Western sanctions on Russia have had a significant impact on the trust in the dollar and the euro, leading many global players to reassess their reliance on these currencies, according to President Vladimir Putin. Speaking at the plenary session of the Eastern Economic Forum, Putin stated that the use of currencies as political weapons by the US and EU has prompted countries to explore alternative payment instruments.
The restrictions on settlements in dollars have raised concerns among nations, prompting them to consider the creation of their own instruments and settlement systems. This has also led to questions about whether it is wise to continue keeping reserves in the US or EU, as well as whether investing in the securities of these countries is still a viable option. Putin also highlighted that sanctions erode credibility not only in the countries that impose them but also in their currencies.
Both the US and EU imposed a range of financial restrictions on Russia in response to its military operation in Ukraine. These measures included disconnecting Russian banks from the SWIFT interbank messaging system, banning the servicing of Russia’s debt in dollars, freezing Russian assets held abroad, and the exit of Visa and Mastercard from the country. As a result, Russia has been effectively deprived of the ability to conduct international transactions in dollars and euros.
In light of these limitations, Russia has increasingly turned to national currencies for its foreign trade. Trade settlements between Russia and Turkey in rubles have surged by 230% in the first seven months of this year compared to the same period in 2022. Additionally, the use of national currencies in Russian-Chinese payments has recently exceeded 80%.
The shift towards national currencies in international transactions reflects a growing desire to reduce reliance on the dollar and the euro, given the uncertainties and risks associated with Western sanctions. This trend further underscores the need for countries to develop alternative payment systems that are not subject to political influence.
While the impact of Western sanctions on Russia cannot be denied, it is important to consider the broader implications for the global financial system. The erosion of trust in major currencies like the dollar and the euro can have far-reaching consequences, potentially destabilizing international markets. Moreover, the reliance on alternative payment instruments may create fragmentation in the global financial system, making it more difficult to achieve efficiency and transparency in cross-border transactions.
In conclusion, the Western sanctions on Russia have sparked a reevaluation of the viability of relying on the dollar and the euro as global currencies. The restrictions on settlements in these currencies have led to the exploration of alternative payment instruments and settlement systems. The increased use of national currencies in Russia’s foreign trade highlights the desire to reduce reliance on Western currencies. However, it is important to carefully consider the potential consequences of this shift for the stability and efficiency of the global financial system.