Strategic Assessment

This essay describes the global economic processes that strengthen the voices in the Gulf urging reduced dependence on the US dollar. The decline of the dollar may sharpen both calls for the Gulf states to change the exchange rate regime and cancel linkage of the local currency to the dollar, and calls to end the pricing of oil in dollars. As the dollar’s strength comprises a central component in the US standing in the international arena, the increase in such calls will likely be accompanied by a US diplomatic effort to guarantee that its Gulf allies will not surprise it with unilateral financial moves that might damage the dollar’s status.