11th June, 2023
Andrei Kostin, one of Moscow’s most powerful bankers said the end of the dominance of the U.S. dollar is nigh.
This comes as the Chinese yuan is rising and the rest of the world sees the peril of the West’s failed attempt to bring Russia to its knees over Ukraine.
Kostin, the CEO of state-controlled VTB, Russia’s second largest bank, told Reuters that the crisis has ushered in sweeping changes to the world economy, undermining globalisation just as China was taking on the mantle of a top global economic power.
Asked if he thought the world was in a new Cold War, Kostin said that it was now a “hot war” that was more dangerous than the Cold War.
The United States and the European Union, he said, would lose from moves to freeze hundreds of billions of dollars of Russian sovereign assets as many countries were moving to settling payments outside the U.S. currency and the euro while China was moving towards a removal of currency restrictions.
“The long historical era of the dominance of the American dollar is coming to an end,” Kostin, 66, told Reuters on the 59th floor of the gleaming VTB (VTBR.MM) skyscraper overlooking southern Moscow.
“I think that the time has come when China will gradually remove currency restrictions.”
“China understands that they will not become world economic power Number 1 if they keep their yuan as a non-convertible currency,” Kostin said, adding that it was dangerous for China to keep reserves invested in U.S. sovereign bonds.
The U.S. dollar has been dominant since the early 20th Century when it overtook the pound sterling as the global reserve currency, though JPMorgan said this month that signs of de-dollarisation are unfolding in the global economy.
China’s spectacular economic rise over the past 40 years, the fallout from the war in Ukraine and wrangling over the U.S. debt ceiling have put the dollar’s status under fresh scrutiny.
VTB, Kostin said, was discussing using yuan in settlements with third countries.
A former diplomat who served in Australia and Britain and went into banking just after the Soviet Union collapsed, Kostin is one of Moscow’s most powerful and experienced bankers, having served previously as head of Vneshekombank, known now as VEB.
Source: Reuters via NAN