The horizon is not so far as we can see, but as far as we can imagine

March of De-Dollarization: Russia Selling In Rubles

So, as many readers will have heard, Russia has said it will only accept rubles in exchange for its exports to “hostile nations” — which is to say, those nations who have sanctioned it over Ukraine.

The main thing to understand is that the West froze hundreds of billions of dollars of Russian reserves on account in the West. They sold us stuff for Euros and dollars and we will now not let them use those dollars or Euros. Sanctions mean that even the dollars and euros they have cannot buy many, perhaps most things, in most Western countries and Japan.

So selling us anything in dollars and euros doesn’t make much sense: they can’t use them without exchanging them for other currencies, and our sanctions make that difficult, since they’re closed out from our banking system.

Thus, rubles. An additional advantage of this is that it increases the value of the ruble, which had collapsed under sanctions.

In order to buy Russian oil and gas, Europeans will have to get rubles. Russians are unlikely to want a lot of euros or dollars because they’re almost impossible to spend, so Europe will probably have to buy Yuan and Rupees, then trade those currencies for Rubles. Paying with gold isn’t really practical, because it would have to be physically shipped to Russia or on account with a country they trust (China, India, a few others). Obviously gold in Western banks is not safe.

Russia’s main exports are oil, gas, wheat and minerals. There are usually other sources, but without Russia there aren’t enough to satisfy world demand. Sanctions on Russia, because they are such a big wheat exporter, may wind up killing a few million people in the global South, more than will be killed in the war.

From the point of view of the West, this is a continuation of de-dollarization. If Saudi Arabia also sells oil to China in Yuan, it will be a big deal. Prices are still set in dollars, but I expect that may end fairly soon.

Payment systems are being set up, and the world will split into two different trade areas. China wants another five to ten years before the big (inevitable) split with the West, they may or may not get it, but if they have any sense they won’t allow Russia to be choked out. They certainly aren’t going to cooperate with US sanctions, and that means they need to cleanly separate their financial system from ours, so that funds can’t be seized in transit, executives can’t be locked up and so on.

The Russians didn’t expect this, they were taken by surprise. Probably because, in fact, it’s a weapon that can only be used against a country like Russia (as opposed to Venezuela or Iran or Afghanistan), once. No one outside the West can now trust the West’s system, and everyone with sense will want their reserves kept elsewhere.

This is mostly a good thing, the West has terribly abused its currency primary to hurt other nations, even before the abuse of sanctions which largely accelerated under Clinton. Control of dollars was part of the arsenal used to keep the South poor and the US in control. China was able to get around this because of American greed and stupidity, and now that it has, it has a veto. Since Russia being taken out will lead it to be surrounded by enemies, it is going to use that veto. Again, Russia cannot be choked out by financial and economic sanctions if China does not permit.

I have been writing about this for almost 20 years now, it was clear it would happen eventually but exactly when and how were unclear. For a few years I’ve been saying we were moving to a Cold War world, and we are.

The difference is that unlike in 1950 or 2000, the West is not clearly stronger than the coalition against it. The USSR was always weaker economically, and though for much of the 50s and 60s they had higher growth (something forgotten today), in retrospect and for some of the smarter people at the time, the outcome was never in doubt, it just needed to be managed so it didn’t turn into World War 3.

This time the outcome is in doubt, and I think the smart money would bet slightly against the West, maybe 3/2. The wild card is climate change, which will hit China very hard, but could also do great damage to Europe and America.

Putin was foolish to get into this situation, reserves should have been withdrawn, but this is a smart move. It’s also going to hurt Europe a lot and damage German industry, whose costs will skyrocket (I have little sympathy, given that Germany has used the Euro to basically de-industrialize most of the rest of the EU.)

The post-American hegemony world isn’t quite here, but it’s being born. Welcome to the Age of War and Revolution and the Twilight of the Neoliberalism.



Clarity on Putin’s Aims


Open Thread


  1. softbaked

    Pretty sure Russia can declare that western banks defaulted. Since the money they placed in western banks is not backed by anything and are just numbers in a computer, they can just repatriate their money by pressing a few buttons on their computer in their central bank. All they need to do is have other countries recognize this western bank default and their repatriation of their money. This will be strengthened by their forcing the west to trade in rubles. To me, it looks like Putin set a trap, because when America declared they seized Russian money, it signaled to the world that the American banking system is not trustworthy and will turn on you if you become their enemy, which is why India and Saudi Arabia are telling the US to kick rocks.

  2. different clue

    If this can destroy globalization and destroy the Free Trade system, that would be a good side-effect outcome.

    If those Americans who have profited from Free Trade Globalization can be torn all the way down to the level of those Americans who have suffered from Free Trade Globalization, at least the American victims of the Free Trade Americans can take some pleasure in poverty spreading to that class of Free Trade supporters and designers who created mass poverty for others.

    So I support total sanctions everywhere, by everyone against everyone. Destroy the International Free Trade Conspiracy and burn their system all the way down to the ground

  3. Astrid

    The loss is 300 billion dollars or about 1/5 of the Russian annual GDP. They still have 300 billion in gold. Maybe they should have kept more in gold but honestly it’s not a big deal. The wealth that matters is in the strength of their army and the treasures under their feet.

    It seems like Putin made the decision to invade in late February and possibly after announcement of recognition for LPR and DPR. By that point, they couldn’t act without losing the element of surprise.

    One interesting concept is whether this will progress too the point where the global south voluntarily detach from the dollar/IMF/world bank regime. If your country is heavily indebt to the West, this is essentially a one time debt jubilee. Add to that the potential ability to buy Russian wheat and fossil fuel at a discount. What can the West offer instead?

  4. Trinity

    “China wants another give to ten years before the big (inevitable) split with the West”

    Should be “China wants another five to ten years”

    Very nice article, Ian.

  5. bruce wilder

    I think back on the belittling of the Russian economy by Obama and others — “smaller than Italy” — which is technically true in terms of nominal GDP, but wildly misleading in any kind of real capacity or resilience assessment.

    I listened to that Duran discussion that Astrid linked to in the other thread. I find it hard to fathom how anyone can take Trump seriously. But, they certainly have nailed “West Wing” brain — “completely lack strategic empathy as a skill set and believe it to be a mortal sin to actually employ” — as well as the hubris begat by globalized financialization centered on London and New York.

    The consequences of de-dollarization for the UK and the EU are topics for smarter folks than me, but I can well imagine that the UK, with all the other factors de-stabilizing its political economy — Dissolution of the Monasteries Oligarchs, Brexit and COVID, Tory government by the steady hand of BoJo loyally “opposed” by Keir Starmer, perhaps the accession of Charles III (the first two having been such a tonic) — could well find itself in a chaotic free-fall.

  6. Mark Pontin

    Africa, or parts thereof, will very likely benefit to some greater or lesser extent from all this. Much low-end manufacturing that China formally did — e.g. garments — can be moved there. All the things people said about China a half-century ago — backward, congenitally incapable of development, blah blah blah — they say about Africa now; they’re just as wrong now as then.

    Two potential problems:

    [1] Africa is *big* — seriously larger in area than depicted under Mercator map conventions, enough to fit in the the territories of China, U.S., India, Japan, Mexico, and the EU, combined– and there are hardly any roads. Roads are prohibitively expensive to build under the current global economic dispensation — the dollar/IMF/world bank regime, as Astrid says. (But see below).

    [2] Climate change, as Africa is prime territory to experience regional ‘wet bulb’ temperatures.

    One additional point: infrastructure –like roads — is required for development. This being said:

    (a) Many African nations will therefore turn more to China, because the Chinese generally offer friendlier terms on this, via the Brick and Road Initiative, etc.

    (b) Africa has already leapfrogged some phases of industrial development that other countries went through — e.g. phone landlines because mobiles have substituted, so mobile payment networks are more advanced and socially entrenched there than anywhere else in the world. We could see other new technologies taking root there ahead of elsewhere. Drone delivery networks, for instance, make sense given the continent’s size, and a drone delivery station in every village might play a broadly similar role to that which railway stations played in 19th and early 20th century small-town life in Europe and America.

  7. jrkrideau

    @ Astrid
    It looks like Putin, (at my uneducated guess, probably in consultation with maybe Sergei Shoigu & Sergei Lavrov and a couple of others) made the decision to attack immediately after Zelenski said he was reputing the no nukes agreement. Putin is on film stating that this was the precipitating reason.

  8. jrkrideau

    Argh, “repudiating” not “reputing”

  9. ptb

    Yep. It takes a special kind of hubris to think that you can sieze a country’s bank accounts, obstruct eexports to it and obstruct its trade with third parties, but insist that you’re entitled to continue imports. We’re going to see the same thing with China, before long.

    Might be worth asking whether policymakers who think that way, would have inhibitions against sacrificing their own people when the time comes, to extend their position of power and privilege for a few years.

  10. Lex

    The Russian response to the EU’s “you can’t change the contracts’ payment terms!” is pretty hilarious. “Oh, didn’t you change a bunch of contract terms with your sanctions? These are your sanctions, we’re just adjusting to them.”

    I’m not ready to believe it, but Russian sources are more and more reporting that Ukraine was planning an offensive for early March. Supposed documents and intercepts to prove it. That would explain the timing of the military advance and the lack of preparation with reserve currency funds. But even there, those have turned into a sort of savings account. Russian default was avoided by saying that the west has the funds already, deduct it from what you stole.

    Agree on Russia and China not expecting the US to react so irrationally. I think both would have preferred more time to prepare but a comparison of national actions since suggests that Russia and China had contingencies in place that the west clearly does not. India telling the Brits not to bother with their trip and then (reportedly) making significant progress with China on border disputes is pretty big news.

  11. Willy

    The good news, such as it is, is that Russia’s economy is smaller than that of Canada. If I remember correctly, the USSR was second in national GDP back in its heyday, something which obviously chaps Putins ass today. BTW, the nation which spent the most time in the #1 position over the last thousand years was China.

    You’d think this would be a wakeup call for Germany to speed up getting off the fossil dependency. And yet another lesson for neoliberal outsourcers like Boeing, which exported a thousand engineering jobs to Russia and now gets to publicly play the corporate fool yet again.

    But we’re not in control. They are.

  12. Willy

    I searched for Zelenski reputing the no nukes agreement, at any time any place in recent history. All I could find anywhere was post-invasion hints, a couple weeks ago, that if NATO didn’t support Ukraine, he’d have to reconsider. Please source that video.

  13. different clue


    I only know what I read and hear from the outside, but I think the right way to think about Boeing is this . . . . imagine the Waldorf Astoria Hotel. Now imagine a group of copper strippers ( McConnell-Douglas) somehow getting control of the Waldorf-Astoria Hotel. The copper strippers have spent from then to now drraining revenue, removing all the good people and bringing in bad ones, stripping out all the copper and all the fittings and everything else worth stripping out and selling, and when the Walford Astoria Hotel has been stripped down to the level of the Packard Factory in Detroit, they will walk away laughing all the way to the bank. So the name “Boeing” is just a legacy of better days, providing cover for the copper strippers till all the copper is stripped.

    About China wanting 5-10 more years before the break with America, that is because China thinks 5-10 more years is necessary to steal and destroy every last vestige of “economy” still left in America , and move the stealable parts to China. The American Upper Class supports China in this effort and this goal, and also wants to avoid a big break for 5-10 more years. Then they will collect their last big payoff from China and move themselves and their money to some nicer place.

    The declarations of China as “main enemy number one” were partly for somwarix show, to cover up the ongoing Free Trade Conspiracy and the DC FedRegime’s facilitating of the Chinese sack and pillage of anything still left in America, all the way down to the ground. The other purpose of Cold War 2.0 was to establish internal domestic social control over the DC FedRegime’s American subjects within America’s borders.

  14. different clue

    ” somewarix” should be “domestic” . . .

  15. different clue

    About the Soviet Unions bigger GDP during the USSR period . . . . I remember P J O’Rourke quoting an anomymous Russian person-in-the-street about that during the very late Soviet Twilight Period, and he quoted this person as saying . . . . ” We build huge machines to dig coal and ore out of the earth. We burn the coal to smelt the ore into steel. We use the steel to build huge machines to dig coal and ore out of the earth”.

    WesterModern civilization has a private enterprise version of that same socio-economic quest and purpose.

  16. anon y'mouse

    why should Africa go with an outdated intratransport system dominated by roads and its itinerant problems? save the roads for where people are needing them, and build train lines instead.

    roads except for local movement of people and goods doesn’t really make sense in a de-carbonifying world, does it?

  17. someofparts

    I’ve been wondering how South America is going to do going forward. Seems like it would be a great advantage for them to be part of the Afro-Asian de-dollarized world. OTOH, it seems like being in the same hemisphere with the US puts them in mortal danger if they try to break free of the dollar death grip.

  18. bruce wilder

    I searched for Zelensky on nukes and found a half dozen reports of his February 19 speech to the Munich Security Conference, including an English transcript from a Ukrainian source.

  19. StewartM

    GDP of Russia today versus Soviet period:

    According to this graph, it was higher in the end of the Soviet era. You see the looting of Russian clearly during the Yeltsin era. From what I’ve seen of the recent (pre-sanction) data, in the Putin economy the per-capita income of Russians has fallen about 40 %. Not a lot to cheer about; Put is not some working-class hero.

    That’s why many older Russians look to the Soviet economy with nostalgia, despite the lack of IPhones and Pizza Huts.

    Now more on that:

    By way of illustrating the depth of the Russian catastrophe of the 1990s and identifying with all those who suffered from it, Putin has said that at one stage he was reduced — while still a serving lieutenant colonel of the KGB — to moonlighting as a freelance taxi driver in order to supplement his income. This is plausible enough. In 1994, while I was working as a journalist for The Times in Russia and the former USSR, my driver in the North Caucasus was an ex-major in the KGB. “We thought we were the backbone of the Soviet Union,” he said to me bitterly. “Now look at us. Real Chekists!”

    But, while the article says, Putin made deals with the oligarchs (sorta fascist-style, allowing those that played along to get rich while exiling or jailing those who didn’t), there is still looting. There was a comment on DKos by a commentator (I think Russian) about a change in the Russian military structure; under the new rules a division was required to be able to form only one brigade combat team (BCT) and said this change was opposed by all the Russian military professionals, but “this was done purposefully to leave more assets available to an oligarch to *loot*”.

    Should we be that surprised? Hasn’t the Pentagon lost trillions of dollars it can’t account for as well?

    This looting is even more a problem than in the Soviet era. Why? The article continues:

    Yet this change may be a long time coming. The siloviki have been accurately portrayed as deeply corrupt — but their corruption has special features. Patriotism is their ideology and the self-justification for their immense wealth. I once chatted over a cup of tea with a senior former Soviet official who had kept in touch with his old friends in Putin’s elite. “You know,” he mused, “in Soviet days most of us were really quite happy with a dacha, a colour TV and access to special shops with some western goods, and holidays in Sochi. We were perfectly comfortable, and we only compared ourselves with the rest of the population, not with the western elites.

    “Now today, of course, the siloviki like their western luxuries, but I don’t know if all this colossal wealth is making them happier or if money itself is the most important thing for them. I think one reason they steal on such a scale is that they see themselves as representatives of the state and they feel that to be any poorer than a bunch of businessmen would be a humiliation, even a sort of insult to the state. It used to be that official rank gave you top status. Now you have to have huge amounts of money too. That is what the 1990s did to Russian society.”

    IOW, in the Soviet days the Russian ruling elite was happy to have a lifestyle maybe 5 times more prosperous than the average Russian. Now they want 50,000 more prosperous, as they compare themselves to the Jeff Bezos of the world instead of their own countrymen.

  20. Willy

    I want to believe that the North Atlantic Treaty and Article 5 will be more effective than the Budapest Memorandum.

    Ukraine has received security guarantees for abandoning the world’s third nuclear capability. We don’t have that weapon. We also have no security. We also do not have part of the territory of our state that is larger in area than Switzerland, the Netherlands or Belgium. And most importantly – we don’t have millions of our citizens.
    We don’t have all this.

    Therefore, we have something. The right to demand a shift from a policy of appeasement to ensuring security and peace guarantees.

    Since 2014, Ukraine has tried three times to convene consultations with the guarantor states of the Budapest Memorandum. Three times without success. Today Ukraine will do it for the fourth time. I, as President, will do this for the first time. But both Ukraine and I are doing this for the last time. I am initiating consultations in the framework of the Budapest Memorandum. The Minister of Foreign Affairs was commissioned to convene them. If they do not happen again or their results do not guarantee security for our country, Ukraine will have every right to believe that the Budapest Memorandum is not working and all the package decisions of 1994 are in doubt.

    He’s right. There were no “security guarantees” which were followed thru, and so Putin invaded. For his part, Putin’s own nuclear threats, after the invasion which he caused, seem far more ominous.

  21. Trinity

    “[2] Climate change, as Africa is prime territory to experience regional ‘wet bulb’ temperatures.”

    But also some of the highest potential solar energy on the planet.

    “Agree on Russia and China not expecting the US to react so irrationally. ”

    Hopefully they’ve figured it out. It’s not just about the US lying to its people, it’s much, much worse than that. I mean that from their perspective, they need to understand it doesn’t end with propaganda to US citizens. We need everybody to understand the crazy train driving all US policy.

    (Cue Ozzy)

  22. Mark Level

    So I see where President Brandon just made a “fiery” speech labeling Putin a “butcher” and stating he must be deposed from power immediately!! Hilarious! How does the broken down US Empire propose to do this? The Imperial Hubris has become self-parody. We’re a “democracy” (haha! it’s not even hidden that we’re an Oligarchy in which the Political Elites 100% support the financial 0.1% and impoverish everyone else), but a “democracy” that has the right to tell the stupid Russkies, and Every Other Country in the world, who their “leadership” is. From the sources I’ve seen, Putin’s popularity has risen domestically since the Russian “action” in Ukraine (hey, the US hasn’t declared an actual war since 1939, & other nations can copy the US playbook), just like George the Lesser after 9/11. I predict that the chances Putin will be deposed by the US are less than the chances that Juan Guaido will be the head of Venezuela by the end of 2022. But I can also safely predict that the MSM Stenographers on all the dumb CNN/Fox/PBS propaganda news shows Sunday morning will be hailing President Brandon’s “strength” and “resolve” and demanding the world obey the wise and ruling US and he be immediately replaced.

  23. Willy

    Biden said the quiet part out loud, for once. It’s a shame he walked it back. It’s a shame the Russian citizens have no way to make that happen, outside of a violent revolution.

    Far too many nations have been backsliding towards authoritarianism. It’s a shame the USA has had a pretty large role in all that, unwittingly as it may have been.

  24. different clue


    Be careful what you wish for. If Putin is removed, it will be by a coalition of military and security-services people who feel he did not go far enough fast enough and hard enough.

    If Putin gets to pick his successor at leisure, that successor will be more of the same . . . a steady hand doing more of the same. If Putin’s position implodes, and Putin’s imploders get to pick Putin’s successor, Russia may get an outright straight-up full-metal-jacket Duginist as leader.

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