| 1. Petrodollar System |
Oil trade is priced & settled in USD, forcing countries to hold dollars. |
Maintains global USD demand; limits alternatives. |
Saudi Arabia pricing oil in USD since 1974 |
| 2. U.S. Financial Dominance |
SWIFT, U.S. banks, and Treasury control global transactions. |
Sanctions & exclusion risk deter alternative systems. |
Iran & Russia cut off from SWIFT |
| 3. Dollar-Denominated Debt |
Many countries (and corporations) borrow in USD. |
Forces repayment in dollars, sustaining demand. |
Emerging markets’ $4T+ USD debt |
| 4. Lack of Trust in Alternatives |
No widely accepted reserve currency rivals the dollar’s stability. |
BRICS/local currencies face inflation & convertibility issues. |
Venezuela’s failed Petro cryptocurrency |
| 5. Network Effects & Inertia |
Global trade, contracts, and reserves are dollarized by default. |
High switching costs for businesses & governments. |
80% of global trade invoiced in USD |
| 6. U.S. Military & Geopolitical Power |
Dollar hegemony backed by U.S. military alliances. |
Countries fear U.S. retaliation for abandoning dollar. |
Iraq’s Saddam Hussein switching to euros (2003 invasion) |
| 7. Capital Flight Risks |
Investors pull money if a country shifts away from dollar stability. |
Causes currency crashes & economic instability. |
Egypt’s pound collapse after partial de-dollarization attempts |
| 8. Limited BRICS Coordination |
BRICS lacks a unified currency/financial infrastructure. |
Local currency trade remains small-scale & inefficient. |
India-Russia rupee-ruble trade disputes (2023) |
