Colonization has been, over the centuries, a historical phenomenon with major consequences. The Roman Empire, and even long before that, its Chinese counterpart, expanded their territories and brought their language and culture. At the end of the Middle Ages, the European nations imposed their domination on the New Continent and as far as Asia. What animated the leaders was above all their desire for power. Gradually, the security of trade routes and access to raw materials that these states lacked were additional motivations.
Decolonization began at the end of the eighteenth century with the creation of the United States, facilitated by the persistent rivalry between France and England. The American continent then freed itself from the grip of Spain and Portugal and Asia from English and Dutch domination. The history of the twentieth century then saw the decolonization of Africa and Vietnam, sometimes at the cost of bloody wars. Conversely, but for ideological reasons, Russia, which became the Soviet Union, took control of the countries located in Eastern Europe while leaving them an apparent independence while China freed itself from Japan. The fall of the Berlin Wall liberated these peoples and it was thought that these pages of world history had been definitively turned.
Russia's invasion of Ukraine has shown that this is not the case, but it may not be the event that will have the most consequences for international relations in the future. A new mode of domination has occurred with the opening of borders and the liberalization of capital movements. It is exercised through money: in recent years, the dollar has become a tool of pressure because it is, by far, the world's leading reserve currency. A new form of colonization has appeared, financial colonization.
The euro could have counterbalanced this development, but it was not designed for that. In order to strengthen the single market, the aim was to avoid fluctuations between European currencies which disrupted trade and had generated frequent exchange rate adjustments in the 1980s, accompanied by political tensions that hampered the completion of the European project. The euro has had two advantages. Thanks to an effective monetary policy, inflation has been brought under control much better than in the past. By becoming a reserve currency, it has facilitated trade within and outside the euro area. But it has never had the ambition to supplant the dollar.
In the early 2000s, China, while entering the World Trade Organization, set itself the goal of internationalizing its currency, the Yuan. This facilitated the financing of its companies, particularly through access to Hong Kong, which was a major international financial centre. But twenty years later, the share of the Chinese currency in central bank reserves as well as in economic and financial exchanges has remained very low and therefore of the initial objectives.
The dollar therefore still has no serious competitor and the American authorities are now using it as an instrument of pressure in a tense international context. This is what is akin to a slow but effective financial colonization. The consequences of US monetary policy on the rest of the world had always been significant, as evidenced by the interest rate hikes in the late 1970s to combat inflation. They caused a surge in the dollar and destabilised the European economies. But the use of the currency as a means of pressure is of a completely different nature today.
A first example is provided by the appearance of a new concept: extraterritoriality. The simple fact of using the dollar for a transaction, wherever it is located in the world, makes the American justice system competent to judge its compliance, with regard to its laws, and to impose sanctions. Alstom and BNP were thus heavily condemned. It has even been claimed that it was an American competitor of Alstom that had been at the origin of the procedure to weaken it, which remains to be proven.
Similarly, if the United States decides to impose an embargo on imports from a country with which there is a dispute, this measure will not only apply to American companies but to anyone who pays for their purchases in dollars or uses a bank responsible for converting the dollars into the currency chosen by the exporter to carry out the transaction.
The United States has accumulated large external deficits that have been financed by its trading partners. The central banks of these states now have very large reserves in dollars, which have been largely used to buy US public debt securities. As international tensions have increased, these institutions, and in particular the People's Bank of China, which is one of the main creditors, have thought of reducing their exposure, but faced with the risk of seeing prices fall, they have had to adopt a very cautious policy, forcing them, de facto, to continue financing American deficits.
The situation has been further aggravated by the US president's plan to buy Greenland. How could it do this if not by paying it in dollars and thus by aggravating its external debt, which is financed by the countries that are constantly under its threats? To overcome this constraint, Donald Trump then informed European countries that they would face heavy retaliation if they started selling the US Treasury bonds they had accumulated over the years, i.e. more than 2000 billion dollars.
These threats do not seem to have impressed the pension funds of the Nordic countries. Denmark's Akademiker-Pension and Sweden's Alecta said they had sold their U.S. securities following the U.S. president's plans for Greenland. Although the reaction of the financial markets to his aggressive statements prompted him to backtrack, the use of the financial instrument in international political tensions had never reached such a degree.
It has also established itself in commercial relations. In a variety of circumstances, ranging from France's refusal to join the "Peace Council" to pressure to buy American oil and gas, there have been countless cases of recourse to the threat of customs duties against countries that refuse to submit to the White House's demands. Here again, the eruption of financial sanctions in disagreements that should be resolved by diplomatic means is unprecedented.
Although these threats have often not been acted upon, they have created a climate of uncertainty that is unfavourable to growth. They encourage states and companies alike to leave the model of "happy globalization" and enter a phase of withdrawal that is not unrelated to the progress in the opinion of extremist parties.
It is as if having a currency that plays a central role in transactions and that has been accumulated over decades by all countries, gives the country that issues it the power to impose its views. One of the challenges of the coming years will be to convince this country that it is in no one's interest to continue in what amounts to neo-colonialism.
Rather than talking about currency wars, it would be more accurate to observe that if money has acquired the characteristics of a weapon of war, it should not be used.