As Russia is preparing plans to wean its banking system off the dollar, advancing a trend of de-dollarization among the US’s largest economic and geopolitical rivals, Russian President Vladimir Putin accused Washington of making a “colossal” but “typical” mistake by exploiting the dominance of the dollar by levying economic sanctions against regimes that don’t bow to its whims.
“It seems to me that our American partners make a colossal strategic mistake,” Putin said.
“This is a typical mistake of any empire,” Putin said, explaining that the US is ignoring the consequences of its actions because its economy is strong and the dollar’s hegemonic grasp on global markets remains intact. However “the consequences come sooner or later.”
These remarks echoed a sentiment expressed by Putin back in May, when he said that Russia can no longer trust the US dollar because of America’s decisions to impose unilateral sanctions and violate WTO rules.
While Putin’s criticisms are hardly new, these latest remarks happen to follow a report in the Financial Times, published Tuesday night, detailing Russia’s efforts to wean its economy off of the dollar. The upshot is that while de-dollarization may be painful, it is, ultimately doable.
The US imposed another round of sanctions against Russia over the summer in response to the poisoning of former double-agent Sergei Skripal and his daughter Yulia, and the US Senate is considering measures that would effectively cut Russia’s biggest banks off from the dollar and largely exclude Moscow from foreign debt markets.
With the possibility of being cut off from the dollar system looming, a plan prepared by Andrei Kostin, the head of Russian bank VTB, is being embraced by much of the Russian establishment. Kostin’s plan would facilitate the conversion of dollar settlements into other currencies which would help wean Russian industries off the dollar. And it already has the backing of Russia’s finance ministry, central bank and Putin.
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