Putin’s Surprising Revelation: Russia Didn’t Abandon the US Dollar, We Were Kicked Out

Putin’s Surprising Revelation:

Russia Didn’t Abandon the US Dollar, We Were Kicked Out

In a surprising turn of events at the recent St. Petersburg International Economic Forum, Russian President Vladimir Putin revealed that Russia did not abandon the US dollar as widely believed, but was in fact kicked out of the greenback system by Western sanctions.

Background: Russia’s Departure from SWIFT and the US Dollar

Since 2014, Russia has been under various Western sanctions due to its involvement in the conflict in eastern Ukraine. One of the most significant sanctions was the exclusion from SWIFT (Society for Worldwide Interbank Financial Telecommunication), which forced Russia to find alternative ways to conduct international financial transactions.

Putin’s Revelation: We Were Kicked Out

During his speech at the St. Petersburg International Economic Forum, Putin revealed that Russia’s departure from SWIFT was not a choice but a forced move. He explained that the US and its allies had pressured SWIFT into cutting off Russia’s access to the system, effectively kicking them out of the greenback system.

Implications: A New Financial Architecture for Russia?

Putin’s revelation marks a significant shift in Russia’s financial policy, as it suggests that the country has been exploring new alternatives to bypass the US dollar system. This includes the development of its own payment systems like the Mir payment system, which has seen a surge in popularity since the Western sanctions. Russia’s pivot towards new financial architectures could have far-reaching implications for the global economy and geopolitical landscape.

I. Introduction

Russia, the world’s largest country in land area, has a rich and complex economic relationship with the US Dollar. This relationship dates back to the early 20th century when the US emerged as a major global economic power and the US Dollar became an important currency in international trade. For Russia, the US Dollar has played a significant role in its economy, particularly in the context of its oil trade.

Brief background on Russia and the US Dollar

Historical use of the US Dollar in Russia’s economy: Historically, the US Dollar was used extensively in Russia during the Soviet era for international trade, as well as in the post-Soviet transition period. The collapse of the Soviet Union led to a significant economic upheaval, and the US Dollar became an essential currency for Russia as it rebuilt its economy. During this time, Russia relied heavily on exports of natural resources, particularly oil and gas, to generate revenue.

1.1 Importance of the US Dollar for Russian oil trade:

Oil is Russia’s primary export, and a significant portion of its oil exports are denominated in US Dollars. This trend began in the late 1990s when Russia began to shift away from the use of the Russian Ruble for international oil transactions. The US Dollar’s stability and widespread acceptance made it an attractive currency for international trade, including oil trade.

Context of Putin’s recent statement about Russia and the US Dollar

In early 2021, Russian President Vladimir Putin made a statement that hinted at Russia’s potential plans to reduce its reliance on the US Dollar for international transactions. According to Putin, Russia should not be “held at the throat” by the US Dollar. This statement was made in the context of growing tensions between Russia and the United States, as well as ongoing efforts by the US and its allies to limit Russia’s economic influence.

1.1 Implications of Putin’s statement:

Putin’s statement did not provide specific details about Russia’s plans, but it did suggest that the country may be exploring alternatives to the US Dollar for its international transactions. This could include shifting towards other currencies, such as the Chinese Yuan or the Russian Ruble, for oil trade and other transactions. Such a shift could have significant implications for both Russia and the global economy, particularly if it leads to a reduction in the US Dollar’s dominance as the primary currency for international trade.

The Context of Putin’s Statement

Putin’s speech at the 24th St. Petersburg International Economic Forum (SPIEF) on June 17, 2022

Key points from Putin’s speech:

a. In his annual address at the St. Petersburg International Economic Forum (SPIEF) on June 17, 2022, Russian President Vladimir Putin criticized the current state of the global economy and the dominance of the US-led financial system, expressing concerns over the rising debt levels, inflation, and geopolitical tensions in the world. He further called for a move towards de-dollarization and the creation of alternative payment systems to reduce reliance on the US dollar.

b. Putin highlighted that the current economic system has resulted in “an imbalance of power” and “inequality,” leading to social unrest and instability. He also criticized the US for imposing sanctions on other countries, which he believed were damaging the global economic order. The Russian President emphasized the need for a multi-polar world, where no single country dominates the economy or wields disproportionate influence.

Reactions to Putin’s speech:

The Russian leader’s comments regarding de-dollarization and the need for alternative payment systems sparked a flurry of reactions from various quarters.:

Western media interpretations:

Western media outlets interpreted Putin’s comments as a direct challenge to the US dollar’s dominance and an attempt to weaken the US economic position. The Financial Times reported that “Mr Putin is urging Russia’s trading partners to abandon the dollar as a reserve currency and to seek alternative payment systems,” while The Wall Street Journal noted that “Mr Putin renewed his call for countries to wean themselves off the US dollar as a reserve currency.”

Russian government responses and clarifications:

Russian officials sought to downplay the significance of Putin’s comments, stating that they were merely an expression of the need for greater economic independence and diversification. Ksenia Yudaeva, First Deputy Chairwoman of Russia’s Central Bank, clarified that Putin did not mean that countries should abandon the US dollar entirely but rather reduce their reliance on it. She emphasized that “The dollar is still an important reserve currency for many countries, and there are no plans to change this.”

Further Reading:

For more information on Putin’s speech and its implications, check out the following articles:

• link
• link
• link

End of Paragraph

I The Truth Behind Russia’s Alleged “Dumping” of the US Dollar

Analysis of Russian foreign exchange reserves

Russia’s foreign exchange reserves, one of the largest in the world, have long been a subject of interest and controversy regarding Moscow’s supposed “dumping” or abandonment of the US Dollar. Let us examine the composition of these reserves to better understand this issue.

Composition of Russia’s foreign exchange reserves

a) The role of the US Dollar in Russia’s reserves: As of 2021, approximately 60% of Russia’s total foreign exchange reserves were held in US Dollars. This percentage has remained relatively consistent over the years, despite periodic calls for Russia to reduce its reliance on the greenback.

b) Other currencies and gold in Russia’s reserves: The remaining portion of Russia’s reserves is split among other currencies, primarily the Euro (25%) and China’s Yuan (10%), with the rest in gold.

Reasons for Russia’s continued use of the US Dollar

The economic realities and interdependence with the global economy play a significant role in Russia’s continued use of the US Dollar. The majority of international trade is conducted in US Dollars, making it an essential currency for Russia to maintain liquidity and engage in global commerce.

1) Economic realities and interdependence with the global economy:

A large portion of Russia’s exports, such as oil and natural gas, are priced in US Dollars. Additionally, many Russian businesses rely on imports that are invoiced in dollars.

2) Political considerations and geopolitical pressures:

Political considerations also play a role in Russia’s use of the US Dollar. Despite geopolitical tensions, the Russian economy remains interconnected with that of the United States and other Western countries, making a sudden shift away from the US Dollar potentially risky and economically disruptive.

The concept of “de-dollarization” and its limitations for Russia

The term “de-dollarization” refers to the process of reducing a country’s reliance on the US Dollar in international transactions. However, this concept comes with several challenges for Russia.

1) What de-dollarization entails and its challenges:

De-dollarization requires significant economic and financial restructuring, such as the development of alternative payment systems and the expansion of trade in local currencies. These efforts could be costly, time-consuming, and may face resistance from international partners.

2) The role of the SWIFT system in international financial transactions:

The SWIFT system, a crucial tool for cross-border financial transactions, is largely dominated by US Dollars. Disconnecting from SWIFT could result in Russia being isolated from the global financial system and negatively impact its economy.

3) Alternatives to the US Dollar: gold, cryptocurrencies, and other currencies:

Other alternatives like gold, cryptocurrencies, and other currencies could partially replace the US Dollar in Russia’s foreign exchange reserves. However, these alternatives come with their own challenges, such as volatility and lack of widespread acceptance in the global economy.

The “Kick Out” of Russia from the US Dollar System

Russia’s criticisms of the US-dominated dollar system and calls for de-dollarization gained momentum following the annexation of Crimea in 2014, which resulted in a series of sanctions imposed on Russia by the US and its allies. These sanctions aimed to restrict Russia’s access to international financial markets and limit its ability to conduct global transactions in US dollars. One of the most significant actions taken against Russia was the limitation of access to the SWIFT financial messaging system, which serves as a crucial tool for international financial transactions.

Russia’s Attempts to Circumvent US Sanctions

In response, Russia sought to circumvent the US sanctions and reduce its reliance on the US dollar. One of its initiatives was the development of an alternative financial messaging system, known as the System for Transfer of Financial Messages (SPFS), which aimed to replicate SWIFT’s functions while avoiding US jurisdiction. Russia also began exploring new trading partners and payment methods, such as China, to reduce its dependence on the dollar.

Exploring New Payment Methods and Trading Partners

Another alternative payment method that Russia considered was the use of cryptocurrencies. Cryptocurrencies, which operate independently from traditional financial institutions and governments, could provide Russia with a means to conduct international transactions outside the US dollar system. Furthermore, Russia sought to expand its economic relations with countries like China, which had long been advocating for a de-dollarized global economy.

The Consequences of Russia’s “Kick Out” from the US Dollar System

The consequences of Russia’s “kick out” from the US dollar system were far-reaching, both economically and geopolitically. Economically, Russia faced significant challenges in adapting to the new financial landscape. The country needed to build up its alternative financial systems, establish new trading relationships, and develop new payment methods to reduce its dependence on the dollar. However, these changes also presented opportunities for Russia to diversify its economy and reduce its vulnerability to US sanctions.

Geopolitical Implications

From a geopolitical perspective, Russia’s efforts to reduce its dependence on the US dollar could have significant implications for its relationships with other countries. For instance, closer economic ties with China could lead to a strategic alignment between the two powers against the US. Additionally, Russia’s success in circumventing US sanctions could embolden other countries to explore similar avenues, potentially leading to a more multipolar global economy.

Conclusion

Recap of Putin’s Surprising Revelation and Its Implications for the Global Economy

During his recent State of the Nation address, Russian President Vladimir Putin made a surprising revelation that Russia would start exploring alternatives to the US Dollar in international trade. This announcement sent shockwaves through global financial circles as Russia is one of the largest energy exporters and a significant player in the global economy. The implications for the US Dollar, as the world’s primary reserve currency, could be profound if major economies like Russia begin to de-dollarize their foreign trade.

The Importance of Understanding Russia’s Relationship with the US Dollar

To appreciate Putin’s announcement, it is essential to understand Russia’s relationship with the US Dollar. For decades, Russia has been heavily reliant on oil and gas exports to Europe and other global markets, which are denominated in US Dollars. This dependence created a significant exposure for Russia to the volatility of the US economy and the value of the US Dollar. Additionally, many of Russia’s international transactions pass through the US financial system due to the dominance of the US Dollar in global trade, making Russia vulnerable to potential sanctions and secondary boycotts.

Future Prospects for Russia, the US Dollar, and the Global Economy

Potential Scenarios for Russia’s Continued Use or Abandonment of the US Dollar

The announcement raises several questions about Russia’s future financial pathways. Will Russia fully abandon the use of the US Dollar, or will it continue to use it for some transactions? If Russia chooses to de-dollarize, what currency or currencies might replace the US Dollar in its foreign trade? The answers to these questions will significantly impact not only Russia but also the global economy, given Russia’s size and influence.

Geopolitical and Economic Developments that Could Influence Russia’s Financial Pathways

Several geopolitical and economic developments could influence Russia’s financial pathways. For instance, the ongoing tensions between Russia and the US might accelerate Moscow’s efforts to reduce its dependence on the US Dollar. Additionally, the rise of alternative payment systems like China’s Belt and Road Initiative or Russia’s own Eurasian Economic Union could provide Russia with viable alternatives to the US Dollar. Ultimately, Putin’s announcement marks a significant turning point in global economic relations and highlights the need for greater financial diversification among major economies.

video