While the US maintains its influence on the world financial system thanks to the global dominance of the dollar, it also maintains its control over the Belgium-based SWIFT financial messaging service, which the world banks use to transact.
The domination of the USA over other countries through the dollar and the global financial system increases the extent of the discomfort in countries such as China and Russia with each new financial sanction that comes to the agenda.
Russian President Vladimir Putin’s last visit to St. Petersburg International Economic Forum (SPIEF), accusing the USA of using the dollar as a weapon brought up the discussions on how to implement “dedollarization”, which is defined as one of the important strategies of the Russian state. According to Putin, by using the dollar as a sanction weapon, the US is “cutting off its branch” and undermining the dollar’s credibility.
Referring to the “petrodollar” relationship, which is one of the most important factors that ensure the dollar’s reserve currency position, Putin stated that energy companies can also reduce the use of the dollar and commented, “This would be a serious blow to the dollar as the world’s reserve currency.”
Russian Finance Minister Anton Siluanov’s statement on June 3 that “We will completely terminate the dollar assets in the National Welfare Fund within a month” had a wide impact in the global markets. The share of the dollar in the National Welfare Fund, which has a volume of approximately 185 billion dollars, is planned to be distributed to assets in euro, yuan and gold.
Calls from Western countries to remove Russia from SWIFT also embody the steps taken by the country to achieve a more independent financial structure from the United States, using emerging technologies in blockchain and digital currencies.
STEPS TAKEN BY RUSSIA
The share of the dollar in Russia’s exports fell to 48.6 percent in the last quarter of 2020, the lowest level in history. The share of the dollar in Russia’s exports was over 80 percent before the US sanctions imposed in 2013 for the illegal annexation of Crimea.
According to the data of the Central Bank of Russia, Russia increased the share of the ruble in international agreements with the Eurasian Economic Union (EAEU) from 54 percent to 70 percent between 2013 and 2019.
In the said period, the share of the ruble in Russia’s exports outside the Commonwealth of Independent States (CIS) rose from 5.5 percent to 8.7 percent, while its imports rose from 23.7 percent to 26.8 percent.
Vyacheslav Volodin, Chairman of the Duma, the lower house of the Russian parliament, said in a statement on March 11 that they increased the use of domestic currencies in trade with China and Turkey, as well as with the EEU.
Russia reduced the dollar’s share of its exports to China, its largest trading partner, from 90 percent in 2013 to 60 percent last year.
BLOCKCHAIN AND DIGITAL RUBLE ALTERNATIVES
Russian Foreign Minister Sergey Lavrov stated on March 22 that their countries should move away from international payment systems controlled by the West. Russian Deputy Foreign Minister Aleksandr Pankin said on April 5, digital currencies and blockchainHe stated that an international system could be developed as an alternative to the SWIFT payment system, thanks to the developments in the
Due to the risk of being removed from the SWIFT system, Russia started to develop SPFS (Financial Messaging System) in 2014 and put it into use in December 2017.
The Ministry of Finance of Russia announced in October 2019 that an agreement was signed with Turkey on trade in national currencies, and that the said agreement could also expand the connection of Turkish banks to SPFS.
In the statement made by the Central Bank of Russia in October 2020, it was noted that the process of introducing the digital ruble into circulation was evaluated, and “Digital ruble may become a new, additional form of payment, together with cash and non-cash payments.” it was said.
The first tests on the digital Russian ruble are slated to begin in early 2022.
US officials, on the other hand, warn that countries such as Russia, China and Iran creating their own digital currencies that act independently of the dollar and other countries’ participation in it may pose a threat to the United States.
THE PRIVATE SECTOR IS DIFFICULT TO ADAPT TO THE DOLLARIZATION PROCESS
In Russia, the administration’s decision to get rid of the dollar assets in the reserves did not change the attitude towards the US currency in the country’s private sector.
The share of the dollar in non-financial sector assets has remained unchanged since 2013, remaining at the level of 45 percent as of last year.
Experts point out that the Russian private sector continues to rely on the dollar and is willing to accept possible losses that may arise from the risks that may arise with sanctions.
Expressing that confidence-building steps should be taken towards the Russian ruble in order for the private sector to participate in the de-dollarization process, experts state that the existence of a new reserve currency alternative to the dollar will support the de-dollarization process.