Skyrocketing interest rates, purchases of rubles and demands for gas payments in Russian currency. Thus continues the run of the ruble which, after recovering its pre-war value despite Western sanctions on the country’s exports and financial systems, changes hands over 84 per dollar, compared to almost 140 per dollar in early March, when the Russian currency had collapsed with the international squeeze. According to the European Commission, however, the appreciation of currencies depends only on the “intervention of the Russian authorities” which had a “massive impact on the state accounts”, including “a sharp rise in interest rates”, which is reflected “on the economy of Russia “. Yet it seems that the Kremlin somehow manages to circumvent the sanctions.
With the result that, according to the International Monetary Fund, the dollar could be the one to pay for, threatening it with international domination in favor of a greater fragmentation of the monetary system.
To say it is the chief economist of the IMF, Gita Gopinath who in an interview with the Financial Times, explained how the sanctions system could encourage the emergence of small currency blocs based on trade between separate groups of countries.
“The dollar would remain the main global currency”, but its supremacy would be threatened by a more fragmented system and “we are already seeing this, given that in trade some countries renegotiate the currency in which they are paid”.
Just think of how Russia has been trying for years to reduce its dependence on the dollar, yet Moscow still had about a fifth of its foreign reserves in dollar-denominated assets just prior to the invasion, with a substantial portion held overseas in Germany. France, the United Kingdom and Japan.
According to Gopinath, the increased use of other currencies in global trade would lead to further diversification of the reserves held by national central banks. “Countries tend to accumulate reserves in the currencies they trade with the rest of the world, and so there could be a trend in which other currencies will play a bigger role.”
In the medium term, the dollar’s dominance will probably not be affected, but its share in international reserves has already dropped from 70% to 60% over the past two decades, with the emergence of other trading currencies. And the war according to Gopinath will also spur the adoption of digital finance, from cryptocurrencies to stablecoins and central bank digital currencies.