Russia vs US: War between Commodities and Currency

Since the outbreak of the Russia-Ukraine conflict, the West has taken actions such as imposing "sanctions from hell" on Russia, freezing the Central Bank of Russia’s foreign exchange reserves, freezing the savings and property of many Russian citizens and kicking Russia out of the SWIFT international payment system. The U.S. then blamed Russia for defaulting on the debt that the West intentionally forced Russia into. Russia is angry about these unscrupulous actions. President Vladimir Putin has pointed out that the global economy and global trade, as a whole, have suffered a major blow, as has trust in the U.S. dollar as the main reserve currency due to U.S. and Western sanctions.

Principal Russian leader Dmitry Medvedev, known for being relatively pro-West, is now the deputy chairman of the Security Council of the Russian Federation.

In an interview with Russian media on March 25, he said, "What is written on the banners of any capitalist society, any market economy? Utter respect for private property rights! This is sacred! The world may perish, but justice will prevail. Everything may perish, but private property will remain. Yet look at what the West is doing today." He continued, “They are blocking the assets of our financial institutions, even the Central Bank. They are even talking about confiscating these assets, that is, nationalizing them. Listen, this is a real war without rules. What will be the consequences of this war? Destruction of the whole global economic order.”

On March 30, Medvedev said that, by freezing Russia's central bank reserves, the U.S. and EU had "damaged their own credibility" and “a new financial order will be negotiated in the world, and the West won’t have the main say in it anymore.” He said the “hellish” sanctions that the U.S. EU and their allies have imposed on Russia over the conflict in Ukraine have failed to cripple the country but are instead “returning to the West like a boomerang.” He jokingly added, “this is hurtful for our friends in Europe and overseas.”

The West wants to use sanctions to reduce the ruble to wastepaper and turn Russia into a pariah state shunned by the international community. Simply put, Russia has launched a disruptive revolution. It has turned the tables by linking basic commodities such as Russian natural gas to the ruble and gold, converting the currency wars of the West into a war between commodities and currency. Russia has commodities and the West has currency. You have your currency, I have my commodities, but I might not allow you to buy my commodities. Let's see who's afraid of whom. In the end, who will be doing the sanctioning? Who will emerge the victor?

After Putin countered the West by dropping his financial nuclear bomb on the West's financial nuclear bomb, the ruble exchange rate snapped back to its pre-sanction level. The Polish prime minister has said publicly that Western financial sanctions against Russia have had no effect. In fact, sensible people all know that currency must be based on national credit. Now that the U.S. does not back this kind of credit, the process of displacing the U.S. hegemony has begun. In fact, this process began a long time ago in response to the U.S. relentlessly weaponizing the dollar. With recent international developments, this process has greatly accelerated.

I view Putin's special military operation as a revolution against the old order. The decision to link natural gas and other raw materials to the ruble is a revolution against the hegemonic order of the U.S. dollar. It is very inspiring for our own endeavors to take the yuan global. As the world's largest economy (based on purchasing power parity), largest trader of goods, largest consumer and investment market, we must bravely design and establish a financial system for the "post-American era."

Russia's approach has liberated the financial world. The world has entered a post-America era. We must rouse a resistant spirit, because if we are resigned mentally to accept U.S. financial hegemony, we will be trapped into abiding by its rules. Obedience affords certain conveniences but at the price of extortion and robbery by the U.S. at will. Now that Russia has come to its senses, it no longer recognizes the financial hegemony of the West, and has launched a powerful ruble, backed by natural gas and grain. Judging from the reaction of the currency market so far, many people are optimistic about the ruble.

Russia's transformation of the currency wars into a war between commodity and currency has paved the path for a new way to imagine the potential of internationalizing the Chinese yuan. We hold the cards. We have abundant natural resources, including a large amount of rare metals. We have the world's most developed production network; we are the only country on earth that can produce almost any product from the first industrial revolution to the fourth industrial revolution. Linking the yuan to our own unique resources and products is a revolutionary idea that we might consider adopting.

Of course, China has the current situation to deal with. We still hold a large volume of U.S. dollars and debt, but thankfully the Belt and Road Initiative has consumed much of it. We have many available options, including a further reduction of the U.S. debt we hold. U.S. credibility and the U.S. dollar, just like the entire U.S. model, are not just on the road to decline, they are facing total collapse. We must take a comprehensive approach, act with resolve and strike while the iron is hot.