Daily Times

The Russia-Ukraine war, which started on February 24, 2022, changed the world in ways more than one.

Some major fallouts of the ongoing war are the increased importance of India in the global community; a changing global financial order; global inflation due to disturbance in the global energy and food supply chains; and new strategic alliances being formed.

Russia, being the largest country in the world and a long-standing global power has many aces up its sleeve. It initially suffered a major setback when the US froze $630 billion in Russian gold and reserves and blocked Russia from the SWIFT payment system, imposing financial sanctions. Russia was ahead of the curve and had its own domestic SWIFT system. Russia started trading in the Russian Ruble, the Chinese Yuan as well as the Indian Rupee. Russia formed a historic alliance with Iran to procure drones. BRICS (Brazil, Russia, India, China and South Africa) even made plans to launch a new currency, as I had predicted in my March 17, 2022 column about the Russia-Ukraine war. Perhaps the most interesting development was that MBS of Saudi Arabia began buying crude oil from Russia and he even made plans to join BRICS. However, the US and Europe have actively wooed India to thwart the BRICS currency plans. I have covered this in detail in my June 27, 2023 op-ed column. Indian PM Modi is visibly heady from all the adulation and perks being showered upon him as an externality of the Russia-Ukraine war.

To understand the implication of the Saudi tilt towards Russia, China and BRICS, one must go back five decades to the oil shock of the 1970’s. In 1973 OPEC weaponized oil sales and sanctioned the US for its support of Israel by placing an embargo on oil sales to the US. The US decided to use a carrot in place of a stick. They offered Saudi Arabia a lucrative deal whereby the US would offer protection to the ruling monarchy i.e. the House of Saud and to Saudi Arabia. In exchange for this Saudi Arabia would conduct all financial transactions in the US Dollar and deposit all its earnings in the US banking system. The Petrodollar was thus born. Through the Petrodollar, the US Dollar became the world’s reserve currency as it ensured the US’ financial dominance of the world. The standard of living that Americans have enjoyed ever since is mainly owed to this financial dominance, as other countries were literally buying the soaring American debt. If the US loses its status as the world’s reserve currency, it will see a sharp decline in the American standard of living.

At the moment, 130 countries are exploring a Central Bank Digital Currency, and the US doesn’t want to be left behind.

This financial dominance of the US was threatened seriously only once, by President Moammar Gaddafi of Libya. President Qaddafi unified the divided African continent controlled by various Western powers, China and others. In 2004, a 53-nation pan-African Parliament laid plans for the African Economic Community – with a single gold currency. This gold currency was set to be launched this current year in 2023. Qaddafi’s plan for an independent gold currency in Africa aimed to free the continent from economic bondage under the IMF, the US Dollar, and the colonial remnant of the French African Franc. African gold currency would have ended colonial exploitation in the continent and with it the human miseries of poverty, disease and violence. The African Economic Community and its gold currency thus posed a grave threat to Western global financial dominance and the economic control of natural resource-rich Africa by the US, France and the greater Western world. Libya and Qaddafi were destroyed by the US-led NATO as part of the War on Terror in 2011. The African gold currency plan for 2023 died with President Qaddafi, as the Libyan military was no match for NATO.

The year 2023 did not see the African gold currency but in the month of September 2023, Russia launched an Islamic banking system in its four southern Muslim-majority states of Dagestan, Tatarstan, Bashkortostan and Chechnya. Russia is a long-standing military hardware supplier to Arab states, as a rival to the US-supported Israel. Russia also has agricultural and commodity trade with the Middle East. This cooperation is now extending to finance. The domestic Islamic banking pilot project will last two years and will be extended internationally based on the outcome of the test period. Although the Russia-Ukraine war has given impetus to implement this project, it has been in the pipeline since the financial market crash of 2008. An MOU was signed between the Bank of Russia and the Islamic Development Bank in 2016. Russia is aiming to woo the oil-rich Middle East and the OIC, with the ultimate aim of replacing the PetroDollar with a Petro Ruble. Russia’s military might and its technological base is allowing it to challenge the Western-controlled international financial system. Russia was forming an alliance with Germany, which was subverted by the US when the Nord Stream pipeline was blown up. Germany’s technology and capital and Russia’s natural resources could have joined forces to become a formidable force. In view of this Russia is now focusing on financial dominance to be able to gain more weight and clout.

The US was already mismanaging the Dollar and when it weaponized it by freezing Russian assets, it sent alarm bells ringing globally. It led to countries exploring gold and other currencies as more viable options. At the moment, 130 countries are exploring a Central Bank Digital Currency (CBDC), and the US doesn’t want to be left behind. This is why POTUS Biden signed an executive order in March 2023 for developing digital assets. US-based CBDC is in the pilot phase at the moment. Concerns remain about individual privacy – of which none would be left – and about government control. The fact that the US Dollar is a global currency has created additional challenges for its launch. Experts expect that it will take some years before it can be effectively implemented. We are certainly living in very interesting times, to say the least.

The writer is an independent researcher, author and columnist. She can be reached at aliya1924@gmail.com