Russia has stated that it is seeking to lessen its dependence on the US Dollar as well as the overall US-controlled financial system. Russia is doing this by increasing bilateral trade with other nations in local currencies.
Russia has already signed agreements with China and Turkey to begin trading goods in local currencies while proposals have been made by Ankara for Russia, China, Turkey and Iran to all begin trading in local currencies rather than the US dollar.
Russia’s largest state-owned bank, Sberbank, has begun trading gold on the Shanghai Gold Exchange, a move that will see Moscow and Beijing, which enjoy large and frequent bilateral trade, move further away from the US Federal Reserve and the notes it issues.
Today, Russian Deputy Foreign Minister Sergey Ryabkov issued the following statement on currency independence:
“We, of course, will intensify work linked to import substitution, reduction of some dependence on US payment systems, the dollar as payment currency and so on. This is becoming a necessity.
It is important for us to create efficient economic schemes that would ensure smaller dependence on the dollar, on the US monetary system”.
Sputnik further reports,
“In early July, Russian President Vladimir Putin and China’s leader Xi Jinping agreed to continue consultations on a wider use of national currencies in mutual payments and investments. Negotiations on the use of national currencies in bilateral trade have also been discussed with India, Iran, Turkey.
On August 2, US President Donald Trump signed into law the “Countering America’s Adversaries Through Sanctions Act” that levies new sanctions against North Korea, Iran and Russia. The sanctions over Russia’s alleged meddling in the 2016 presidential election target the country’s defense and economic sectors and restrict dealings with Russian banks and energy companies. The law also limits the US president’s ability to ease any sanctions on Moscow by requiring Congress’ approval to lift any restrictions”.
Dumping the dollar as a currency for bilateral trade could be Russia’s strongest weapon against US sanctions. Due to the implicit dependence of the US domestic economy on the global strength of the US dollar as a trading and reserve currency, countries moving away from the dollar and turning to either local currencies, metals or a combination thereof, could do serious and lasting damage to the United States. This could rightly be called a blow-back effect of sanctions that Russophobic and anti-Trump US Congressmen and women had not fully considered when voting in near unanimous numbers in favour of sanctions.
Anti-Federal Reserve campaigner and former Congressman, Dr. Ron Paul has spoken about how the sanctions could have a disastrous effect for the US dollar and consistently, the domestic American economy.
The US has previously taken drastic measures when foreign leaders decided to abandon the dollar as a trading currency. In 2000, Iraq stopped trading its oil in the US dollar, opting instead to trade in euros, a move that a month prior to the US-UK illegal invasion of Iraq was reported as having positive effects on the Iraqi economy.
Likewise, former Libyan Revolutionary leader Muammar Gaddafi’s plan to begin trading in what would have been a pan-African gold backed Dinar was exposed in declassified emails as being a source of anger for then US Secretary of State Hillary Clinton, who later masterminded the NATO war which illegally overthrow the Libyan government.
In 2011, the same year that the US and its allies invaded Libya, Dominique Strauss-Kahn, the then Managing Director of the IMF was arrested in New York on assault charges. The charges were later dropped but not before he was forced from his powerful position at the IMF while simultaneously ruining his chances to become the President of France. Prior to his arrest he was a favourite to win the Presidency.
Strauss-Kahn’s flagship policy at the IMF was favouring something called Special Drawing Rights (SDRs), a trading value based on the aggregate value of 4 or 5 major currencies. If countries began using SDRs as a main trading vehicle rather than relying exclusively on the US dollar, this could have greatly damaged the prestige and international value of the dollar.
Why was Strauss-Khan arrested in a move which destroyed his pro-SDR career and then later fully exonerated of wrongdoing? The trend in relation to Saddam Hussein and Muammar Gaddafi speaks for itself.
Many link the US led wars against Iraq and Libya as being proximately related to the two resource rich states moving away from dollar dependency.
Unlike Libya and Iraq, Russia and China are nuclear superpowers. Even if the US wanted to overthrow the governments in Moscow and Beijing, any attempts to do this would almost certainly lead to a nuclear world war.
The US has therefore boxed itself into a corner. By leaving Russia, China and their trading partners, including NATO member Turkey with no better option than to begin moving away from the dollar, the US may well have cooked its own golden, or in this case, green goose.
The almighty Dollar is beginning to lose its might.
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About the author
Adam Garrie is Managing Editor at The Duran