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Currency war

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The recent rise in the value of the U.S. dollar against the Iranian rial has come against the backdrop of renewed efforts by many non-Western countries to reduce U.S. financial hegemony over international institutions.

In a political statement on the first anniversary of the Ukraine war on Friday, global financial crime watchdog Financial Action Task Force (FATF) suspended the membership of Russia, a move that is likely to result in the disruption of some Russian financial transactions with foreign countries.

Accusing Russia of starting a “war of aggression against Ukraine” and engaging in arms trade with “United Nations sanctioned jurisdictions,” the FATF said, “The Russian Federation’s actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system. They also represent a gross violation of the commitment to international cooperation and mutual respect upon which FATF Members have agreed to implement and support the FATF Standards. Considering the above, the FATF has decided to suspend the membership of the Russian Federation.”

The suspension came at a delicate moment in an international system punctuated by efforts to wriggle free from Western financial clout. The FATF, which happens to have had suspended Iran’s membership, made ample political allegations to justify its decision, a move that indicated how international financial institutions dominated by the West can be used as leverage to put pressure on rivals. This influence can be clearly seen in other international institutions such the International Monetary Fund.

Facing this Western exploitation, countries all over the world, even those allied to the West, are trying to reduce their dependence on Western-dominated financial institutions and currencies. For example, Iran and Russia have recently discussed ways of removing the U.S. dollar from their trade. Similarly, the United Arab Emirates and India did the same thing. And Iraq, which has greatly suffered for its reliance on the U.S. dollar recently, is moving in the same direction in its transactions with China.

In this regard, China appears to be a prime option in de-dollarization efforts. Some are now talking of petroyuans instead of petrodollars.

Iran is perhaps the biggest fan of these efforts given its never-ending suffering with the dollar. In recent weeks, the Iranian rial has fallen sharply against the U.S. dollar, registering new all-time low records. Of course, some experts say that the depreciation of the Iranian currency has political reasons too. They say that Iran is facing a currency war that is aimed at intensifying economic hardships for ordinary people in order to get them to revolt against the establishment.