Opposition to U.S. Imperialist Domination of International Finance

Growing Resistance to Attempts to Maintain U.S. Hegemony

The U.S. financial oligarchy uses its control of international institutions in the realm of trade, and the movement of money and credit to impose worldwide sanctions and blockades. Those countries wishing to break free from U.S. hegemony find themselves up against barriers that restrict their ability to trade or in other ways engage in international finance and business.

For example, the extraterritorial edict the U.S. has issued banning banks and other enterprises from doing business with Russia extends to all because, eventually, if an enterprise or state anywhere in the world, wants to engage in global business with others, it will come into contact with a U.S.-controlled institution.

In an item titled "Turkish state banks exit Russian payment system," Bloomberg News reports, "The threat of U.S. sanctions has forced lenders in Türkiye to stop dealing with Russian Mir [credit] cards, a senior official told Bloomberg. The decision followed a warning from the White House that financial institutions would risk secondary penalties if they help sanction-hit Russia to bypass Ukraine-related punitive measures."

"Earlier this month, the U.S. Treasury's Office of Foreign Assets Control (OFAC) announced that it was ready to impose sanctions on any institution outside Russia using the country's payment system.

"Turkish lenders joined the Mir payment network in early August, allowing tourists from Russia to pay for their purchases in the country.... The forced measures that are expected to be taken by Halkbank, Ziraat Bank and VakifBank to stop using Mir marks the latest turnaround in the Turkish stance on anti-Russia sanctions.... Mir was developed by the Central Bank of Russia as a domestic alternative to Visa and Mastercard after the first round of sanctions was imposed on Moscow in 2014. Since the introduction of the new payment system, Russian banks have issued more than 129 million Mir cards. Last week, Russian media reported that banks in Kazakhstan and Vietnam had stopped accepting Mir payment cards to avoid the risk of U.S. secondary sanctions."

The Atlantic Council, a front group for U.S. imperialism, reports on the global financial measures to sustain U.S. hegemony: "Over the past six months, the Group of Seven (G7) has leveraged the combined force of the dollar, euro, pound and yen to exact a heavy toll on the Russian economy. The backbone of this strategy rests on the way the world uses the dollar as an international reserve currency and the overwhelmingly preferred settlement mechanism in global currency exchanges. Nearly half of the world's trade is conducted in dollars, which also comprise approximately 60 per cent of global foreign-exchange reserves."

The Council expresses alarm however that sanctions are losing their effectiveness, as those affected are developing alternative means to circumvent the financial attacks. It writes, "De-dollarization or reducing a country's reliance on the dollar has gained momentum: From Russia to China -- and to many non-aligned countries in between -- there is a fear that overreliance on the dollar gives the United States too much leverage."

The Council reviews various methods U.S. imperialism has developed to sustain its hegemony and suggests how it may retain their effectiveness. It begins with the private system called SWIFT: The Society for Worldwide Interbank Financial Telecommunications, which the U.S. financial oligarchy controls led by the U.S. Federal Reserve, which is a cartel of U.S. private banks.

SWIFT provides what it calls safe, secure, and efficient communication between banks for moving money. Over eleven thousand financial institutions in more than two hundred countries and territories rely on SWIFT for their financial transactions.

While SWIFT provides a method of secure communication, the actual fund clearance and settlement is handled by another U.S. Fed-controlled institution, the Clearing House Interbank Payments System (CHIPS). CHIPS clears close to $1.8 trillion in transactions daily.

The Council writes, "The (CHIPS) system has 43 direct participants, which are all U.S. banks or foreign banks with U.S. branches, and eleven thousand indirect participants, which are banks without U.S. branches who are engaged in the system through their accounts with direct participants. Through its participants, CHIPS covers over 96 per cent of dollar-denominated cross-border transactions. CHIPS works in parallel with the Fed-owned Fedwire Funds Service to actually clear and settle transactions. Together, SWIFT, CHIPS, and Fedwire broadly cover almost all dollar-denominated international transactions. They create a network effect that is nearly impossible to rival."

Regardless of the gloating, the Council grudgingly admits that rivals are indeed rising to challenge U.S. financial hegemony including its champions SWIFT, CHIPS, Fedwire and the U.S. credit card giants. Russia and China in particular are rapidly developing alternatives.

The Council writes: "Russia began developing its System for Transfer of Financial Messages (SPFS) after being hit by a round of sanctions following the 2014 annexation of Crimea. It functions as an alternative to SWIFT for transmitting information across four hundred domestic Russian banks and around fifty international entities primarily from Central Asia. Although reports have recently emerged about central banks in India, Iran, and China connecting to SPFS."

China developed its own Cross-Border Interbank Payments System (CIPS) in 2015 as an alternative to the CHIPS system. The People's Bank of China supervises the transactions. The system began by using the SWIFT infrastructure in China but has rapidly built an independent network that includes around one-tenth of the total participants in SWIFT. Reports in the financial press say the volume of transactions through CIPS using primarily the Chinese currency the yuan is growing by 50 per cent per year.

The Council admits the extensive imposition of sanctions is generating more resistance and expansion of alternatives to the U.S. dollar and financial mechanisms. It says the growth of the Russian and Chinese systems followed "the imposition of stricter financial sanctions on the countries that designed these (new) systems. As U.S. officials tighten sanctions measures, there will be more incentive for countries to participate and grow the network of these alternative payment rails."

The Council notes that not only are "U.S. adversaries like Russia or competitors like China" resisting U.S. hegemony. "Countries like India, Indonesia, Brazil, and South Africa are all exploring changes in the way they process cross-border payments and the possibility of reducing their reliance on the SWIFT system," it writes.

Credit and Debit Cards

Others around the world are exploring ways to have their own credit and debit cards used internationally but face attacks from the U.S. financial oligarchy to shut them down or at least blunt their effectiveness. The U.S. dominates the credit and debit card industry. U.S.-controlled Visa, Mastercard, and American Express are the three largest companies that allow cross-border and domestic payments. Visa and Mastercard each reach close to 53 million global merchants in over two hundred countries but alternatives are rapidly taking hold. The Chinese alternative payment network called UnionPay was introduced in 2002. UnionPay now has 55 million merchants in 180 countries signed up to use the credit or debit card, including 37 million merchants located outside of China.

The Council writes, "Since Visa and Mastercard suspended their services in Russia, UnionPay has emerged as one of the only options for cross-border transactions for Russians. Another one of those options is Mir, Russia's homegrown card scheme. Mir, which was developed during the 2014 round of sanctions on Russia, has become popular because it is used for pension and public-sector payments domestically and can be used by Russians living abroad. Over one hundred million Mir cards have been issued, and several countries, including Turkey and Iran, have expressed interest in joining Mir's network. Additionally, Russian banks have been doing business with UnionPay for several years, and given UnionPay's large network, Mir could partner with UnionPay to expand its reach with marketing or even co-branded cards."

Technical developments in the financial sector are also creating alternatives to the U.S. credit cards such as wallets and platforms that primarily enable domestic retail payments in the local currency of a country. Chinese fintech companies are more advanced on this front with the two most popular global digital wallets, AliPay and WeChat Pay. Each has more than a billion users with AliPay in use in up to 110 countries and WeChat Pay in 50 countries. The U.S.-controlled ApplePay and GooglePay have around four hundred million users each.

Developments in digital currencies are also allowing countries to bypass the U.S. dollar-based financial system by using Central Bank Digital Currencies (CBDC). Twelve cross-border CBDC experiments are underway, such as the multiple CBDC Bridge (mBridge) that connects Thailand, Hong Kong, China, and the United Arab Emirates in a multi-currency exchange bridge.

The system is touted as cheaper, more efficient, less risky, and a faster transaction pipeline than existing systems, in addition to the benefit of not having the U.S. in control. One hundred and five countries are actively using forms of CBDC. Some of them are planning to launch "Wholesale CBDCs" that will enable institutional transfers between banks bypassing altogether the necessity to use SWIFT.

The Council notes with alarm, "Over time, these innovations could erode the way the dollar's global dominance is used to make sanctions effective. That's certainly the hope in Beijing: According to the International Monetary Fund (IMF), the People's Bank of China has 300 staff members solely dedicated to its CBDC -- that's larger that the entire staff of most other countries' central banks.

"De-dollarization is not a new idea -- but both fintech innovation and the weaponization of the dollar via sanctions have breathed new life into an old debate. ... [T]hreats to the dollar are looming in the distance: The yuan's share in global payments has seen an uptick this year, and given the energy crisis, countries could be convinced to offer ruble or yuan swap lines and increase the share of these currencies in their balance sheets. Over time, if the United States does not lead with allies in their own technological innovation, many countries will seek alternatives."

Exasperated, the Council falls back on the imperialist method of imposing U.S.-controlled standards "to curb the growing fragmentation in the global payments landscape." "Fragmentation" is code for any alternative to the hegemony of the U.S. dollar and financial systems. Imposing what they call global standards is a tried and true method to weaken fragmentation or loss of U.S. control.

The Council issues a veiled threat against those wanting relief from U.S. hegemony. "The United States has a crucial role in setting global standards and needs to be more active at the Group of Twenty (G20) and IMF on these issues. This would serve two purposes: It would ensure that innovation in the payments landscape does not lead to more fragmentation and also would make clear which countries are interested in collaborating -- and which ones truly want to carve out a different path."

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This article was published in

Volume 52 Number 11 - November 2022

Article Link:
https://cpcml.ca/Tmlm2022/Articles/M520118.HTM

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