A senior adviser to Putin said that if the United States were to impose sanctions on Russia over Ukraine, Moscow might be forced to drop the dollar as a reserve currency and refuse to pay off loans to U.S. banks. As newswires reported the comments from Putin’s senior aide Glazyev, the USD Index fell marginally to session lows and broke below 80.00 before recovering.
Russia could reduce to zero its economic dependency on the United States if Washington agreed sanctions against Moscow over Ukraine, politician and economist Glazyev said, warning that the American financial system faced a “crash” if this happened.
Sergei Glazyev, a senior adviser to President Putin, added that if Washington froze the accounts of Russian businesses and individuals, Moscow will recommend to all holders of U.S. treasuries to sell their U.S. government debt.
Glazyev is often used by the authorities to stake out a hardline stance. He does not make policy but has the ear of Putin and would be aligned with the more hawkish elements in the Russian government and military. “We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves,” said Kremlin economic aide Sergei Glazyev. He told the RIA Novosti news agency Russia could stop using dollars for international transactions and create its own payment system using its “wonderful trade and economic relations with our partners in the East and South.”
Russian firms and banks would also not return loans from American financial institutions, he said. “An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system,” he added.
Late Monday, U.S. President Barack Obama said the U.S. plans to impose penalties on Russia unless it withdraws its military forces, and on Tuesday, Russia reportedly called troops on military exercises back to their bases.
Glasyev’s comments were likely sanctioned by the Kremlin and by Putin himself. They would appear to be a warning to the U.S. regarding isolating Russia politically and imposing economic sanctions.
If diplomacy does not prevail, then trade wars and currency wars will ensue with attendant consequences for the already vulnerable financial system and global economy.
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