Turkey is now going to use its domestic currencies to trade for oil and gas with China and Iran. With the greenback being the world’s reserve currency, this has given great benefit to the United States to have the ability to run large national deficits with the rest of the world because their has always been a large demand for U.S. dollars for foreign exchange transactions where a country would use their national currency to buy dollars then conduct the underling oil transactions using those purchased dollars with the country supplying the oil.
Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover, local media reported on Wednesday.
Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world’s major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February.
Turkey’s decision to make settlements with Iran and China in national currencies was announced during a visit to Iran by Turkish Prime Minister Recep Tayyip Erdogan. The Turkish premier told a Turkish-Iranian business forum on Tuesday that the countries had prepared a legal framework for transition to settlements in national currencies.
“We have adopted a necessary legislative act and are prepared for the transition,” the Turkish newspaper Milliyet quoted Erdogan as saying.
Analysis: If this trend continues the U.S. government is going to be forced to cut spending or raises taxes or deal with a rapidly falling dollar based on lack of support and oversupply.