The annual summit of the China-led Shanghai Cooperation Organization (SCO) is taking place this week. As with every meeting of the SCO or BRICS, leaders repeat calls to “ditch the dollar.”
Yet these discussions never go beyond rhetoric because there is no viable alternative to the US dollar as a reserve or trade currency.
The SCO has ten members: Belarus, China, India, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan, and Uzbekistan. None of their currencies are hard or fully convertible.
Even the yuan and rupee, often called partially convertible, remain tightly managed and restricted. Exchange rates to the dollar illustrate the weakness: the Belarusian ruble trades at 3.37 per USD, the yuan at 7.13, the rupee at 87.95, the Pakistani rupee at 283.37, the Russian ruble at 80.58, the Tajikistani somoni at 9.52, and the Uzbekistani som at about 12,477.
Efforts to create an SCO or BRICS alternative always collapse for the same reason: weak, nonconvertible currencies that lack international trust and usability.
A fully convertible currency is one that can be exchanged freely without government restrictions. A hard currency is stable and reliable, issued by a politically and economically strong state. An international currency is widely used and held outside its borders.
The dollar and euro meet all these standards. They are traded freely, backed by strong institutions, and used globally in trade, reserves, and investment. SCO currencies fail across the board, hampered by capital controls, inflation, sanctions, and weak institutions.
Four main proposals have been floated to bypass the dollar: a monetary union, a currency basket, a peg to a stable asset, and currency swaps. None are workable.
A monetary union, modeled on the euro, is impossible for the SCO. Members vary widely in GDP, inflation, debt, and fiscal discipline.
China and India dominate, while Tajikistan and Kyrgyzstan remain underdeveloped.
The EU spent decades building institutions before adopting the euro, while the SCO has no central bank or convergence framework.
A union would leave stronger economies subsidizing weaker ones, creating crises worse than those in the eurozone.
Geopolitical rivalries, India-China and India-Pakistan conflicts, further block cooperation, while sanctions on Russia and Iran would taint a shared currency. Iran raised the idea in 2024, but no progress followed.
A currency basket, similar to the IMF’s Special Drawing Rights (SDR), would inherit the weaknesses of its components. Since most SCO currencies are volatile and non-convertible, the basket would lack liquidity and trust.
Disputes over weighting, especially resentment of Chinese dominance, would complicate adoption. At best, it might reduce USD use in limited settlements, but it could not function as a global currency.
Pegging to a stable anchor such as the dollar, euro, or gold would defeat the purpose of de-dollarization. Tying to the dollar binds members to the very system they want to escape.
A gold peg would require massive reserves that even China cannot provide, much less poorer members. Pegs also expose economies to foreign policy and commodity volatility, while sanctions would make them even riskier.
Currency swaps are equally flawed. In theory, bilateral or multilateral swaps would allow members to settle trade in local currencies. In practice, asymmetry makes this unworkable.
China and India tower over weaker economies, and most SCO currencies are volatile, non-convertible, and plagued by inflation. Swaps would lean on the yuan, creating an imbalance and leaving stronger economies exposed to weaker ones.
Smaller members lack reserves to sustain swap accounts. Political mistrust also undermines cooperation: border disputes and rivalries discourage countries from tying capital to each other’s currencies.
Sanctions complicate swaps further. Russia and Iran are under heavy restrictions, and partners risk secondary sanctions by trading in their currencies.
Even the yuan faces limits to convertibility and hesitancy from global firms. Operationally, swaps would require 45 separate bilateral agreements among 10 members, each demanding reserves and monitoring.
Stronger economies would be forced to hold depreciating currencies such as the Iranian rial or Uzbekistani som, while weaker ones cannot reciprocate. Proposals for an SCO Development Bank or clearing mechanism remain stalled.
At best, swaps could reduce USD use in a handful of bilateral deals, such as Russia-China yuan-ruble settlements, but global trade in oil and commodities remains dollar-based. Swaps cannot scale into a full alternative.
In the end, all four proposals point to the same conclusion. SCO currencies are weak, restricted, and distrusted. Neither unions, baskets, pegs, nor swaps can overcome these structural flaws.
Just like BRICS, the SCO remains dependent on the US dollar, leaving de-dollarization talk as little more than posturing.
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