Sergei Glazyev: The long and rocky road to the multipolar world of finance

By Pepe Escobar

Linked to the Eurasian Economic Union (EAEU), the headquarters of the Eurasian Economic Commission (EEC) in Moscow is arguably one of the most important hubs of the emerging multipolar world. There I was greeted by the Minister for Integration and Macroeconomics Sergei Glazyev – previously The Cradle interviewed was received – for an exclusive, expanded conversation about the geoeconomics of multipolarity.

Glazyev was accompanied by his top economic adviser Dmitry Mityaev, who is also secretary of the Science and Technology Council of the Eurasian Economic Commission. The EAEU and the EWK are formed by Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia. The group is currently busy finalizing a series of free trade agreements with nations from West Asia to Southeast Asia.

Our conversation took place without prior arrangements, flowed freely and straight to the point. I initially suggested a few talking points centered around the talks between the EAEU and China on designing a new gold/commodity-based currency to bypass the US dollar and how realistically it would be possible for the EAEU, the Shanghai Cooperation Organization (SCO) and BRICS+ adopt the same currency architecture.

Glazyev and Mityaev were completely open in the conversation and also asked questions about the Global South. As much as sensitive political issues should be treated discreetly, what they revealed about the realpolitik path to multipolarity was sobering.

Glazyev stressed that the EER cannot ask member states to adopt a specific economic policy. While there are serious proposals to shape a new currency, the final decision rests with the leaders of the five permanent members of the commission. That requires political will – which ultimately has to come from Russia, which is responsible for more than 80 percent of trade within the EAEU. It is quite possible that after Chinese President Xi Jinping’s visit to Moscow on March 21, where he will hold intensive strategic talks with Russian President Vladimir Putin, new impetus will be given.

Regarding the war in Ukraine, Glazyev emphasized that China is doing well at the moment, since its economy has not been sanctioned by the US and the EU, or at least not yet, and Beijing can buy Russian oil and gas at greatly reduced prices. The revenue Russia loses from selling energy to the EU will now have to be compensated by the planned Power of Siberia 2 pipeline, which will run from Russia to China via Mongolia – but that will take a few more years.

Glazyev outlined the possibility of a similar debate on a new currency within the SCO. Again, that will depend on political will, in this case Russia and China. A joint decision by Xi and Putin, with key input from India and, if Iran becomes a full member, Iran too. So far, an expansion of bilateral trade in their own national currencies has been realistic, as in the cases between Russia and China, Russia and India, Iran and India, Russia and Iran, and China and Iran.

In essence, Glazyev fails to see Russia, under severe sanctions, taking a lead in building a new global financial system. China could do this with its initiative to global security (Global Security Initiative). The split of the global economy into two blocs seems inevitable: into a US dollar-dominated zone – with an integrated eurozone – and into a zone where the majority of the global South will gather, with a new financial system and a new trading currency for international trade . Domestically, however, individual nations will continue to conduct business in their own national currencies.

The road to offshore decoupling

Glazyev has always been a harsh critic of the Russian central bank, and he voiced his misgivings about it – echoing his own A book “The Last World War”. Glazyev never stopped emphasizing that the US logic is to harm the Russian economy on all fronts, while the motives of the Russian central bank raise “serious questions”.

He said that some detailed proposals for rebalancing the central bank had been handed to Putin, but there had been no follow-up so far. He also raised the extremely sensitive issue of corruption, involving key oligarchs who, for some reason, have not been marginalized by the Kremlin.

Glazyev has warned for years that it is imperative for Moscow to liquidate all foreign exchange reserves held in the US, UK, France, Germany and other Western countries. These assets should have been replaced by investments in gold and other precious metals; with holdings of highly liquid commodity stocks; in government bonds of EAEU, SZO and BRICS member states and in the capital of international organizations with Russian participation, such as the CIS and BRICS development banks.

At least the Kremlin now seems to be fully aware of the importance of developing infrastructure for the expansion of Russian exports. This includes the creation of international exchange trading venues for trading in Russian primary goods within Russian jurisdiction and in rubles, as well as the creation of international sales and service networks for Russian high value-added products.

For Russia, according to Glazyev, the most important challenge in monetary policy is to modernize lending. To prevent adverse effects from foreign sources of finance, the key is domestic monetization – “including the expansion of long- and medium-term refinancing of commercial banks against commitments from manufacturing companies and authorized government agencies. It is also advisable to consistently replace foreign loans from state-controlled banks and corporations with domestic ones to replace sources of credit”.

So the imperative path for Russia that has now been trodden is offshore decoupling. Which essentially means getting rid of an “overly critical dependence on Anglo-Saxon legal and financial institutions” that entails the risk of “systematic losses in the Russian financial system due solely to the difference in profitability between the borrowed and placed capital”.

What Glazyev has repeatedly emphasized is that until there is a reform of Russia’s central bank, any serious discussion of a new currency introduced by the Global South faces insurmountable hurdles. The Chinese, heavily intertwined with the global financial system, may now have fresh ideas after Xi Jinping officially and unprecedentedly defined the US-provoked hybrid war against China for what it is and called it by its name: it is a US -American operation.

It seems clear that the road to a new financial system, largely designed by Russia and China and adopted by large parts of the Global South, will remain long, rocky and extremely challenging. The discussions within the EAEU and with the Chinese could be transferred to the SZO and even to BRICS+. But everything will depend on the political will and political capital collectively brought in by the Russia-China strategic partnership.

That is why Xi Jinping’s visit to Moscow next week is so crucial. The leadership in Moscow and Beijing now seems fully aware of the hybrid two-front war unfolded by Washington. This means that their strategic partnership – the ultimate anathema to the US-led empire – can only thrive if they jointly employ a full suite of measures: from instances of soft power to deepening trade and economic ties in their own national currencies, one of their own A basket of currencies and a new reserve currency that is not hostage to the Bretton Woods system that legitimizes Western finance capitalism.

Translated from English. First published by THey Cradle.

Pepe Escobar is an independent geopolitical analyst and writer. His latest book is called Raging Twenties. He has been banned from Facebook and Twitter for political reasons but you can follow him Telegram consequences.

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