The Global South should establish a new financial system to mitigate the risks posed by the West, the head of VTB Andrey Kostin says
The dollar and the entire Western financial system built around it has been jeopardized by the sanctions on Russia, Andrey Kostin, CEO of Russia’s second-largest bank, VTB, told RT on the sidelines of the Eastern Economic Forum on Tuesday.
Asked about Russia’s push toward switching trade to national currencies, Kostin responded that it is done out of necessity rather than a targeted attempt to undermine the greenback.
“The dollar is illegally used as a weapon. It should not be done like this – we’re talking about finance and the economy, why should it be used for other purposes than this. It should be free from political and geopolitical risks. That’s the only reason [for de-dollarization],” he stated.
To illustrate his point, the banker quoted a famous phrase from ‘The Godfather Part III’ movie, “finance is a gun, politics is knowing when to pull the trigger.”
“And that is what we saw – the politicians in the West pulled the trigger and it’s been used against Russia, and not only Russia but other countries,” he explained.
Kostin noted that while a decade ago nobody wanted to use local currencies in cross-border transactions and were content with using the dollar, now more and more countries are reevaluating this stance.
“We raised the question of using local currencies ten years ago but nobody wanted it at the time – why, they said, we can use the dollar, it’s good – and it was good until we faced the situation when America started to threaten us, threaten other countries, saying ‘if you don’t do this, if you don’t do that we’ll cut you off from the dollar.’ If they had not behaved like this we would never have raised this question,” Kostin said.
Kostin said that it is high time for countries in the Global South to create their own financial system based on national currencies.
“It is the right time for the Global South to start to build up this system because though the Global South removed the colonial system politically after World War 2, the colonial system in the financial sector still exists, the empire built by the US with the help of its allies still works,” he stated. Kostin added that it is now “very clear to most of the world that if we continue like this there will be a threat of the [US] using the financial system as a weapon.”
The banker noted, however, that the idea is not to fight the Western financial system but to build a parallel system that will work to the benefit of the Global South.
“We see big changes in the balance of economic power in the world with such countries as China, Arab countries, and that allows us to create a different system which would be based on different principles – principles of independence, sovereignty, the use of currencies other than the dollar and euro.”
Kostin first outlined his idea for a new financial system at the Financial Congress organized by the Russian central bank in July. His proposal included four primary principles: replacing SWIFT with a new messaging system; replacing US-linked correspondent relationships among banks with horizontal links among local banks based on blockchain technology; creating an international depository settlement hub in the Persian Gulf to replace EU-based Euroclear and Clearstream; and creating new instruments for raising capital instead of using foreign currency bonds that are linked to the West.