The addition of Russia to the ranks of Iran, Venezuela, Yemen and others enduring “maximum pressure” campaigns will only further the creation of financial and economic mechanisms that bypass the US dollar and the global architecture that supports it. 

From the opening salvo of a full-scale war between Russia and Ukraine last week, it was inevitable that we would reach this point. Under American pressure, the European Union has agreed to expel the central bank of Russia from the SWIFT messaging system, the so-called “plumbing of the global financial system”. The measure, along with massive export restrictions from western states, is specifically designed to cripple the Russian economy, preventing it from paying for its imports and more crucially, receiving payment for its exports.

Moscow now joins just a handful of states worldwide to be subjected to such totalizing economic warfare. The most prominent example is the Islamic Republic of Iran, which has endured massive sanctions since its inception in 1979, escalating to the point of economic siege in 2012 and again in 2018. Venezuela, under the leadership of Hugo Chavez and now Nicholas Maduro has gone from being one of the largest oil exporters to the United States to the victim of a siege that has led to a massive refugee crisis throughout South America and outright theft of its national gold reserves by the Bank of London.

Far more effective attempts at economic strangulation are currently being carried out against Yemen, where the Ansar Allah movement had the temerity to overthrow a western and GCC-backed president. That country’s death count is rapidly approaching 400,000 of whom the overwhelming majority are civilian victims of famine and disease resulting from a total land, sea, and air blockade of the country enforced by the GCC states as well as the western powers directing them from afar.

Afghanistan’s near 40 million population is also being viciously punished for NATO’s defeat at the hands of its Taliban rulers. Nearly the entire population lives in absolute poverty and is unable to survive because the American government froze the central bank’s assets and has seen fit to release only half of the approximately US$8 billion. The other half Washington has seen fit to keep for itself, to compensate the families of 9/11 victims, whose losses the Afghan people have manifestly nothing to do with. In the case of the latter two countries, almost no other country has even recognized them as legitimate states entitled to sovereign equality and membership of the United Nations. 

Now, these nations are joined by the largest state on earth and one of its most critical suppliers of raw materials, from feed grains to strategic metals and fertilizers. 

Related News

An elusive ceasefire in Ukraine as Kiev and its Western backers play for time

Ukraine is resembling the fall of Saigon in 1975 as its governing regime takes to echoing Trump’s anti-China policies

The initial impacts of the sanctions regime are likely to be socially devastating on Russia but like the countries in whose company it now finds itself, it will quickly find a way to circumvent these economic hurdles and find new markets for its goods. It could also conceivably become far more self-sufficient in higher-end value-added goods, as it will now be forced to substitute imports of western technology. 

Russia has seen this moment coming for years, hence its US$630 billion central bank reserve of which only 16 percent is held in US dollars. What is likely to make up a growing proportion of that reserve will be the Chinese yuan. Beijing has dropped all limits to its importation of Russian wheat, signaling that the PRC may be willing to provide Russia a guaranteed market for most, if not all of the commodities it will now be unable to sell freely on the global market. Chinese non-compliance with the US and EU-mandated sanctions may augur a more terminal split with the west. 

Should China opt for a final economic decoupling from its decades-long partners, the East Asian giant would likely choose to serve as a guaranteed market for similarly besieged states, Iran, Yemen, Afghanistan, and Venezuela. Its likely means of doing so have been intimated in just the last few days. The Cross-Border International Payments System (CIPS) is Beijing’s In-house version of the western SWIFT system, albeit in its infancy and far less wide-reaching. What it would do is significantly expand the use of the yuan as a means of payment-settling, particularly for energy imports. Given its insatiable demand for energy, the Chinese economy, waning pandemics-permitting, could finally propel the widespread adoption of a non-western global currency. Bilateral trade between Russia and China, now well over US$100 billion annually has already been largely “de-dollarized” with the US currency being used to settle less than 23 percent of payments between the two nations.

A parallel financial-plumbing system built to service a growing list of states could significantly internationalize and speed up this trend. 

Russia could instead expand the use of its own domestic payment system, the System For Transfer of Financial Messages (SPFS), created in 2014, to facilitate international transfers. This would be especially effective in the former states of the Soviet Union, in the Caucasus and Central Asia. Several or all of these isolated states might construct their own indigenous payment systems that could be mutually compatible. As direct fuel shipments and technical assistance from Iran to Venezuela over recent years have demonstrated, the weaponization of the US dollar and the international financial system is serving more to unite disparate nations in sanction-proofing their economies than in toppling their political systems. 

Planners in Washington are almost certainly aware of this and while the bountiful natural resources of the Russians are now lost to them, it may just be the cost of having Europe now entirely beholden to the US for its economic survival, as well as the South American, Middle Eastern and East Asian former Russian markets the west has secured for itself. 

While the west’s expanded economic market share will keep the dollar, euro, and the pound afloat in the immediate post-COVID world, this will only delay the inevitable. NATO belligerence has now set in motion the forces that will eventually produce a successor to the current world-reserve currency, and the very existence of a parallel financial universe will show that other worlds than that ruled by the euro or the dollar, are possible.