The end of the dominance of the U.S. dollar is nigh as the Chinese yuan rises and the rest of the world sees the peril of the West’s failed attempt to bring Russia to its knees over Ukraine, one of Moscow’s most powerful bankers told Reuters. Andrei Kostin, CEO of state-controlled VTB, Russia’s second-largest bank, said the crisis was ushering in sweeping changes to the world economy, undermining globalization just as China was taking on the mantle of a total global economic power.
Kostin, who served in the foreign service of Australia and Britain before moving into banking after the collapse of the Soviet Union, is a former head of Russia’s state-controlled Vneshekombank. He has a reputation as a brilliant and ruthless operator, but he is also one of Putin’s most trusted bankers.
Asked whether the world was in a new Cold War, Kostin said it was more dangerous than its predecessor. He added that the United States and Europe would lose from moves to freeze hundreds of billions in Russian sovereign assets. At the same time, many countries were shifting away from the greenback and euro in international settlements.
The shift, known as de-dollarisation, is boosted by the fallout from sanctions on Iran and the U.S. debt crisis. Russia’s economy has also helped. It mainly depends on oil and natural gas, so it needs to find alternatives to the dollar in financial markets.
He said the bank explored the potential to use the yuan in mutual trade with China and discussed using it in payments to third countries. The yuan is expected to become an international reserve currency in the next decade, and it already accounts for about 70 percent of all payments between Russia and China.
“Each country should think about building its financial and economic security in alternative ways because it’s hazardous to rely only on America,” he said. He added that this was especially true for countries that are not part of the Bretton Woods system of global financial governance.
Aside from its massive size, VTB also benefits from the fact that it is not controlled by Russia’s state, unlike market leader Sberbank, which is 50 percent state-owned. It also has a decent dividend payout, which is essential to investors, and it has a good balance sheet thanks to its focus on international business. The bank has a global network of offices and is expanding its presence in Germany, opening a branch later this month. Despite the growing political and financial risks, Kostin is upbeat about his company’s prospects. “The world is changing, and we are not going to stop it,” he said. “There will be a better tomorrow for all of us.” (Reporting by Kelvin Chan; Editing by Andrew McHugh)
