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Friday November 22, 2024

Dollar bullets

OFAC effectively uses the US dollar as a geopolitical tool to exert influence and pressure on other countries

By Dr Farrukh Saleem
November 10, 2024
US dollar banknotes are seen in this photo illustration taken February 12, 2018. — Reuters
US dollar banknotes are seen in this photo illustration taken February 12, 2018. — Reuters

Trump is halting bloody bullet wars, only to ignite bloody trade wars. Meanwhile, the Office of Foreign Assets Control (OFAC), the financial intelligence and enforcement agency of the United States Department of the Treasury (USDT), leverages the dominant position of the US dollar in the global financial system to advance three primary goals: imposing economic sanctions, freezing assets, and restricting access to the US-controlled financial system. By doing so, OFAC effectively uses the US dollar as a geopolitical tool to exert influence and pressure on other countries.

In March 2022, the OFAC imposed significant economic sanctions on Russia, freezing approximately $300 billion of the Central Bank of Russia’s foreign exchange reserves. Additionally, the US has imposed sanctions on Iran ($120 billion), Afghanistan ($7 billion), North Korea, Sudan, Cuba, and Syria, resulting in the freezing of hundreds of billions of dollars in assets held in financial institutions and other jurisdictions.

In 2009, Brazil, Russia, India, and China – known as the BRIC countries – formed an intergovernmental organisation. In 2010, South Africa joined, and the group was renamed BRICS. In 2014, BRICS established the $100 billion New Development Bank (NDB) and created an additional $100 billion reserve currency pool. On January 1, 2024, Egypt, the UAE, Ethiopia, and Iran officially joined the bloc. On September 2, 2024, Turkey formally applied for membership, while Saudi Arabia is still considering joining.

The countries that have either expressed interest in joining BRICS or have already applied for membership include: Afghanistan, Algeria, Angola, Azerbaijan, Bahrain, Bangladesh, Belarus, Bolivia, Burkina Faso, Cameroon, Colombia, Congo, Cuba, El Salvador, Equatorial Guinea, Ghana, Indonesia, Iraq, Kazakhstan, Kuwait, Laos, Libya, Malaysia, Mali, Myanmar, Nigeria, North Korea, Peru, Senegal, Serbia, Sri Lanka, Syria, Tunisia, Uganda, Uzbekistan, Venezuela, Vietnam, Yemen, and Zimbabwe.

The BRICS group now accounts for over a quarter of the global economy and represents around 4.4 billion people – more than half of the world’s population, compared to just 735 million in the US-led West. BRICS is increasingly adopting a bold geopolitical stance, challenging the traditional Western-led global order. As these nations explore alternative financial systems and work to reduce reliance on the US dollar, they are positioning themselves as a strategic counterbalance to Western influence in global affairs.

Brazil’s President Luiz Inácio Lula da Silva has proposed the creation of a new, pan-BRICS currency. This initiative, along with other monetary proposals being discussed aim to reduce reliance on the US dollar. Potential alternatives include a BRICS cryptocurrency or a basket currency composed of the currencies of the member nations.

In light of Trump’s decisive victory and the increasing weaponisation of the dollar, Pakistan must diversify its reserves to reduce its vulnerability to geopolitical tensions and potential economic sanctions. By incorporating assets such as gold, Bitcoin, and silver, Pakistan can build a more resilient financial strategy. Gold has long been a stable store of value during times of economic uncertainty and can serve as a robust safeguard against currency depreciation. Bitcoin, while more volatile, offers unique benefits as a decentralised digital asset that is beyond the influence of traditional financial systems and geopolitical pressures. Silver, with its dual role as both a precious metal and an industrial commodity, adds further diversification and can respond differently to market shifts compared to other assets.

The goal is to strengthen Pakistan’s financial sovereignty in response to the weaponisation of the dollar. The goal is to reduce reliance on a single reserve asset. This approach will provide a buffer against unexpected global economic shifts, ensuring greater stability and flexibility in managing the country’s economic future.

The writer is a columnist based in Islamabad. He tweets/posts @saleemfarrukh and can be reached at: farrukh15@hotmail.com