The end of the dominance of the US 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, the CEO of state-controlled VTB, Russia’s second largest bank, said the crisis was ushering 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 US 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 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 powers 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 US sovereign bonds.
The US dollar has been dominant since the early 20th Century when it overtook the pound sterling as the global reserve currency, though JP Morgan 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 US debt ceiling have put the dollar’s status under fresh scrutiny.
VTB, Kostin said, was discussing using yuan in settlements with third countries.