© Reuters. Russian ruble and US dollar banknotes are seen in this illustration taken, February 24, 2022. REUTERS/Dado Rovic/Illustration
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Written by Jay Faulconbridge and Elena Fabrichnaya
MOSCOW (Reuters) – The end of the U.S. dollar’s dominance is near, one of Moscow’s most powerful bankers told Reuters, with prices rising and the rest of the world seeing the danger of the West’s failed attempt to bring Russia to heel on Ukraine. .
Andrei Kostin, chief executive of state-controlled VTB, Russia’s second-largest bank, said the crisis was ushering in sweeping changes in the global economy, undermining globalization just as China was taking over as the world’s major economic power.
Asked if he thought the world was in a new Cold War, Costin said it was now a “hot war” that was more dangerous than the Cold War.
He said the United States and the European Union stand to lose from moves to freeze hundreds of billions of dollars of Russian sovereign assets as many countries move to settle payments outside the US currency and the euro while China moves toward de-currency. restrictions.
“The long historical era of US dollar hegemony is coming to an end,” Kostin, 66, told Reuters on the 59th floor of the gleaming VTB skyscraper overlooking southern Moscow. “I think the time has come for China to gradually lift currency restrictions.”
“China knows that it will not become the world’s No. 1 economic power if it keeps the yuan as a non-convertible currency,” Costin said, adding that it is dangerous for China to keep reserves invested in US sovereign bonds.
The US dollar has been dominant since the early 20th century when it overtook the British pound as the global reserve currency, although JPMorgan (NYSE: ) said this month that signs of a dollar’s decline are unfolding in the global economy.
China’s stunning economic rise over the past 40 years, fallout from the war in Ukraine, and the debate over the US debt ceiling have put the dollar under new scrutiny.
Kostin said that VTB was discussing the use of the yuan in settlements with third countries.
“hot war”
A former diplomat who served in Australia and Britain and went into banking immediately after the collapse of the Soviet Union, Kostin is one of Moscow’s most powerful and experienced bankers, having previously served as president of Vneshekombank, now known as VEB.
After President Vladimir Putin sent troops into Ukraine in February last year, the West deployed what it said were the toughest sanctions ever imposed in an effort to weaken Russia’s economy and punish Putin for the war.
The United States sanctioned Kostin in 2018 for what it called Russia’s malign activity around the world. After the war, he was punished by the European Union and Britain, which called him “a close associate of Putin.”
He said the sanctions were unfair and a political decision that would “backfire” on the West, quipping that he had read interesting articles about drug money laundering through major Western banks.
“We really got into a hot war,” Kostin said of the crisis with Ukraine. “It’s not cold when there are so many Western weapons and so many Western military services and advisors. The situation is worse than in the Cold War, it’s very difficult and worrying.”
Kostin said VTB will see 400 billion rubles ($4.9 billion) in profits in 2023 after a significant increase in the first five months of the year and a record loss last year.
He said that the Russian economy will not be broken by the West. The International Monetary Fund in April raised its forecast for Russia’s GDP for 2023 to 0.7% growth from 0.3%, but lowered its forecast for 2024 to 1.3% from 2.1%.
“Sanctions are bad and of course we suffer from them. But the economy has adapted,” he said. “At the same time, we expect the sanctions to intensify and to close some windows, but we will find other opportunities,” he added.
When asked if the Russian economy will remain a free economy, Kostin said: “I very much hope so.”
($1 = 82.0000 rubles)