In early June 2021, the Russian Finance Minister said that the oil fund of the National Welfare Fund will completely get rid of its exposure to the US dollar. We are talking more specifically about $40 billion. Russia thus plans to switch to the euro, the digital yuan and to gold. Let’s take a look at how this will affect geopolitics and the world economy.
US dollar is a reserve currency
It is common knowledge that the USD is the world’s reserve currency. Russia’s National Welfare Fund has an approximate size of $120 billion. This means that roughly 35% of this amount is in US dollars. The decision will therefore have serious significance both in the world economy and in geopolitics. However, the truth is that Russia has been trying to break away from the US dollar for more than 10 years. So if you follow international politics, this news should come as no great surprise.
Back in 2009, the then Russian president, Dmitry A. Medvedev, was unhappy with Russia’s dependence on the US dollar, and there was an effort with China and other countries to create a supranational currency to replace the US dollar. Today, under Vladimir Putin, the country has a different goal. By abandoning the US dollar, it wants to better protect itself from the risk of US economic sanctions and possible pressure on the economy from the US. However, Russia is not really taking a risk by buying gold. It is a well-thought-out move, even if it is not the cheapest. It is also possible that other countries will follow this decision.
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