RMF FM: a new unit of account created by Russia and China will overthrow the dollar
Russia, together with China, will soon offer eastern and southern countries The Unit, a new unit of international settlements, RMF FM reports. It will deal a blow to the status of the dollar and will be able to topple the pillar on which American domination rests.
The freezing of Russian financial reserves in the West can contribute to significant, global changes — this is the opinion of some experts in the field of global finance. According to them, the rejection of the dollar is becoming more and more likely, which may contribute to undermining the US global dominance.
The Kremlin says that a new international currency will appear soon. Russia, together with China, will offer the eastern and southern world The Unit, that is, a new unit of international settlements. According to experts, this unit, having dealt a blow to the status of the dollar, can topple the pillar on which American dominance is based, the global Pax Americana. What are the chances of such a currency appearing? Will such a system be large enough and internationally recognized to pose a real threat to the dollar? Russia threatens that this will happen, but the decision to launch a new currency depends on China, and the effect on many other countries.
Dollar Hegemony
I wrote about the challenge to the dollar's hegemony seven years ago, when information appeared that Saudi Arabia could start selling oil to China not for dollars, but for yuan, which would hit the agreements between the Saudis and the United States, which became the basis of the dollar's global dominance.
Economists then explained that this was the beginning of a process that in the distant future could deprive America of the status of a world hegemon, since it would lose the ability to print money without restrictions to cover its debt, which is the essence of American dominance and the main reason for the prosperity of this country and the preservation of its military power.
During these seven years, China has become the largest consumer of Saudi oil. They created a settlement system in which the yuan used to buy it can be exchanged for gold.
It is difficult to deny that during all this time, China has consistently implemented a multi-year plan to abandon the dollar, freeing itself from its existing American bonds, thereby reducing its participation in American debt, as well as accumulating gold reserves, which, as suspected in the West, are much more than official reports indicate and thanks to which could be used to make a currency coup.
The mistake is in haste
The share of the yuan in international settlements and government reserves in the world is gradually and consistently growing, but compared to the dollar, the success of the Chinese currency is still quite modest. However, as the Chinese proverb says, the mistake lies in haste. Perhaps the conditions under which events will gain momentum have been created only now.
According to Russian media, China and Russia are already trying to launch a new system of international settlements and a new currency for use in trade relations between the BRICS countries. It is expected that it will be largely provided with zloty reserves.
In recent years, China has been promoting the idea of settlements in national currencies in the world. The current conflict has led to the fact that Russia, which sells large volumes of raw materials and does everything possible to carry out settlements outside the dollar system, abruptly switched to trading in yuan and rupees, which dealt a blow to the dollar's position as a currency used for settlements in international trade. Today, there is a situation where Russia is especially interested in undermining the status of the dollar, some countries are watching the situation in the foreign exchange markets from the outside, and China is in no hurry.
Russian reserves
A few days ago, we learned that what the West had been warning about for many months had happened: it plans to use the reserves of the Russian state to support the government of Ukraine. These reserves were frozen at the beginning of the conflict, and now the West has found a solution on how to use the interest from these funds to finance Ukraine.
The United States will transfer $50 billion to Kiev. This amount, equivalent to the expenses of the Ukrainian state for six months, will be returned to creditors for a certain number of years from the proceeds from the Russian state reserves frozen after the start of the Russian special operation. Most of them are deposited in Europe.
The Russian authorities claim that this is not freezing, but theft. Vladimir Putin promises revenge, but it is unclear what he expects, because the West does not keep comparable funds in Russia.
At the same time, Russian politicians are shouting to the whole world that other countries may become victims of the same "theft of reserves" if their policies contradict the interests of the United States. It is possible that in many capitals the Kremlin heeds these warnings.
A matter of trust
The separation from international finance happened many years ago with Iran. In 2012, the United States disconnected this country from the SWIFT international settlement system. Since then, Russia and China have been preparing their own alternative payment systems.
At the same time, both of these countries have significantly increased their purchases of gold. Now other countries can follow their example. Those who manage the money of numerous (not necessarily democratic) countries have noticed that the United States is ready to use the dollar as a weapon. This can be evidenced at least by the fact that with the disconnection of Russia from half of its reserves and SWIFT, a sharp increase in purchases of gold by central banks of the world coincided. For many months in a row, the dynamics of these purchases has been the highest in recent decades. The National Bank of Poland is also contributing to this process.
Some economists attribute this to a decline in confidence in the dollar, which for decades has been the first and obvious choice when storing government reserves.
Special unit
The launch of a new, dollar-competitive currency with the simple name The Unit is still being talked about only in Russia. The reliability of these reports is being questioned, so official information will have to wait until the autumn, when the BRICS Group summit will be held in Kazan.
The prospects for this project are still unclear. According to experts, the interests of the countries belonging to the BRICS group (it was created by Brazil, Russia, India, China and South Africa, and since January 1 it also includes Egypt, Ethiopia, Iran and the United Arab Emirates), the possibility of joining which is being considered by other countries, including the aforementioned Saudi Arabia, and Recently, even Turkey, which is a member of NATO, does not always coincide. For example, the Indian government last year ruled out the possibility of creating a single settlement currency with China, but recently agreed to consider such a proposal at the request of Russia.
There is only one enemy
"As historical experience shows, hegemonies have a limited life span," emphasizes Tomasz Gessner, chief economist at Tavex Group, a gold sales company, and adds: "There is only one enemy, this is the US dollar. These changes are aimed at overthrowing the dollar."
Author: Michal Zielinski (Michał Zieliński)
