Growing Challenge to U.S. Dominance of Global Finance
- K.C. Adams - 
Mass actions in Ecuador
against International Monetary Fund imposed reforms,
October 14, 2019.
An area of contention in the
world today is U.S. dominance of global finance and its use of
institutions to ensnare countries within their grasp. Russia and China
have now agreed to establish a new shared international financial
framework so as to make sure the U.S. can no longer control their
trading relations or interfere in their internal affairs by imposing
sanctions.  The U.S. controls
and uses the World Bank and Asian Development Bank, the International
Monetary Fund, the Bank for International Settlements and SWIFT system,
credit cards and the U.S. dollar as weapons to dominate others and
ensure its global hegemony.[1][2]
Glenn Diesen, a professor at the University of South-Eastern
Norway and an editor at the journal Russia in Global Affairs,
recently penned an article published in RT, which notes: "China
and Russia have been gradually moving towards such an arrangement since
the Global Financial Crisis of 2008 revealed the risks of excessive
reliance on the U.S. However, American economic sanctions against both
Moscow and Beijing appear to have intensified the search for
alternatives." Diesen details the immense power of
what he calls "the American-centric financial architecture." He writes,
"Most international trade is conducted in U.S. dollars, the transfer of
payments goes through the SWIFT transaction system in which the country
has immense sway, while financing derives from U.S.-led investment
banks, debt is ranked by U.S. rating agencies, and even the main credit
cards are American. These economic instruments of power enable
Washington to run an empire -- it can manage huge trade deficits,
collect data on its adversaries, give favourable treatment to allies,
and crush its adversaries with sanctions." Diesen
contends, "The U.S.-centric financial architecture is no longer
sustainable. The White House has lost control over its negative trade
imbalance, debt is spiralling out of control, and rampant inflation is
destroying the currency." 
Within the
situation Diesen says the foundations for the role of the U.S. dollar
as the international reserve currency and to settle global trade and
accounts "are quickly coming to an end." He writes: "A
financial partnership between China and Russia, the world's largest
energy importer and the world's largest energy exporter, is an
indispensable instrument for dethroning the petrodollar. In 2015,
approximately 90 per cent of trade between Russia and China was settled
in dollars, and by 2020, dollar-denominated trade between the two
Eurasian giants had almost reduced by half, with only 46 per cent of
trade in dollars. Russia has also been leading the way in cutting the
share of U.S. dollars in its foreign reserves. The mechanisms for
de-dollarizing China-Russia trade are also used to end the use of the
greenback with third parties -- with advancements being seen in places
such as Latin America, Turkey, Iran, India, etc." Diesen
explains, "The SWIFT system for financial transactions between banks
worldwide was previously the only system for international payments.
This central role for SWIFT began to erode when the U.S. used it as a
political weapon. The Americans first expelled Iran and north Korea,
and in 2014, Washington began threatening to expel Russia from the
system as well. Over the past few weeks, the threat of using SWIFT as a
weapon against Russia has intensified." In the face
of these attacks and threats, China, Russia and several European
countries have created alternatives to SWIFT. Using these alternate
financial institutions, countries have been able to some extent, as
Diesen says, "to curb Washington's extra-territorial jurisdiction and
thus continue trading with Iran. A new China-Russia financial
architecture should integrate [the Chinese system] CIPS and [Russian]
SPFS, and make them more available to third parties. If the U.S. expels
Russia, then the decoupling from SWIFT would intensify further."[3]
 Diesen details
the rising opposition to the U.S.-controlled development banks and
other lending institutions writing, "The U.S.-led IMF, World Bank and
Asian Development Bank are renowned instruments of U.S. economic
statecraft. The launch of the Chinese-led Asian Infrastructure
Investment Bank (AIIB) in 2015 became a watershed moment in the global
financial architecture, as all the major allies of the U.S. (except
Japan) signed up in defiance of American warnings. The New Development
Bank, formerly referred to as the BRICS Development Bank, was a further
step towards decoupling from the U.S.-led development banks. The
Eurasian Development Bank and future SCO Development Bank are more
nails in the coffin of U.S.-controlled development banks."
The
contention has reached into other financial areas with China and Russia
developing their own rating agencies and replacing the dominant
position of Visa and Mastercard in their respective countries with
their own credit cards such as the Chinese company UnionPay's credit
cards and non-currency payment systems including the widely used
Chinese mobile platform Alipay. "Furthermore,"
Diesen writes, "China and Russia seek to avoid U.S.-dominated
transportation corridors. China has invested trillions of dollars into
its Belt and Road Initiative for new land and sea corridors, while
Russia has advanced a similar but more modest program that includes
developing the Arctic as a maritime route in partnership with China."
Diesen concludes: "The U.S. can use more sanctions to oppose
the development of a multipolar international financial architecture,
although continued economic coercion will only increase the demand for
decoupling from America. The first rule of sanctions is that when they
are enduring, the targets of sanctions will learn to live without the
belligerent power. What began as an effort to weaken and isolate
Washington's adversaries eventually ends up isolating the U.S."
China's Belt and
Road Initiative (click
to enlarge) Notes 1. Excerpts from "How
the SWIFT System Works," by Shobhit Seth follow:
"[...] Behind most international money and
security transfers is the Society for Worldwide Interbank Financial
Telecommunications (SWIFT) system. SWIFT is a vast messaging network
used by banks and other financial institutions to quickly, accurately,
and securely send and receive information, such as money transfer
instructions. "More than
11,000 SWIFT member institutions sent over 35 million transactions per
day through the network in 2020. The organization recorded an average
of 42.5 million messages per day on a year-to-date basis in March 2021.
Traffic grew by 9.8 per cent compared to the same period of the
previous year. [...] "This
payment network allows individuals and businesses to take electronic or
card payments even if the customer or vendor uses a different bank than
the payee. "SWIFT works
by assigning each member institution a unique ID code that identifies
not only the bank name but country, city, and branch."
For the full item click
here. 2. The Wikipedia
article "Society for Worldwide Interbank Financial Telecommunication"
explains: "[SWIFT] sends
payment orders, which must be settled by correspondent accounts that
the institutions have with each other. To exchange banking
transactions, each financial institution must have a banking
relationship by either being legally organized as a bank or through its
affiliation with at least one bank. While SWIFT transports financial
messages in a highly secure manner, it does not hold accounts for its
members nor perform any form of clearing or settlement.
"As of 2018, around half of all high-value
cross-border payments worldwide used the SWIFT network, and in 2015,
SWIFT linked more than 11,000 financial institutions in over 200
countries and territories, who were exchanging an average of over 32
million messages per day (compared to an average of 2.4 million daily
messages in 1995). "Though
widely utilized, SWIFT has been criticized for its inefficiency. [...]
SWIFT has also attracted controversy for enabling the United States
government to monitor, and in some cases interfere with, intra-European
transactions." 3. Below are excerpts from the
article "Kremlin reveals new independent Russian-Chinese financial
systems," by Layla Guest, published by RT on December 15, 2021:
"Russia and China will develop shared financial
structures to enable them to deepen economic ties in a way that foreign
states will be unable to influence, the Kremlin has announced following
talks between the countries' leaders. "The
move appears to be a response to a series of warnings that Western
nations could push to disconnect Russia from the Brussels-based SWIFT
financial system as a form of sanctions. "...
During the talks..., Russian President Vladimir Putin and his Chinese
counterpart Xi Jinping called for increasing the share of national
currencies in mutual settlements and expanding cooperation to provide
Russian and Chinese investors with access to stock markets, said Yuri
Ushakov, Putin's foreign policy advisor. "Ushakov
said 'particular attention was paid to the need to intensify
efforts to form an independent financial infrastructure to service
trade operations between Russia and China.'
"'We mean creating an infrastructure
that cannot be influenced by third countries,' the Kremlin
aide added. [...] "Both
Russia and China are said to be increasingly looking to move away from
using the U.S. dollar as the main currency of international trade,
instead using their own denominations to underpin the booming volume of
Moscow-Beijing trade. "[At
a December 7 hearing before the Senate Committee on Foreign Relations,]
U.S. Under Secretary of State Victoria Nuland said that the White
House, along with a number of Western European nations, was mulling
completely isolating Moscow from the global financial system should
Russian troops dare to invade Ukraine. "Just
the day before, Bloomberg had suggested that Washington could target
the country's major banks and even disconnect Moscow from the SWIFT
network. "At the end of
November, the boss of Russia's state-run oil giant Rosneft, Igor
Sechin, accused Washington of manipulating the dollar to further its
own interests and said the currency was losing its appeal due to the
U.S. Federal Reserve's policy of quantitative easing -- essentially
flooding the global economy with an excess supply of money.
"Earlier this year, Russian Foreign Minister
Sergey Lavrov suggested that Beijing and Washington 'need to
move away from the use of Western-controlled international payment
systems.' The top diplomat also accused the U.S. of seeking 'to
limit the technological development opportunities of both the Russian
Federation and the People's Republic of China.'" [The
sanctions against using the Chinese company Huawei's products are a
case in point. The attacks include the arrest of its Chief Financial
Officer Meng Wanzhou in Vancouver at the behest of the U.S.
authorities, where she was held under house arrest for three years. --
TML Ed. Note]
This article was published in
Volume 52 Number 1 - January 9, 2022
Article Link:
https://cpcml.ca/Tmlm2022/Articles/MS52013.HTM
Website: www.cpcml.ca
Email: editor@cpcml.ca
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