Indian Head of American Think-Tank Supports De-Dollarisation - Report

Oil trade has to be de-pegged from the dollar for countries to tide over the US stranglehold on the international financial system and oil trade, says Vikram Mehta, while emphasising a non-dollar based financial messaging system as an alternative to the dollar-based SWIFT.

New Delhi (Sputnik): A non-dollar based trading regime is crucial to do away with US' absolute sway over oil trade, according to Vikram Mehta, the chairman of the Indian arm of American think-tank the Brookings Institution. Mehta has opined this in the newspaper Indian Express in context of the current US sanctions against Iranian oil purchases.

He pointed out the economic advantage that the US has, as the leverage to impose sanctions on Iran stems from the fact that oil is priced in dollars and that the dollar is considered a reserve currency in global markets.

READ MORE: US Not to Force Private Firms to Sell Cheaper Oil to India Amid Iran Sanctions

"One of several reasons for America's economic leverage is that it sits at the epicentre of the global financial system. The dollar is a reserve currency. Global trade is preponderantly carried out in dollars. Oil is priced in dollars", Mehta said.

The fact that the US has control over financial messaging systems, financial intermediaries, etc. has made it a threat to every entity that trades with Iran after 3 May, he opined.

"The US treasury is the favoured haven for risk averse investors. And, it (the US) controls the financial messaging system (SWIFT). Banks, financial intermediaries and corporates would not be able to function if they did not have access to this system. This latter reality is the threat that hangs over every entity that continues to trade with Iran after May 3", he added.

READ MORE: US Plans to Announce New Set of Sanctions Against Iran – Reports

Mehta advocated for a financial messaging system that can do non-dollar transactions without SWIFT, as it would blunt the threat from US oil hegemony.

"Clearly, this threat would lose its edge if there were an alternative messaging system that enabled non-dollar transactions without SWIFT. The European signatories of JCPOA (Germany, France and the UK) have created such a system. They announced in January the establishment of a SPV 'Instrument in support of Trade Exchange' (INSTEX) to enable companies to trade with Iran without having to deal with dollar-based US banks", he said.

Emphasising strongly that countries must create a non-dollar-based trading system, Mehta stated that this would work towards taking the sting out of the US stranglehold on the international financial system and avert severe consequences that may be awaiting countries arising from Trump's policies.

"The rest (countries other than US) must find ways of creating a non-dollar based trading system, particularly regards petroleum and thereby weakening America's stranglehold over the global financial system", he advised.

The views and opinions expressed by the speakers in this article are their own and do not necessarily reflect the position of Sputnik.