Why Russia wants to have its own USD

It is no doubt that the USD is the most influential currency in the world. The United States has often used the USD as leverage over other country’s economies, administration, and sanctions. Haven held this position for decades, America still fears the event of another country taking over their currency’s influence, reasons why the nation is weaponizing the USD against other economies to safeguard its financial and international position. Although the US total global economic output is only 20%, the USD accounts for more than half of the currency fund. This is because a majority of the world affects transactions in USD nationally and internationally and as such, the US gets to trade in its own local currency, avoiding all the exchange rates. The dollar strength was improved when the currency in the tie of Nixon cut its ties with gold, leading to the US’ domination in the supply of currency.   

The US is taking advantage of the role that the dollar has to play in other economies to weaponize the currency. The influence of the currency gives the US the opportunity of smoothly financing deficits in the budget. With such leverage, in situations like crisis and other emergencies, their economy is protected by BOP (balance of payments), or any other surpluses, since they trade in their own currency. The United States’ financial policies such as quantitative facilitation influence the USD to increase its upper hand in competitiveness. Because there are fewer US residents trading forex, many new US forex investors do not understand the concept of direct and indirect quotes with regards to currency pairs. Of course, the USD is a major currency, yet its value cannot be determined on its own. That is why a second currency is required to value the worth of another, thus it begs the question, “what are currency quotes?” so that traders can better understand the position of their local currency and how they can benefit from a particular currency pair.  

However, the currency’s influence is not only in cases such as competitive advantage but also in its involvement in sanctions, this is where the dollar’s real power is. The Patriot Act and the Trading With the Enemy Act permit the US administration to weaponize payment streams. US sanctions on Iran is a clear example of how they are weaponizing the dollar against other countries and their economies. The US has banned any form of transactions between them and Iran and has placed an embargo on the nation’s sale of aircraft parts to Iranian companies. Other countries are prohibited from trading with Iran as well, and many Iranians are stuck with these sanctions as they are unable to conduct international transactions as well as get paid in dollars or other influential foreign currencies. Iranians even suffer the effects of this out of Iran as they are not allowed to own a MasterCard or a visa card in certain countries because of these same US sanctions. These are the same effects suffered by Venezuela. The United States together with other countries such as Panama, Canada, the European Union, and Mexico placed sanctions on Venezuela during their crisis and urged other countries not to get involved with the country. And have ordered limited supply and use of dollars in these countries. The dollar as one of the main currencies for international trade limits these countries from making any such international transactions that involve payments in USD. This is the US weaponizing its currency at its best. The result of such sanctions has greatly affected both Iran and Venezuela, the economies of these countries have plummeted to an all-time low, ranging from downfall in GDP, a fall in oil prices, and a lot more. The economies of these two countries suffer high levels of inflation, the value of local currencies compared to dollars is half the initial value, also leading to high costs of living. 

However, America’s glory days might come to an end if Russia achieves its ambitions of taking the place of the USD in global markets. The Russian government is trying to get its Rubble as strong and influential as the USD. After Russia’s interference with the US presidential elections and aggressions against other nations, the United States House of senates is making provisions for the penalization of Russian. The US Senate plans on placing a number of sanctions on Russia, which will in effect limit Russia’s access to the USD and debt markets from its banks. The Russian defence businesses have also been barred from access to the greenback, this in effect has made it difficult for Russian large oil and gas corporations to have access to the USD or borrowing in dollars. 

Russia for the past years has witnessed a come back since its undoing during the fall of the Soviet Union. It has gradually gained some ground in the global economic platform after the disastrous fall. And it is safe to say that the nation is a force to contend with and a great power at that. It wasn’t surprising when the President of Russia spoke against the US sanctions against Moscow. Thus leading to Putin’s decision of cutting Russia off from the USD. The Russian government has expectations of taking over the USD’s influence on economies by pumping in well over $1.6trillion into their economy to ensure that Russian big corporations don’t rely on the USD anymore. The Russian government in an effort to kill the USD is permitting countries such as Iran to trade in its local currency. 

Russia’s ambitions sound quite appealing but it is safe to say that and might seem doable, but it is safe to say that such ambitions are far fetched. The USD’s power is enduring and unmatched. It is backed by the power of the US economy and can hardly be overtaken by any currency, Russian ruble inclusive. In so far as the use of the currency still stands tall amongst other countries’ currencies on the global market, its use as a global currency will always be its point of leverage. 

The leverage of the USD does not make it the strongest currency in the world, however, there are many other currencies such as the Kuwait dinar, KWD, Bahrain dinar, BHD,  pound sterling, GBP, yet these currencies are not as influential as the USD, reasons, why the United States is taking advantage of its currencies to, control the financial markets and economies of other countries. And the Russian ruble still has a long way to go in efforts to get to the level of the USD. President Donald Trump during his presidency has greatly used the power of the dollar as a tool of foreign policy.