European Union Foreign Minister Federica Mogherini announced at the UN General Assembly that the EU, Britain, China and Russia will continue to support the framework of legal business dealings with Iran. Aside from trade, the announcement shows the EU is countering the US dollar’s supremacy by settling transactions in euros, Michael Anti, a Chinese commentator, wrote in Chinese magazine
iWeekly.
The announcement is a strong objection to the US’s withdrawal from the Iran nuclear deal, Anti said. But what matters more is the international use of euros. Cross-border trade is mainly settled in US dollars, but with the US reinstating sanctions and an embargo on Iran, continued use of the US dollar will bring punishment. Their proposal is to build, through the European Central Bank, standardized exclusive payment channels and accounts at the level of European and British governments, which the US cannot trace back to, Anti noted, summarizing Mogherini’s UN announcement.
This is financial confrontation. If the US fails to find a countermeasure, its embargo will lose effect, and more Chinese and Russian companies will deal with other countries under the embargo through such channels, which will be a heavy blow to US dollar supremacy. If the US seeks to punish, it can only punish the ECB. But it will take a long time before the EU will compromise, according to Anti.
The development reflects that European countries are prepared for globalization without the US despite the difficulties of such a course, and, in the absence of a new world leader over the long term, the EU will step forward to do its best to fill the gap. But Anti also warns that with its markets, capital and innovation outshone by the US, the EU might be hard pressed to manage, and the move will not elevate the standing of the euro much.
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