What weapon against Western sanctions can Russia use?

The most entertaining event of the first day of the official visit of Russian Prime Minister Mikhail Mishustin to China was unexpectedly not the Chinese agenda itself, but his meeting with the head of the BRICS New Development Bank, ex-President of Brazil Dilma Rousseff

What weapon against Western sanctions can Russia use?
Photo: Shutterstock.com

The topic of conversation was the protection of trade and economic relations of the states that are members of the association. What is needed for this?

What did Mishustin talk about with Rousseff?

For a meeting with the head of the BRICS bank in Shanghai, the Russian delegation gathered an impressive bank landing party. Together with the prime minister, the meeting was attended by Chairman of the Board of Sberbank German Gref, head of VEB.RF Igor Shuvalov and President of VTB Andrey Kostin.

Russia sees one of the main goals of the BRICS Bank in protecting the trade and economic ties of the BRICS countries from the influence of illegitimate sanctions from the collective West, Mishustin said during the meeting. Rousseff, for her part, recalled that Russia stood at the origins of the formation of the BRICS bank, and assured that the bank “is determined to fulfill its obligations to all founding members, including Russia.” She also stressed that she “takes a very clear position on sanctions.”

What tools can be used to protect the economic ties of the BRICS countries from Western sanctions? One word was heard very often in Shanghai yesterday – de-dollarization. The idea is simple – if transactions between BRICS members are not carried out in dollars, then the Americans and their allies cannot trace them.

It should be noted that the Brazilians are very active in creating an independent BRICS financial system. This was previously called for by the current president of the country, Lula da Silva. He wondered why it is necessary to carry out all transactions in dollars, if this can be done in national currencies – be it yuan, real or ruble.

“If in 2021 only about a quarter of settlements between our countries were carried out in national currencies, then last year it was already almost two thirds,” Mishustin said at the opening of the Russian-Chinese business forum. “We will continue to enhance the independence of bilateral financial cooperation and thereby strengthen economic sovereignty.”

The chairman of the board of Sberbank German Gref, who flew to China together with Mishustin, also spoke about de-dollarization yesterday.

“Over the year, the share of the yuan in Russia’s export operations increased from 2 to 18%, in imports – from 5 to 27%, this is an impressive trend. In Sberbank, we also see a significant interest of clients in the national currencies of friendly countries in general, and the yuan is the undisputed leader here,” he said.

Moreover, this year the BRICS members announced their desire to create their own single currency. This issue will be discussed at the organization’s summit in August 2023.

Is dedollarization a response to sanctions?

Judging by the reaction of the Americans, this is really a sore point for the United States. Thus, the influential American Mises Institute published a study stating that while the process of de-dollarization may continue “for quite a long time,” it could ultimately severely limit the ability of the United States to act as the “global policeman,” said Americanist Malek Dudakov.

The share of the dollar in foreign exchange reserves by the end of 2022 fell to 58% – this is the minimum for 27 years. If the share of the dollar continues to decline, the Mises Institute study says, it will complicate the main US strategy to support the economy – printing money. After all, this money will no longer be needed in such quantities by the rest of the world, and therefore, such actions by the American authorities will lead to bursts of inflation within the country. It will not work out uncontrollably to increase military spending, it will lose effectiveness and the instrument of sanctions, which will lead to a weakening of the US position in the world.

The head of the US Treasury, Janet Yellen, also recognized the negative consequences of dedollarization. What to do with this problem, the White House has not yet come up with. There is now hope that the process of de-dollarization will indeed take a long time, which will give US and US-oriented international financial institutions time to reorganize. In the interests of Russia and its like-minded people, the United States will not be given this time.

Gleb Ivanov, AiF

Due to censorship and blocking of all media and alternative views, stay tuned to our Telegram channel