The end of the dominance of the United States 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 globalization
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, 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 power Number one 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
JPMorgan said this month that signs of de-dollarization are unfolding
in the global economy.
China's
spectacular economic growth over past 40 years, fallout from the war in Ukraine
and wrangling over the US debt ceiling has put the dollar's status
under fresh scrutiny.
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.
After President Vladimir Putin sent troops into Ukraine in
February last year, the West unfurled what it said were the toughest sanctions
ever imposed in an attempt to weaken the Russian economy and punish Putin for
the war.
Kostin was sanctioned by the United States in 2018 over what
it called Russia's malign activity around the world. After the war, he was
sanctioned by the EU and by 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 the laundering of drug money through major Western banks.
"We have already entered into a hot war," Kostin
said of the crisis with Ukraine. "It is not cold when there are so many
Western weapons and a lot of Western services and military advisers involved.
The situation is worse than in the Cold War, it is very difficult and
alarming."
Kostin said VTB would see a profit of 400 billion
roubles (US$4.9 billion) in 2023 after a bumper first five months of the year
and a record loss last year.
Russia's economy, he said, would not be broken by the West.
The International Monetary Fund in April raised its 2023 Russian GDP forecast
to growth of 0.7% from 0.3%, but lowered its 2024 forecast to 1.3% from 2.1%.
"Sanctions are bad, and we suffer from them, of course.
But the economy has adapted," he said. "At the same time, we expect
that sanctions will intensify, they will be tightened, some windows will be
closed, but we will also find other opportunities."
Asked if Russia's economy would remain a free economy,
Kostin said: "I very much hope so."
(US$1 = 82.0000 roubles)
