Putin threatens to banish the dollar from payment systems

Removes it from Russian Pension Fund investments and warns of oil and gas payments
El presidente ruso, Vladímir Putin PHOTO/AFP

PHOTO/AFP  -   Russian President Vladimir Putin

As the United States decides to launch a sanctions offensive against the Russian regime, Moscow has gone on the counter-offensive in a forceful manner. The Kremlin has decided to cancel all dollar-denominated investments in the National Wealth Fund, which supports the national pension system. Not only that, the all-powerful Russian president, Vladimir Putin, has threatened to start paying for all oil and gas purchases in the currencies of the selling countries and stop using the dollar.

The Russians announced at their "Davos forum" in St Petersburg that they are eliminating the dollar from their $186 billion wealth fund. The fund's managers will spread their investments across euro-denominated securities (40%), Chinese yuan (30%), Japanese yen (5%), sterling (5%) and gold assets (20%). Russia's pension support fund is fed by the country's revenues from oil sales.

El Kremlin ha decidido cancelar todas las inversiones denominadas en dólares del Fondo Nacional de Riqueza, que se encarga de dar apoyo al sistema nacional de pensiones PHOTO/ARCHIVO
PHOTO/ARCHIVO-The Kremlin has decided to cancel all dollar-denominated investments of the National Wealth Fund, which is responsible for supporting the national pension system.

The digital ZeroHedge warns that the Kremlin is taking this step "as Washington continues to tighten the screws on sanctions against Moscow, blaming it for everything from a series of corporate cyber-attacks that appear to target US infrastructure to election interference, expansionist aims in Ukraine and the crackdown on opposition activists".

It is a total war on all fronts, physical, currency and virtual. Putin has denounced the US for using the dollar as a tool to " fight an economic and political war" against states that do not agree with it. A summit between the presidents of the United States and Russia is scheduled for 16 June, Wednesday of next week. A meeting that the Russian leader has set on fire, stating that if his rival uses the dollar, he can apply a strategy against the dollar. Although a few days ago he pointed out that "if you have heard anything and think that we want to get rid of the dollar as a reserve currency or as a universal means of payment, that is not the case". These words were uttered in a videoconference interview from St. Petersburg with the main international news agencies, including Efe. But the truth is that Putin himself has threatened to stop paying for all oil and gas supply contracts in dollars. And what is more, to force Russian companies to do the same.

Timothy Ash, senior emerging markets sovereign strategist at BlueBay Asset Manager, warned on CNBC that "the message is 'we don't need the US, we don't need to transact in dollars, and we are invulnerable to more US sanctions", adding that this strategy could be interpreted as a sign that Moscow expects more US sanctions.

Una pareja pasa por delante de una composición escultórica "Feria" en Serpukhov a unos 95 kilómetros de Moscú el 4 de junio de 2021 PHOTO/AFP
PHOTO/AFP-A couple walks past a sculptural composition "Fair" in Serpukhov about 95 kilometres from Moscow on 4 June 2021.
Phantom gold

The disagreements that have arisen between the Russian and US administrations have been directed towards the currency market. The Russians are very upset that the gold purchases they have made in recent years, joined by China, have not resulted in a revaluation of gold. US and British banks have made heavy sales of gold contracts, which has prevented the price of the precious metal from rising and the dollar from falling.

As this newspaper reported in its Saturday edition, the curious thing is that these securities are backed by a "phantom gold" that does not exist. The Bank for Settlements (BIS), the world's banking supervisor, will impose a coefficient this month to curb this speculation. It is curious that it was Putin himself who pushed the BIS to adopt this measure.