What happens when the dollar's not in the middle?

FOR most of our lifetimes global trade has worked like this: if you were selling oil in Brazil or importing fertiliser in India then you priced it in dollars.

- Peter McGahan

Even if the buyer and seller had no connection to the US, the greenback was the middleman. Trade cleared through US banks, contracts were written under New York law and if something went wrong western courts had the final say, and a field day: nice if you can get it.

It was enforced upon others. For decades, it worked, because everyone trusted it or just couldn’t break into an alternative.

Not any more.

Over the past two years that foundation has cracked, not in one dramatic collapse but in a quiet shift which is now gathering speed. Countries are rewriting how they trade with each other, and they're doing it without the dollar.

Let's start with what's happening between countries.

Trade agreements are no longer defaulting to dollar payments. China is settling oil deals with Saudi Arabia in yuan. India is buying goods from Russia in rupees.

Whether it’s China-Brazil, India-Russia, Iran-China or Saudi-China, deals in oil, fertiliser and machinery are being settled in currencies other than the dollar.

Brazil and China are swapping their own currencies for bilateral trade. Even the United Arab Emirates and India, two long-time dollar users, signed a deal in 2023 to trade in rupees and dirhams.