Rouble’s new oil exchange currency status is just the start warns international banker
After being surprised by the Sino Soviet military alliance, the West must now accept the reality of Sino Soviet manoeuvring to establish a joint reserve currency challenging the USD.
This is the conclusion of leading Middle East banker Meguerditch Bouldoukian the former deputy governor of the Bank of Lebanon and the world authority on correspondent banking the system under which trading banks cooperate with one another internationally.
In an interview with MSC Newswire he observed that since the end of the Cold War the West had seen “what it wanted to see,” and believed “what it wanted to believe” instead of confronting realities.
This had been characterised by its shared imperative to signal its moral superiority to the Sino-Soviet bloc by for example weakening its own competitive structure in its pursuit of environmental “perfection.” This policy vastly empowered the bloc through the transfer to it of Western currency.
This enabled Russia to lay the groundwork for its underpinning ambition which is to use its relatively new status as a leading global energy resource to “supplant the petro dollar system and with it the reserve currency system too.”
Anyone doubting this said Mr Bouldoukian only had to experience the fact that access to Russian oil and gas is now readily available to buyers “only too willing to settle in currencies other than US dollars.”
“Russia by itself even after its empowerment by the West as a petro state simply does not have the clout to follow this through.
“But in combination with the yuan this possibility of a reserve currency does now take on the outline of a reality.”
United States foreign policy following World War II was to split China off from Russia.
The fall of the Berlin Wall had induced however in Western leadership and especially in the United States and the EU an ‘’illusory and even euphoric” sense that the threat “singly or together” from the old bloc had evaporated.
Even now the threat posed by the two countries working in harmony to challenge the international banking system and its underlying correspondent banking network was being routinely shrugged off, he noted.
Can such a combination replace the US dollar in the international payments system and will the US dollar remain dominant worldwide?
A rival reserve currency Mr Bouldoukian stressed must be capable of being used:-
- For the settlement of international commercial transactions
- For financial transactions short & long term borrowings on the one side and for investments and savings purposes on the other:
- As a reserve currency for central banks and other international financial institutions
Mr Bouldoukian noted that Russia’s economic reforms started in the early 1990s and were inspired by the model of securities regulation that originated in the USA but in practical terms these were decoupled from the actual US model.
It was now that Russia’s economy started to depend heavily on fossil fuel exports, the prices of which determined the value of everything else in Russia.
This over-reliance on fossil exports was always dangerous. “But as we have seen the naiveté of the West played very much into Russia’s hands and continues to do so to this day.”
Russia’s ability to squeeze every advantage out of the West’s blindness has meant “and this has to be acknowledged” that the rouble is a now leading currency for the world energy trade, he stated.
The United States he noted had failed to understand that the German proclaimed high moral purpose in letting Russia take over the role of its own nuclear and traditional power sources merely disguised a recurrence of Germany’s always-present vulnerability to political extremism.
Germany now became near-dependent on Russia for all its raw materials and did so under the camouflage of being seen to do good in the eyes of the United States and EU political class, Mr Bouldoukian added.
In order to avoid a Sino-Soviet alternate reserve currency he urged Western leaders to beware of implementing the ostentatious “high minded ideals” of this class and instead focus on the now manifest economic threat being posed by the formation of the rival reserve currency.
An example now of the imminence of this threat to global banking he insisted was that the rival reserve currency was already undergoing market testing and positioning.
Russia is directing a development project with BRICS nations dedicated to its cherished reserve currency strategy, warned Mr Bouldoukian.