Chief Executive Director of PJSC NK Rosneft Igor Sechin told how he sees the future of world currencies. The economic effects of the departure of the dollar, the gradual transition to the yuan and the prospects for the ruble as a new reserve currency — all these topics were discussed by him at the Energy Panel during the XXVI SPIEF.
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According to the head of Rosneft, avoiding settlements in dollars, creating new payment mechanisms and creating new supply chains will help minimize new risks of crisis phenomena.
“New risks initiate the necessary solutions to minimize them. These are the formation of new payment mechanisms, the departure from the dollar, the creation of new secure supply chains that provide access to new markets,” he said.
In his opinion, the advantages that Europe previously had and which were the basis for the competitiveness of European industry have now begun to receive the countries of the Asia-Pacific region. Sechin stressed that everything that used to be considered signs of liberal democracy and a free market ceases to exist. The foundations of international contract law are being destroyed, in particular, the arbitration system is being destroyed, all the institutions of a market economy are being destroyed.
Sechin also shared his vision of what starting conditions must be met in order for the currency to qualify for the status of a new reserve. To do this, the country must have a sufficiently large and stable economy, as well as free and barrier-free capital transactions.
“Currencies backed by commodity and raw material flows are becoming promising, which gives them weight and liquidity. First of all, it is the yuan. The ruble is one of the most resource-rich currencies,” said the head of Rosneft.
However, according to Igor Sechin, there are at least 2 problems — these are geopolitical pressure from the current hegemon and the risks associated with the lack of targeting of the ruble exchange rate, which does not allow it to provide cross-border lending, prevents the ruble from turning into a regional settlement system.
The head of Rosneft touched upon the systemic crisis of the entire US financial system. The recent agreement to temporarily lift the debt ceiling in the United States means that the Federal Treasury will borrow about $2 trillion in the market this year. This could trigger a new outflow of deposits as funds are invested in new debt, further weakening the banking system.
The head of Rosneft stressed that the issuance of debt obligations in itself is an absolutely normal systemic way of developing the economy, and for many years the growth rate of debt in the world corresponded to the growth rate of GDP. However, in the past 20 years, the so-called «developed» countries, and in particular the United States, have begun to clearly abuse their position in the financial sector, sharply starting to build up debts and inflate the value of assets.
At the same time, the problems in the US banking system have not gone away. Despite the apparent calm, regional banks continue to experience problems — about 700-800 banks are experiencing problems with assets and capital.
As a result, since the beginning of the banking crisis, US regional banks included in the S&P index have lost about 25% of their value, while the entire US banking system is only about 20%. At the same time, the S&P 500 index rose by 8%, the report notes.
The international credit rating agency Moody's revised its assessment of the prospects for the US banking industry: the forecast for the sector was downgraded to a negative level. Further growth of interest rates will cause a new wave of bank failures.
“There is no doubt that the US monetary authorities are able to stop these problems to a certain extent. At the peak of the crisis in March, the Fed injected about $0.5 trillion into the financial system. However, this simultaneously limits the ability to fight inflation. Periods of high inflation have happened before, although recently they have been forgotten in the West, but they have never been accompanied by a debt crisis of this magnitude,” concluded Igor Sechin.