Since 2020, China and Russia have moved to link their currencies together. After Russian President Vladimir Putin invaded Ukraine, the international community quickly cut the country off from the world’s economic system through heavy sanctions. It likely wasn’t unexpected as Putin and Chinese President Xi Jinping met in February during the Winter Olympics ahead of the attack on Ukraine.
In 2020, the two authoritarian leaders agreed to an economic alliance. Both were heavily dependent on the dollar at the time, and many saw their arrangement as aspirational and rhetorical. Perhaps the two leaders’ goals are coming to fruition quicker than expected. Without the international SWIFT system to convert currencies, Moscow was stuck. Now, it appears the two countries have found a way around the global financial institution. If so, it could threaten the dollar as the world’s dominant currency.
What Is SWIFT?
Back in 1973, 239 banks in 15 countries founded the Society for Worldwide Interbank Financial Telecommunications (SWIFT). At the time, it was very difficult for businesses and individuals to easily transfer money between countries. Enter SWIFT — it was a quick, accurate, and secure way to send information and money anywhere in the world. By 1977, it had expanded to 518 financial institutions in 22 countries. Today, it serves over 11,0000 members from 200 countries and territories.
In 2021, member institutions averaged 42 million messages per day. It is the most efficient way of initiating international payments around the globe.
China and Russia Get Around Sanctions
When the US initiated sanctions against Russia, all the country’s financial institutions were cut off from SWIFT. So, what did Putin do? He turned to his new ally. The Russians and Chinese established a procedure allowing governments, businesses, and individuals to transfer money without using SWIFT. The effect is the Kremlin can bypass multinational sanctions.
Rebekah Koffler, a former DIA intelligence officer and the author of “Putin’s Playbook: Russia’s Secret Plan to Defeat America,” told Fox News Digital the goal of the new system is to supplant the dollar as the dominant world currency by 2049.
Russian Demand for Yuan Grows
Since the Ukraine invasion, Moscow’s demand for the yuan has increased significantly. Koffler said President Joe Biden’s policies toward the two countries pushed them together. She said the sanctions had little effect on the Kremlin, only made the Biden administration feel morally superior, and would likely lead to a devastating impact on the dollar in the global financial market over time.
Russian state bank VTB CEO Andrey Kostin said the new partnership would allow businesses in his country to work with the Chinese and eliminate the need for them to trade dollars or euros. He said it would lead to a “massive rejection” of the dollar in international payments as the yuan gains prominence.
Koffler added that India is considering alternatives to SWIFT. In addition, Putin signaled a new global currency could also include members from Brazil and South Africa.
In addition, on Wednesday, September 7, Fortune reported that the dollar is so strong, it’s causing problems for developing economies. Could they bail on SWIFT and join the new monetary system if it benefits their economies?
A lot can happen over the next few months.