Amid Ukraine Crisis, Russia’s War on Dollar Dominance Intensifies

CC_BY Kremlin.ru

Amid Ukraine Crisis, Russia’s War on Dollar Dominance Intensifies

Russian companies prepare to ditch the greenback to pay for trade in Asian currencies.

Russian businesses are gearing up to change contracts from the United States dollar to the Chinese renminbi and other Asian currencies, according to leading bankers.

“Given the extent of our bilateral trade with China, developing the use of settlements in rubles and yuan [renminbi] is a priority on the agenda, and so we are working on it now,” Andrei Kostin, chief executive of state bank vtb, told Russian President Vladimir Putin. “Since May, we have been carrying out this work,” Kostin said, adding that it is among his bank’s “main tasks.”

Pavel Teplukhin, head of Deutsche Bank in Russia, said: “Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies and to set up accounts in Asian locations.”

Meanwhile, Russia’s central bank has launched measures to establish a national payment system that will reduce Russian reliance on Visa, MasterCard and other Western firms.

Teplukhin is among the many who believe all of Russia’s anti-dollar moves add up to something that will not soon blow over. “It looks like this is not just a blip,” he said, “this is a trend.”

Moscow’s movement away from the dollar and toward Asian currencies underscores the Kremlin’s attempts to pivot toward Asia as its ties with Western powers become strained. The United States and the European Union have imposed sanctions on some Russians after the Kremlin’s annexation of Ukraine’s Crimean Peninsula in March, and Western banks have reduced their lending activity in Russia.

Russia’s pivot East is, in large part, a response to these punitive Western measures.

Some Russian hardliners are even pushing for Moscow to respond to Western sanctions by entirely “de-dollarizing” its economy, which would represent a stunning blow to the dollar’s international status.

The prevailing view among most Western analysts is that Russia would not go to such an extreme because of the substantial short-term damage it would cause the Russian economy. They believe the economic interdependent relationship between Moscow and Washington will survive the present Ukraine turbulence.

But such a view does not factor in human nature. Human nature can be illogical; the nature of conflict and war often defies basic logic. Nations knowingly inflict harm on themselves as a necessary byproduct of injuring their enemies.

Stephen Sestanovich, a former American diplomat now at Columbia University, explains: “This may be self-defeating for [Russia], but that doesn’t mean it’ll go away. … We may well be getting a glimpse of the future of geopolitics ….”

Read more: Russia’s Euros-for-Oil Plan Threatens Dollar’s Reserve Currency Status

Optimistic Western policymakers believe the leadership in Russia values economic comfort more than it values a chance at undermining America’s global power and influence. But millennia of mankind’s bloody history prove that priorities are not always so ordered. Nations routinely place their own wellbeing at risk and willingly endure suffering if that is what is required for them to inflict harm on enemies.

The bitterness Putin harbors over America’s global hegemony and nato expansion runs deep. He views the U.S. as morally bankrupt and in rapid decline, and seems convinced that America will not be a source of prosperity much longer. For more information on this trend, read “Russia’s Oil-for-Euros Plan Threatens Dollar’s Reserve Currency Status.”