Last week in Saint Petersburg, Russia, one of the most important economic forums of recent times was held. It was the Saint Petersburg International Economic Forum (SPIEF). Although attended, in person or electronically, by representatives of more than 170 countries across the world, it barely attracted a mention in the western mainstream media.
The forum provided the opportunity for a major discussion of what might fairly be described is the new economic order: the shift of economic emphasis from the West, where it has prevailed for the past 200 years at least, to the East.
There are many symptoms of this fundamental shift in the world’s economic focus. An obvious one is the steady decline of the United States dollar as the medium for international trade. This was discussed at one of the forums of the conference where IMF managing director Kristalina Georgieva, Russian central bank Governor Elvira Nebiullina and Russian minister of finance Anton Siluanov shared a forum.
Siluanov announced that in May of this year for the first time, less than 50% of Russia’s exports were nominated in United States dollars. Siluanov announced that Russia intended to totally abandon the United States dollar in the Russian wealth fund. This was part of a major restructuring of the Russian foreign exchange system.
The role of the British pound was also to be reduced (which won’t endear the Russians to the British). The role of the Euro and Chinese Yuan would also be increased, with the status of gold and the Japanese yen remaining stable. These changes may be seen as preparation for heday, which many now see as imminent, when Russia is excluded from the world financial system.
A further topic of discussion at SPIEF was the increasing role of the Chinese in Eurasia’s economy. A combination of Chinese technical capability and Russia’s massive energy resources will provide the foundation of an Eurasian market that will progressively diminish the West’s hitherto dominant role.
One of the principal factors driving the change is decades of United States abuse of the power they retained as the source of the world’s main trading currency. When the use of that power turned to abuse, as has been manifestly obvious for the past several decades, it inevitably produces a reaction. The Russian and Chinese led abandoning of the dollar is the obvious outcome of the growing disenchantment with decades of United States abuse of its position.
The timing of the SPIEF conference is also notable. It occurred in the days before the G7 and NATO summits and two weeks before the Biden – Putin summit set to occur in Geneva. The impetus for this summit has come from Biden. Together with a softening of some points of difference with Russia in recent weeks, and notably with the withdrawal of United States opposition to the completion of the pipeline providing Russian gas to Germany and elsewhere in Europe. The United States clearly has expectations of making geopolitical gains at the Geneva meeting. In all probability, it will be too little, too late.
The Russians are plainly aware of United States attempts to separate them from China, upon whom the Americans are increasingly concentrating their antipathy. The Russian-China partnership has developed too far to make any fantasy of a United States inspired separation feasible.
An outstanding example of Russia – China Corporation can be seen in the progressively greater role being played by the Shanghai Cooperation Organisation. The SCO currently has eight member states, including somewhat surprisingly Pakistan and India cooperation in their mutual interests, four observer states, including, of particular interest, Afghanistan, looking to a post United States future, and six dialogue states. Its membership spans the Eurasian region.
Along with other important regional groupings such as the International North South Transportation Corridor, and the Russian originated Eurasian Economic Union, which after a slow start became a serious body in 2010 with the implementation of the Eurasian Customs Union and the 2011 signing by eight countries of a free trade agreement. It is notable that there is overlapping membership of these different organisations. One thing they have in common is the desire for a non-western dominated set of arrangements to govern their economies, and increasingly other, concerns.
The Russian perspective on these developments was recently provided by President Putin. In a wide-ranging discussion on future developments, Putin drew a direct parallel with the Soviet Union and the United States. As quoted by Reuters, Putin said the United States was wrong to think that it is “powerful enough” to get away with threatening other countries, a mistake he said, that led to the downfall of the Soviet Union.
Putin made the comments during a meeting late on Friday as he spoke about United States sanctions against Moscow, according to Russia’s news agency Tass. “We hear threats from the Congress, from other sources. This is done within the control of the United States’ domestic political press” Putin was quoted as saying. “The people who do this, they probably assume that the United States has such economic, military and political might that it can get away with it. It is no big deal, that is what they think.”
Putin said such behaviour reminded him of the Soviet Union “the problem with empires is that they think they are powerful enough to make such mistakes. We will buy these people, bully them, make a deal with them, give necklaces to them, threaten them with battleships. And this will solve all the problems. But problems accumulate. A moment comes when they cannot be solved anymore.”
It is this background that Putin will bring to his meeting in Geneva with Biden. There was no reason to expect the Russians to make any significant concessions to the Americans. They clearly see the latter as an empire in decline. It is doubtful that the Americans have as clear a view of their own future as seen by others.
The world is changing, perhaps faster than Biden appreciates. Whether he and his advisors have the wit to recognise the impact of these changes remains an open question. It would perhaps be unwise to place too much reliance upon an American capacity for insight into these changing realities.
James O’Neill, an Australian-based former Barrister at Law, exclusively for the online magazine “New Eastern Outlook”.