Igor Sechin: The use of the dollar as an economic weapon have set in motion the process of de-dollarization

One of the key reasons for the beginning of the gradual de-dollarization of the architecture of world finance was the use of the dollar as an instrument of unfair competition, said Igor Sechin, Chief Executive Officer of Rosneft, in his report at the Energy Panel of the 27th St. Petersburg International Economic Forum.

According to his words, the U.S. financial system is also an active instrument of unfair competition. Financial restrictions extend to the whole world, as the U.S. financial system is the basis of the world financial infrastructure. It is used as one of the instruments of illegal influence in violation the fundamentals of the Bretton Woods monetary system, under which the dollar should play the role of the world reserve currency and the main means of payment.

“In recent years, the use of the dollar as an economic weapon, and the uncontrolled growth of the U.S. national debt have set in motion the process of de-dollarization”, Sechin said.

He remained that since 2001, the dollar's share in international foreign currency and gold reserves has fallen from 71% to 58%. The crisis of confidence in the U.S. dollar as a reserve currency, Sechin noted, has caused central banks in developing countries to favor other protective assets, including gold. As a result, its share in foreign exchange reserves has almost doubled over the past ten years.

“In addition to increasing the share of gold in reserves, developing countries are withdrawing gold reserves from the vaults in the United States and the United Kingdom. In particular, the Reserve Bank of India moved more than 100 tons of gold out of the Bank of England, a quarter of its reserves stored abroad. A number of countries, such as Saudi Arabia, Nigeria, South Africa, Egypt and others have taken similar decisions to repatriate gold reserves”, noted the Chief Executive Officer of Rosneft. At the same time, over the past 15 years, the share of developing countries among foreign holders of U.S. Treasury bonds declined from 51% to 28%.

As Sechin said, the growth of US national debt is another important factor in undermining confidence in the dollar and shifting problems from the financial sector to the energy market and the rest of the world.

“Over the past 20 years, the US has aggressively used the special status of the dollar to finance large-scale borrowings. As a result of such policy, in the last year the ratio of US government debt to GDP came close to 100%. To address the liquidity bubble, the US Federal Reserve was forced to raise interest rates in record time from near zero to 5.5%”, clarified the Rosneft’s CEO.

As an example of such growth consequences, he recalled the British pound, which was the world's reserve currency until the Second World War. “The increase of the UK government debt to 130% of GDP became one of the factors that put an end to the pound's dominance in the world”, Sechin said.

The Rosneft head noted that so far, we have not seen any practical steps to limit the growth of the national debt. On the contrary, now the U.S. continues to increase its debt at a record pace - by USD 1 trillion every 100 days. “Interest payments on the national debt have already exceeded USD 1 trillion, which is higher than government spending on defense and health care. Last year, total U.S. Social Security and Medicare liabilities exceeded USD 250 trillion, including more than USD 70 trillion not supported by future revenues. In a high-rate environment, the U.S. budget deficit is already at 9% of GDP, four times the average of the last eighty years», Sechin stated.

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Rosneft
June 8, 2024