Russian President Vladimir Putin emphasized the importance of setting up alternative financial institutions in the face of the weaponization of the US dollar by Washington. During a meeting with the head of the New Development Bank (NDB) Dilma Rousseff, Putin discussed the significance of this endeavor.
Rousseff, the former president of Brazil who took over the NDB in March, traveled to St. Petersburg in preparation for the Russia-Africa summit. Putin expressed his confidence in Rousseff’s ability to develop the institution, acknowledging the challenging nature of the task given the current state of world finance and the use of the dollar as a tool of political struggle.
Putin stressed that the economic bloc of Brazil, Russia, India, China, and South Africa, known as BRICS, is not directed against any particular country but rather aims to work together in mutual interest, including in the field of finance. He highlighted that BRICS members are increasingly settling accounts in their national currencies, indicating a shift away from the reliance on the US dollar.
Rousseff agreed with Putin’s perspective and advocated for the implementation of this approach by developing countries in general. She emphasized that for developing nations, one of the biggest challenges is raising funds for projects of national interest, including social services and environmental issues. Often, these issues are overlooked as the focus remains on the debt problem.
The article also mentions the significant influence of the US dollar in the global economy. While the US accounts for about 20% of global economic output, more than 50% of world currency reserves are held in dollars. However, concerns have arisen in other countries following the financial sanctions imposed on Russia over the Ukraine conflict. The measures, including the freezing of sovereign reserves and blocking of SWIFT access, raised fears that similar actions could be taken against other nations in the future.
Last October, Putin criticized the US for weaponizing the dollar and undermining the institution of international financial reserves. This sentiment was echoed by US Treasury Secretary Janet Yellen, who acknowledged that sanctions could drive countries to reassess their reliance on the dollar.
Furthermore, there are indications that the era of the dominance of the US dollar may be coming to an end. Andrey Kostin, the head of Russia’s VTB bank, stated in a recent interview that the long historical era of the dollar’s dominance is fading away. While many Western economists do not see any other currency capable of replacing the greenback, Putin hinted in June that BRICS might be working on a reserve currency of its own, potentially based on a basket of commodities.
In conclusion, Putin’s remarks underscore the importance of developing alternative financial institutions in response to the weaponization of the US dollar. The BRICS countries are actively exploring ways to settle accounts in national currencies and potentially create their own reserve currency. This shift reflects a broader trend of reducing reliance on the dollar in the global economy.