Russia Strikes Out at Sanctions and Takes Its Battle to the Dollar!

• Russia Strikes out at Sanctions and Takes its Battle to the Dollar! 
  by Stefan Hedlund, worldreview.info, via http://www.globalresearch.ca/
  The European Union sees a new deadline on implementing economic sanctions against Russia over the Ukraine crisis expire today, June 30, 2014. But Russia’s President Vladimir Putin is turning the tables on the United States to spur a global ‘de-dollarisation’, writes Professor Stefan Hedlund.
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  Russia is making a concerted attack on the status of the America’s greenback dollar as a global reserve currency and is in the process of abandoning the ‘petro-dollar’ as its trading unit for oil and gas.
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  Russian energy companies have been told to ditch the dollar and sign contracts in rubles and the currencies of partner-countries. The desire to reduce the use of dollars is in line with China’s aim to promote international use of the Chinese yuan. Other emerging market nations would also like to see reduced American hegemony.
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  An attack by Russia on the US dollar would be devastating and could, in theory, trigger a stock market collapse in the United States. However, the status of the greenback as global reserve currency is not yet under serious threat, for the simple reason that the alternatives are worse. But the Russian attack may prod the global economy to take a further step on the road to a system without a designated reserve currency.
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  If Central Banks across the world were to sell off their holdings of US government bonds, then the US economy would be flooded with dollars, causing the currency to plummet, inflation to spike and interest rates to skyrocket.
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  The consequent rise in the cost of financing government debt would be monstrous, and having to return to fiscal balance would force the closure of so many social spending programmes that there would be rioting in the streets.
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  It is unlikely this will happen, but it does provide a sobering background to the game Russia is playing, and what may eventually happen if Washington persists in refusing to get its own house in order.
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  Over the past few decades, the world has become so used to viewing the greenback as the ‘natural’ global reserve currency that warnings about a possible end to this way of cheaply financing the US deficit have been routinely shrugged off. Measures to prepare for a declining role of the greenback are not being implemented.
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  In the aftermath of the subprime mortgage crisis which triggered the recession in 2008, and the humiliating 2011 downgrade of the US sovereign credit rating, warning voices have begun to question how long this can go on. Those who are the biggest holders of US debt, mainly the BRICS countries (Brazil, Russia, India, China and South Africa), have begun looking for ways to move away from the dollar.
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  Ever since the collapse of the Soviet Union in 1991, Russia has been addicted to US dollars. During the turbulent 1990s, the greenback all but replaced the collapsing ruble offering both a means of exchange and a store of value. With the spike in oil prices which began in 2001, the Russian Central Bank has been able to stabilise the currency, and the role of the dollar has receded.
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