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Russia’s de-dollarization plan and its implications for the world

By Juan Torres

Although the Western media is barely addressing it, Russia has been discussing in the last few weeks the adoption of a series of economic measures that would involve a significant change in direction and a powerful response to the sanctions and threats linked to its role in the conflict in the Ukraine and Crimea.

The plan is based on a series of proposals made more than a month ago by Sergei Glazyev- academic and adviser to President Putin – whose main objective is for the Russian economy to abandon everything that has to do with the dollar’s area of ​influence.

Among the measures Glazyev proposes and which Moscow is trying to implement represent some that represent a major blow to the dollar if you consider that Russia is currently the largest exporter of natural gas in the world and the second largest exporter of oil. And other measures, if they prove effective, could provide a powerful boost to Russia’s economy too.

Among the former proposals are:

  • the Russians would transfer assets and dollar accounts now domiciled in NATO countries to banks in countries considered ” neutral”
  • establish controls on capital movements
  • sell bonds issued by NATO countries that are owned by Russia
  • limit the operations that Russian banks can perform in foreign currencies, especially those which are not related to trade, to prevent speculative transactions
  • quickly reduce Russian holdings of currencies of countries considered hostile or supporting sanctions against Russia
  • impose Russian jurisdiction over strategic companies that are currently based in tax havens
  • switching to national currencies the existing accounts of the Eurasian Customs Union (Belarus , Kazakhstan and Russia ), or other trade agreements.

These de-dollarization measures would weaken the US dollar. Especially if you consider the long and stealthy process China is undertaking to strategically disassociate itself with the greenback.

And while the military and economic might of the United States, or its huge gold reserves, which are nearly four times higher than the official China and Russia together, allow the US great advantage over any other economic power, this Russian plan could start something that is both novel and could generate conflict.

It will be particularly interesting to see how Sergei Glazyev’s plan for the central bank to launch quantitative easing in the line with the programmes already conducted in China, Japan and, to a lesser extent, U.S, pans out.

Convinced that creating liquidity need not cause excessive inflation if rather than fuelling speculation it facilitates and finances the production of goods and services, the plan aims to boost the Russian economy and could be crucial and highly relevant worldwide, just as capital outflows, the Ukrainian crisis and the effects of the general crisis have weakened it considerably.

In the coming months we will see if Russia takes a different path to that neoliberal road of recent years, playing a different role in the world and reactivating its economy, which will in any case also require similarly significant progress ​​in the areas of internal democracy and human rights. Time will tell whether this will happen, but in the meanwhile we have to be vigilant.

El Publico

Translation by Revolting Europe

About revoltingeurope

Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope

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