Thread: Russia warns could 'reduce to zero' economic dependency on US Dollar

AFP
3/4/14

Russia warns could 'reduce to zero' economic dependency on US

Moscow (AFP) - Russia could reduce to zero its economic dependency on the United States if Washington agreed sanctions against Moscow over Ukraine, a Kremlin aide said on Tuesday, warning that the American financial system faced a "crash" if this happened.

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"We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves," said Kremlin economic aide Sergei Glazyev.
He told the RIA Novosti news agency Russia could stop using dollars for international transactions and create its own payment system using its "wonderful trade and economic relations with our partners in the East and South."

Russian firms and banks would also not return loans from American financial institutions, he said.
"An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system," he added.
He said that economic sanctions imposed by the European Union would be a "catastrophe" for Europe, saying that Russia could halt gas supplies "which would be beneficial for the Americans" and give the Russian economy a useful "impulse".

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Pedestrians walk under under a board listing foreign currency rates against the Russian ruble just o …

Glazyev has long been seen as among the most hawkish of the advisors to President Vladimir Putin but many observers have seen his hand in the apparent radicalisation of policy on Ukraine since the overthrow of president Viktor Yanukovych.

Economists have long mocked his apocalyptic and confrontational vision of global economics but also expressed concern that he appears to have grown in authority in recent months.

A high ranking Kremlin source told RIA Novosti that Glazyev was speaking in the capacity of an "academic" and his personal opinion did not reflect the official Kremlin policy.

Glazyev descrived the new Ukrainian authorities as "illegitimate and Russophobic", saying some members of the government were on lists of "terrorist organisations, they are criminals".

"If the authorities remain criminal then I think the people of Ukraine will get rid of them soon," he added.

http://news.yahoo.com/russia-warns-c...VT7BUA4C3QtDMD

So Russia is going to abandon the dollar as a reserve currency? Good luck with that one

I've already explained why meaningful trade and financial sanctions against Russia are a non starter – everyone would lose from such action. Europe would be pushed back into recession, Russia into financial meltdown. This is not the sort of self harm Europe is prepared to contemplate right now. Indeed, thanks to the indiscretion of a UK official, who was snapped going into Downing Street with his briefing documents on display for all the world to see, we know this to be the case. Trade and financial sanctions have already been ruled out.

Whatever. This doesn't seem to have stopped the Russians threatening retaliatory action against the threat of the non sanctions. One possibility, says the Kremlin economics aid Sergei Glazyev, is for Russia to abandon the US dollar as a reserve currency, or to figure out a way to use a new payments system that was not reliant on US dollars for international transactions. Good luck with that one.

I've written before about the inevitability of decline for the dollar as the world's major reserve currency, but this process is on a very long fuse and basically depends on China eventually displacing the US as the world's largest economy.

That's not going to happen any time soon. In the meantime, the dollar remains overwhelmingly the currency of choice for international transactions, and is the middle currency in virtually all transactions. For instance, if you were looking to buy Singapore dollars with Russian roubles, you would typically first buy US dollars with your roubles and then swap them into Singapore dollars. The US dollar is also the pricing currency for virtually all commodity transactions, including crucially, oil. Repeated attempts to set up alternative pricing arrangements have all come to nothing.

Then finally, more than 60 per cent of the world's central bank foreign currency reserves are held in dollars. The euro, the next biggest reserve currency, comes nowhere close. This is not about to change. In other words, Russian threats are as vacuous as Western ones. Hey ho.

http://blogs.telegraph.co.uk/finance...with-that-one/