US dollar to lose reserve status if Congress rejects Iran deal: Kerry
US Secretary of State John Kerry has warned that the dollar’s status as the global reserve currency could be threatened if Congress rejects the nuclear accord with Iran.
“If we turn around and nix the deal and then tell them, ‘You’re going to have to obey our rules and sanctions anyway,’ that is a recipe, very quickly … for the American dollar to cease to be the reserve currency of the world,” Kerry said Tuesday at a Reuters event in New York City.
The top US diplomat said if American lawmakers prevent the Obama administration from implementing the nuclear agreement, it could put Washington at odds with European allies, China and Russia.
“The notion that we can just sort of diss the deal and unilaterally walk away as Congress wants to do will have a profound negative impact on people’s sense of American leadership and reliability,” Kerry noted.
Currently, there are only four currencies that are counted by the International Monetary Fund (IMF) as major reserve currencies that can be used in international transactions: The US dollar, the euro, the British pound and the Japanese yen.
However, the American dollar remains the dominant reserve currency throughout the world.
But financial analysts have often speculated that a competing currency like the euro or the Chinese yuan will eventually dethrone the dollar as financial patterns and global trade shifts towards Asia.
“The complications that will grow out of it (rejecting the Iran accord) are enormous, and there will be an increase in this notion that there ought to be a different reserve currency because the United States is misbehaving and not in fact living by the agreements that it negotiates itself,” Kerry added.
In a speech last week at American University, President Barack Obama also warned that scuttling the deal would bolster the case against the dollar as the reserve currency.
Most Republicans oppose the nuclear agreement with Iran, but they need a two-thirds vote in both chambers of Congress to override a presidential veto, and to reach that threshold, Republicans need Democratic support.
Congress has until September 17 to review and vote to either approve or disapprove of the Joint Comprehensive Plan of Action announced by Iran and the P5+1 group of countries on July 14.
Obama has launched an aggressive campaign of private entreaties and public advocacy to rally enough Democratic support to preserve the nuclear accord.