The Great Illusion of Alternative

In early January 2026, the world media exploded with reports about Turkey's possible entry into the defense pact between Saudi Arabia and Pakistan. Analysts were quick to declare this event the beginning of a new era—the formation of an alternative world order based on Islamic financial principles and capable of challenging dollar hegemony.

The Islamic banking industry is estimated at 4.5 trillion dollars with an annual growth rate of 10-15%. Saudi Arabia controls 32.9% of the world's Islamic banking assets. Pakistan has nuclear weapon; Turkey has advanced military technology. It may seem that all the elements for creating a financial “Doomsday weapon” are in place.

However, behind the bombastic rhetoric about the “collapse of American guarantees” and the "erosion of dollar hegemony" lies a fundamental paradox: the alternative financial system, which claims to replace Western capitalism, is itself permeated with the very principles that it supposedly rejects. Islamic banking is positioned as an ethical alternative, free from interest (riba), speculation and financial abuse. But it is enough to look at real practice to discover that the same interest rates, only renamed, are hidden under beautiful Arabic terms.

Murābaḥa: bribery in halal packaging

The central instrument of Islamic banking is murābaḥa, a purchase and sale agreement with a margin. Theoretically, a bank buys an item for a customer and then resells it at a profit. No interest, just the trading margin. In practice, murābaḥa is an ordinary loan with a fixed interest rate, only clothed in Islamic terminology.

Critics explicitly call this “legal hypocrisy.” Research shows that modern murābaḥa contracts closely approximate traditional financing mechanisms. Moreover, Islamic banks often do not even buy goods physically—they create a fictitious chain of documents that mimic a purchase and sale transaction, while in fact ordinary lending takes place. As the scientists note, “ownership does not remain with the bank,” but is immediately transferred to the borrower in exchange for a fixed income, which is equivalent to creating debt.

Islamic banks even set their “profitable” rates based on LIBOR, SOFR, or central bank rates, that is, they are directly linked to ribā-based indicators. How can there be an “Islamic” rate if it correlates with interest rates? This is the first paradox: the system, which positions itself as the antithesis of usury, actually parasitizes the percentage indicators of the traditional financial system.

Risk Sharing: A beautiful Myth

The second key principle of Islamic banking is the partnership division of risks and profits. In theory, the bank should participate in the client's profits and losses through the mechanisms of muḍāraba and mushārakah. In practice, these instruments account for a minuscule proportion of Islamic banks' operations. The study showed that the financing of Islamic banks according to the principles of muḍāraba and mushārakah is “hopelessly insufficient and far from the implementation of Islamic principles in practice.”

When a client's project goes belly up, the bank does not incur any real losses—the client remains in debt for the entire amount. This is not a division of risks, but a one-sided burden. The bank willingly takes its share of the profits, but when the business fails, the client is left alone with their problems. Sharia councils, which receive salaries from the banks themselves, dutifully issue fatwas legitimizing complex contracts that centuries of Islamic jurisprudence would reject.

Moreover, Islamic banks demonstrate stable income without losses, which contradicts the very logic of a risky partnership. According to experts, depositors’ expectation of stable profits and no risk of losses is an “unnatural product of capitalist banking,” but this is exactly how Islamic banks work in practice.

Failures and Quarrels: A Phony Ethics

The history of Islamic banking is replete with major failures that expose claims of ethical superiority. In 1988, the Islamic investment house Ar-Ryan collapsed, thousands of small investors lost their savings. In 1998, the management of Bank al Taqwa failed with losses of more than 23% of the fixed capital for depositors—later it turned out that the management violated banking rules by investing more than 60% of assets in one project.

The Islamic Bank of Britain (IBL) in South Africa went bankrupt in 1997 due to widespread insider lending, fraud, and poor governance. The audit found that the bank had been accumulating ribā-based debt secured by real estate to finance other banking institutions—a direct violation of Sharia principles. At the same time, the bank actively promoted its Sharia competence. The outstanding loans accounted for 30.3% of the total amount, but the accounts showed no reserves.

The Turkish Ihlas Finance House closed in 2001 due to risky lending, rapid expansion, and questionable central bank regulation. Dubai's debt crisis in 2009 showed that sukuk (Islamic bonds) can inflate debt to unsustainable levels.

Islamic Windows: An Imitation of Piety

The phenomenon of “Islamic windows,” divisions of traditional banks offering Sharia products, deserves special attention. In 2011, the Qatari central bank ordered traditional banks to close their Islamic branches. The reason? Mixing of funds, the impossibility of real separation and, in fact, imitation of Islamic principles to capture a share of a growing market without real adherence to Sharia.

Some opponents of Islamic windows claim that this is “a way for traditional banks to take a share of the growing Islamic finance market without fully applying Islamic methods.” The activities of the Islamic branches are “polluted by ribā” through the mixing of funds. The excess liquidity of the Islamic unit is transferred to the main bank, which mixes it with its own money and uses it in non-Islamic investments.

This is the third paradox: even within the Islamic financial system, there is recognition that supposedly Sharia products may be a simple marketing trick (window dressing) rather than a genuine alternative.

Structural Weaknesses of the alliance

Let's come back to the geopolitical “financial weapon” of the Turkish-Saudi-Pakistani alliance. Here the paradoxes multiply with every aspect of the analysis.

Pakistan, presented as the military pillar of the alliance, is in a state of permanent economic dependence on the IMF. The country has participated in 24 IMF programs since 1958. The current $3 billion Stand-By program is accompanied by stringent conditions. Pakistan suffers from chronic balance of payments deficits, fiscal ‘mismanagement,’ and depletion of foreign exchange reserves.

The economic crisis of 2021-2024 has become the largest since independence. The rupee depreciated to historic lows, and the government had to raise fuel prices to meet IMF conditions. How can a country that depends on Western financial institutions be the basis of an alternative financial architecture? This is the fourth paradox.

Turkey, in turn, remains a NATO member with the second largest military contingent after the United States. The country is experiencing its own economic problems. Turkish Islamic banking assets are estimated at about $80 billion, a modest sum amid global ambitions. Can a state embedded in a Western military structure lead a financial riot against the West?

Saudi Arabia still trades oil for dollars. Despite controlling $740 billion in Islamic banking assets, the Kingdom remains the United States' most important partner in the region. Yes, trust in American security guarantees has been undermined. But economic integration with the dollar system is so deep that a sharp break would mean economic suicide.

BRICS and De-dollarization: Over-the-Top Ambitions

The original text relies on the synergy of the Islamic financial bloc with the BRICS de-dollarization initiatives. However, the reality of BRICS is far from revolutionary unity.

The BRICS summit in July 2025 in Rio de Janeiro did not produce any concrete progress towards a common currency. The final declaration made no mention of a common currency or a coordinated de-dollarization strategy. Even President Lula, who previously actively promoted the idea, raises it less and less often.

Experts note the structural contradictions of the BRICS: lack of institutional coherence and political unity, divergent economic models and geopolitical priorities, excessive dependence on China and Russia for strategic leadership. The expansion of the BRICS is only exacerbating coordination problems.

Moreover, the BRICS does not have the institutional mechanisms to support a full-fledged alternative financial order. Unlike the IMF, the bloc does not have a lender of last resort capable of providing liquidity in economic crises. Credit and swap line agreements between the BRICS countries remain underdeveloped. Reliance on SWIFT remains a major obstacle, as most global transactions are still processed through a US-controlled financial infrastructure.

Brazil and India are showing unwillingness to fully confront the United States on financial issues. Even under Lula's independent foreign policy, the future Brazilian government may not be ready to antagonize the United States on such a critical issue.

The Iranian Experience: Warning Instead of a Pattern

The original text mentions that “Iran's experience of circumventing sanctions through Islamic banking can be scaled up.” Indeed, Iran has created one of the most adaptive machines for circumventing sanctions in the world. But this is not a triumph of Islamic banking—it is a triumph of the shadow economy, criminal methods of money laundering and corruption.

The Iranian Central Bank helped sanctioned institutions circumvent the restrictions by conducting dollar transactions on their behalf. Financial institutions remove Iranian names and addresses from accompanying documents so that monitoring systems do not detect and block transfers. The Cyrus offshore bank, established in the Kish Free Zone, is secretly owned by the sanctioned Parsian Bank and was used to transfer the proceeds from the sale of oil to the IRGC.

US financial intelligence describes how Iran conducts transactions through exchange houses and shell companies in the UAE and Hong Kong using forged documents and layered transactions. Iran has created an alternative CIMS/RUNC messaging system to bypass SWIFT. But foreign financial institutions using CIMS expose themselves to an increased risk of secondary sanctions.

This is certainly not a role model, but a warning: The so-called “alternative financial architecture” turns out to be a network of money laundering, fraud and crime. Since 2020, the FATF has been calling on member states to apply enhanced verification and even countermeasures against Iranian illicit finances. The United States has designated the entire jurisdiction of Iran as a zone of primary concern in terms of money laundering.

Critical Mass or Critical Failure?

The source text states that the accession of the UAE (10% of global Islamic banking assets), Qatar (5-6%), Malaysia (10-12%) and Egypt could create a block controlling more than 60% of global Islamic banking assets. It sounds impressive.

But let's face it. Islamic banking accounts for about 1% of global banking assets. Even if the entire Islamic banking sector unites into a monolithic system (which is absolutely unrealistic), its share in the global financial system will remain marginal.

Moreover, the lack of uniformity of Sharia is a serious problem. Most Islamic banks have their own Sharia councils that govern the bank's policies. The four schools (madhhabs) of Sunni Fiqh apply Islamic teachings to business and finance in different ways. Disagreements on specific points of religious law arise both between schools and within them. Moreover, Sharia councils sometimes change their decisions, canceling previous ones.

Competition in the search for convenient fatwas (fatwa shopping) compromises the system. How can we create a unified financial architecture when the basic principles are interpreted differently in Saudi Arabia, Malaysia and Turkey?

Time Horizon: Between Optimism and Reality

The original text recognizes that in the short term (1-3 years), the threat to the Western system remains moderate. The institutional ties with the West are too deep to be severed overnight. But then an optimistic forecast is made that in the medium term (3-10 years) the threat will become high under certain conditions.

These conditions include the creation of a full-fledged alternative payment system independent of SWIFT, synchronization with the BRICS mechanisms, the accession of major players in Islamic banking, and the joint development of military technologies.

However, each of these conditions faces insurmountable obstacles. An alternative to SWIFT (like Iran's CIMS) means isolation from the global financial system and the risk of secondary sanctions. The BRICS de-dollarization mechanisms do not show any real progress. The accession of new players is complicated by their own ties to the West-the UAE is the largest financial hub deeply integrated into the dollar system.

Joint development of military technologies (like the Turkish KAAN fighter) are long-term projects that require stability and financing, which Pakistan does not have. Moreover, military cooperation is not equivalent to financial integration.

Conclusion: Ambitions That Frittered Away in Reverie

The narrative of Islamic banking as a “doomsday weapon” against dollar hegemony suffers from a fundamental gap between ambitious rhetoric and modest reality. Islamic banking is positioned as an ethical alternative to Western capitalism, but in practice it reproduces the same mechanisms with cosmetic changes in terminology. Murabaha is an interest-bearing loan in halal packaging. Risk sharing is a beautiful myth that banks avoid in practice. Islamic windows turn out to be an imitation of piety in order to capture market share.

The geopolitical alliance of Turkey, Saudi Arabia and Pakistan looks impressive on paper, but crumbles upon closer inspection. Pakistan depends on the IMF, Turkey is a member of NATO, Saudi Arabia trades oil for dollars. BRICS is not showing any real progress in de-dollarization, and the Iranian experience of circumventing sanctions is not an example of an alternative financial system, but an example of a criminal shadow economy.

Islamic banking accounts for about 1% of global banking assets and suffers from a lack of uniformity in Sharia interpretations. Creating a unified alternative financial architecture on such a basis is a utopia that lacks neither institutional coherence, nor political will, nor economic prerequisites.

The genuine paradox is as follows: an alternative financial system cannot be built by those who are deeply embedded in the system they claim to be challenging. It is impossible to try to nix the hegemony of the dollar system and depend on dollar oil prices IMF loans and SWIFT transactions simultaneously. It is also impossible to proclaim ethical superiority by practicing the same interest rate mechanisms under other names.

Islamic banking, perhaps, plays a useful niche role by offering religiously comfortable products to a certain segment of the population. But the claims that these weapons are capable of “turning the dollar order around” are just ambitions that frittered away in reverie. Western financial system faces many challenges, but Islamic banking in its current shape is not a viable alternative. It is rather a mirror reflecting the same vices with religious gilding.