• VTB Bank CEO, Andrey Kostin, criticizes actions blocking Russia from accessing gold and foreign exchange reserves.

• China recognizes the limitations of maintaining the yuan as a non-convertible currency. 

During a recent interview with Reuters, Andrey Kostin, the CEO of VTB Bank, Russia’s second-largest bank, expressed that the actions taken by the United States and its allies to prevent Russia from accessing its significant gold and foreign exchange reserves worth hundreds of billions of dollars are compelling several countries to opt for currencies besides the USD for conducting international transactions.

According to him, the crisis is bringing about extensive transformations in the global economy, eroding the concept of globalization precisely when China assumes the role of a leading global economic force. Kostin further said that “The long historical era of the dominance of the American dollar is coming to an end, I think that the time has come when China will gradually remove currency restrictions.”

Kostin stated that in China, individuals and institutions face stringent foreign exchange regulations that restrict the free movement of money into or out of the country.

He further noted that China recognizes the limitations of maintaining the yuan as a non-convertible currency if it aspires to become the leading global economic power. Moreover, he expressed concern about the potential risks of China’s decision to invest its reserves in U.S. sovereign bonds.

Since the 20th century, specifically when it surpassed the pound sterling as the global reserve currency, the U.S. dollar has held a dominant position. However, JPMorgan recently stated that indications of de-dollarization are emerging within the global economy.

The remarkable economic growth of China in the past four decades, coupled with the repercussions of the conflict in Ukraine and ongoing debates surrounding the U.S. debt ceiling, have triggered a renewed examination of the dollar’s standing.

Russia responds

Amid ongoing discussions between Vneshekombank (VTB), the second-largest bank in Russia in terms of assets, and countries beyond China regarding the utilization of the yuan for trade settlements, Kostin’s remarks carry significance. The ongoing debate gains momentum due to apprehensions that Washington is utilizing the global financial system, denominated in US dollars, as a weapon against Russia in light of the Ukraine conflict.

 These concerns are compelling countries worldwide to seek alternative currencies for trade, as the sanctions imposed on Russia for its invasion of Ukraine have raised the alarm among prominent world leaders and business figures regarding the extent of Washington’s influence. 

According to Kostin’s statement reported by Reuters, he affirmed that  “We have already entered into a hot war. 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, and it is very difficult and alarming.” Despite the impactful sanctions targeting Russia and its economy, Kostin expressed confidence in the country’s ability to adjust.

As reported in April, VTB incurred a significant loss of $7.7 billion in 2022 due to Western sanctions against Russia. However, after acquiring a competing Russian bank, the bank anticipates recording record profits in 2023.