started planning for direct payment of traded goods and commodities in their local currencies, bypassing the US financial system.
A number of developed and developing economies will start making direct payments in their local currencies, by passing the US financial system. This will devalue US dollar and will be a threat to US economy.
After withdrawal by US from Iran Nuclear deal, threat of sanctions is looming on firms and countries operating and trading in Iran’s oil and Gas sector, making them reluctant to continue operations in Iran and to invest further in ongoing projects.
In discussions with Iran’s leaders, European Union leaders vowed to protect the deal and to continue to trade with Iran to protect Iran’s economy and EU firms from US sanctions.
On May 20, 2018 Iran’s foreign minister Mohammad Javad Zarif met Arias Canete, European commissioner for Energy and climate. Canete, said that Tehran wanted EU to act fast to preserve the trade of Oil from Iran and consider making direct Euro denominated payments to the Iran’s Central Bank, bypassing the US financial system. EU moved to protect EU firms from US penalties and have asked member governments directly pay Iran’s central bank for oil.
EU passed legislation to protect European firms from US sanctions and ready to retaliate to any of the action taken by US that may harm member countries economy. The Oil giants operating in Iran are feeling the heat of sanctions if they continue to trade and deal with Iran and keep investing in Iran’s Oil and Gas projects.
“The blocking statute forbids EU companies from complying with the extraterritorial effects of US sanctions,” the European commission said.
Like Iran, Venezuela is also sanctioned by US and struggling hard because of high inflation. Most of the Venezuela’s economy is dependent on Oil trade. As, Venezuela has the world’s largest oil reserves of about 300 billion barrels followed by Saudi Arabia with about 266 billion barrels of oil reserves. Saudi Arabia is the world’s largest oil producer at present.
The cash trapped nation is planning to make Petro its official currency by 2020. Petro is the world’s first state backed crypto currency tied to oil reserves of Venezuela. Petro was put on pre-sale on 20 February, 2018. Many see this as the safest crypto currency, but Donald trump administration has issued a ban on Petro.
In month of March, 2018, a team of experts from Venezuela’s blockchain department visited New Delhi and entered into a pact with Coinsecure, a Delhi based Bitcoin trading firm to sell Petro in India.
Coinsecure Chief Executive Officer Mohit Kalra said Venezuela wanted to add Petro as a cryptocurrency on Coinsecure, so that Venezuela can trade Petro against bitcoin and the rupee.
During the Visit, Venezuela has offered India a 30 per cent discount on crude oil purchases. The discount, however, will be applicable only if India makes the payment of traded oil in the country’s new blockchain technology-based digital currency Petro.
In January, 2018, Central bank of Pakistan allowed the import-export and financial transactions can be in denomination of Chinese currency, Yuan to be used for bilateral trade and investment activities.
In a statement, State bank of Pakistan stated, “SBP has already put in place the required regulatory framework which facilitate the use of Yuan in trade and investment transactions.”
The countries sanctioned by US and countries struggling hard with high inflation because of US sanctions will start making direct local currency denominated payments, bypassing the US financial system. Bypassing the US financial System will be a challenge and direct threat to US economy. US dollar will be devalued that will hurt to the US economy. Ultimately US will no more be the economic power center of the world.