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Russia's top banker believes that more dangerous than the Cold War, it is the "hot conflict" that is bringing the dominance of the USD to an end.

Sitting on the 59th floor of the gleaming VTB skyscraper overlooking southern Moscow, Andrei Kostin, CEO of Russia’s most powerful bank, argues that “the long historical era of dollar dominance is coming to an end and it is time for China to open up and gradually lift its currency restrictions.” The Chinese yuan is rising in value and the rest of the world is starting to see the dangers posed by the West’s failed efforts in the Russia-Ukraine conflict.

Cộng sự thân cận của Tổng thống Putin: Kinh tế Nga đã thích nghi, đồng USD thành ‘nạn nhân’ của cuộc xung đột nóng. (Nguồn: VTB Capital)

Close associate of President Putin: Russian economy has adapted, USD becomes 'victim' of hot conflict. In photo: VTB Capital skyscraper. (Source: VTB Capital)

The current geopolitical and economic crisis is ushering in profound changes to the world economy, undermining globalization, even as China is taking on the role of a leading economic power, commented Andrei Kostin, CEO of state-controlled VTB Bank, Russia's second-largest bank.

Asked if he thought the world was in a new Cold War, Mr Kostin said it was now a “hot conflict” and more dangerous than the Cold War.

According to the CEO of VTB, in the Russia-Ukraine conflict, the US and the European Union (EU) have lost out right from the moves to freeze hundreds of billions of dollars of Russian sovereign assets; as a result, many countries have flatly refused to use the US currency and the Euro for payments in their trade and investment transactions; meanwhile, Beijing is moving towards removing restrictions on its national currency.

“China now understands that it cannot become the world’s number one economic power if it keeps the yuan as a non-convertible currency,” Kostin analyzed. And it is also dangerous for Beijing to continue investing in US sovereign bonds.

The US dollar has been dominant since the early 20th century when it overtook the British pound as the global reserve currency, but just last month, JPMorgan said signs of de-dollarization were emerging in the world economy.

China’s spectacular economic rise over the past 40 years, the aftermath of the Russia-Ukraine conflict and the US debt ceiling debate have put the dollar under new scrutiny. The CEO of VTB said they are discussing the use of the yuan in economic transactions with third countries.

Mr Kostin, a former diplomat who served in Australia and Britain, moved into banking shortly after the collapse of the Soviet Union. He is now one of Moscow’s most powerful and experienced bankers, and was also the head of the Russian Development Bank Vneshekombank, now known as VEB.

After President Vladimir Putin launched a military campaign in Ukraine (February 2022), the US and the West have continuously imposed the toughest sanctions on Russian officials, organizations and individuals considered close to President Putin and aimed at weakening the Russian economy.

In 2018, Mr. Kostin was sanctioned by Washington. After the Russia-Ukraine conflict broke out, he was further sanctioned by the EU and the UK on the grounds that he was a "close associate of President Putin."

VTB Bank CEO Andrei Kostin said the sanctions were unfair and a political decision that would be “counterproductive” for the West. “We have entered a hot conflict,” Kostin said of the crisis with Ukraine.

"It's not cold at all, when there are so many Western weapons and so many Western military services and advisers involved. The situation is worse than during the Cold War, very difficult and alarming," Mr. Kostin said.

However, VTB CEO Kostin said VTB would still make a profit of 400 billion rubles ($4.9 billion) in 2023 after a bumper first five months and a record loss last year. He said the Russian economy would not be broken by the West. The International Monetary Fund (IMF) in April raised its forecast for Russia's 2023 GDP growth to 0.7% from 0.3%, but cut its 2024 forecast to 1.3% from 2.1%.

"Sanctions are bad and of course we are suffering from them. But the Russian economy has adapted," Andrei Kostin asserted.

“We hope that, during this time, as sanctions may increase further, restrictions may tighten further, some “windows” will continue to close, but we will still find other opportunities.”

Asked whether the Russian economy will remain a free economy, the CEO of Russia's top bank said, "I very much hope so."

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