Israel’s central bank added the Chinese yuan to its reserve holdings for the first time ever on April 20, adding the country to a small but growing list of countries that have recently reduced their exposure to the US dollar.

Previously, Israel’s central bank held only US dollars, euros, and the British pound, but will add the yuan, along with the Australian dollar and Canadian dollar, to a foreign currency stockpile that has surpassed $200 billion. This is happening at the same time as the US dollar’s share of the total global currency reserves is at its lowest point in over two decades, adding to growing fears that the US currency is losing its status as the go-to reserve currency.

Both China and Russia have made no secret of their intent to undermine the US dollar.

Both China and Russia have made no secret of their intent to undermine the US dollar, and should they succeed, they will have “changed the world forever,” but at the direct expense of the United States, whose status as a global superpower has been cemented by the global power of its currency.

For this reason, the Sino-Russia security pact has been described as a “partnership in de-dollarization,” with both countries shifting away from using the dollar in bilateral trade in 2018, after then US President Donald Trump imposed heavy tariffs on Chinese imports to launch his US-China trade war.

“While Moscow had previously spearheaded the de-dollarization initiative, Beijing quickly modelled Russia’s strategy when it perceived its own risk to punitive US financial measures,” observes the Atlantic Council. “This made way for a 2019 agreement to replace the dollar with national currencies in international settlements between them.”

Crippling US and European Union sanctions on Russia for its illegal invasion of Ukraine have decimated the cratered Russian economy and currency. More than $600 million in Russia’s foreign reserves are frozen. Mastercard, American Express, and Visa have suspended their services in the country, as have streaming and social media platforms.

Russia’s sudden economic isolation has reinvigorated efforts by Beijing and Moscow to persuade allies and non-allies alike to restructure their foreign currency reserve holdings.

China convinced Tel Aviv to reduce its US dollar holdings by 8 percent.

China has found a willing partner in Israel, a staunch ally of the United States, having convinced Tel Aviv to reduce its US dollar holdings by 8 percent.

This is a big deal, because any sell off the dollar, which currently accounts for 60 percent of $12.8 trillion in worldwide currency reserves, not only threatens its reserve-currency status, but also the US economy writ large, because “inflation really will run rampant if other countries start dumping dollars,” according to the Wall Street Journal.

The investment banking firm Charles Schwab says having the world’s reserve currency affords the US certain “privileges,” including allowing the US to borrow at lower rates than would otherwise be possible. In other words, should the US dollar lose its privileged status, interest rates would soar for American home mortgage owners, triggering a total collapse of the property and stock market.

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This brings into view the so-called “special relationship” between Israel and the United States, because if the world is locked in a new Cold War between democracy and authoritarianism, as President Biden often proclaims, then Israel is willingly advancing China’s geopolitical interests to the detriment of the United States.

To be clear, Israel is a sovereign nation, and it has every right to make whatever decisions it determines to be consistent with its national and strategic interests –– and if that includes reducing its dollar holdings and replacing it with the Chinese yuan, then so be it. Most countries diversify their foreign reserves.

But equally, the US is a sovereign nation, and it too has every right to make whatever decisions it determines to be consistent with its national and strategic interests. With that in mind, one must then ask: Where does the $3.8 billion US taxpayers contribute towards the Israeli military each year sit within the logic of advancing US national and strategic interests?

Israel is the largest cumulative recipient of US foreign assistance since World War II.

Today, Israel is the largest cumulative recipient of US foreign assistance since World War II, and that was even before former US President Barack Obama signed a military assistance package worth $38 billion over 10 years in 2016.

Notably, the deal did little to advance US strategic interests, but was seen largely to placate congressional Republicans who opposed the Iran nuclear deal, and to subsidize US military defense contractors, which reap huge profits by selling arms to Israel.

But now Israel is deliberately undermining the economic and security interests of the United States, partnering with China to de-dollarize the international financial system.

While it’s been noted by many, including The Atlantic,  that “no matter how bad the relationship between the two countries’ top leaders, no matter who gets elected to the White House, no matter how loudly some voters voice their opposition or how charged the underlying ideological debate,” the move by Israel’s central bank to advance the interests of Washington DC’s number one geopolitical adversary (China) must surely rise to the level of something altogether different from the historical past.

Ultimately, the US must not allow Israel to have its cake and eat it, too. Either it’s with the US in the new Cold War against authoritarian regimes and therefore deserving of continued US military aid, or it’s with China and Russia, and therefore no longer merits its “special relationship status.”