Sergey Glazyev (1961) is a prominent Russian statist and nationalist who previously served as advisor to the Kremlin from 2012 to 2019. In the wake of the 2022 Russo-Ukraine war, Glazyev reemerged at the top of the public debate and outlined the essence of his ideas: state capitalism, Eurasian integration, and expansionary fiscal and monetary policy. He analyzes the consequences of the Western sanctions against Russia. Predicting the end of the dollar as the dominant global currency, he argues that BRICS (Brazil, Russia, India, China and South-Africa) will respond with state capitalism and Eurasian integration.
The geopolitical analyst Pepe Escobar published an interview with Glazyev on the international news website The Cradle, which also makes reference to Glazyev’s essay Sanctions and Sovereignty, as well as his interview with a Russian business magazine. Their conversation revolves around the emancipation of the “Global South”, anchored in “a new monetary/financial system via an association between the EAEU (Eurasian Economic Union) and China, bypassing the US dollar.” The aim is to present the world with “a clear alterative to the Washington consensus”.
The decision to freeze Russian foreign exchange reserves in custody accounts of western central banks, Glazyev argues, undermines the status of the dollar, euro, pound and yen as global reserve currencies. Japan’s staunch response against Russia is noteworthy in the context of the Pacific theatre, as most Asian nations have chosen to not assign any blame in the conflict. One explanation for Japan’s resolute stand is its “concern about China’s hegemonic ambitions in Asia and worries about the implications of Ukraine for Taiwan. It stands with NATO in Europe, expecting that this solidarity will be reciprocated in Asia and deter China from invading Taiwan.”
This brings out two major geopolitical considerations. The first being that the freezing of Russian funds and the sanctions by the West, accelerate the ongoing dismantling of the dollar-based economic world order. The second is that the Russo-Ukrainian war is not a solely European conflict, but is part of geopolitical machinations that drive Russia and China closer together. It is also an opportune case for China to test the waters, gauging how the Asian allies of the West respond to being encouraged to put sanctions on Russia.
The media discourse of Western Europe is focused on sympathy for the Ukrainian victims of the war, while the geopolitical considerations are neglected. We will expound these considerations to understand the conflict as part of a bigger picture. One decade ago, Glazyev and his colleagues at the Astana Economic Forum outlined this picture by suggesting a transition to a new global economic system: one driven by an innovative synthetic trading currency based on an index of currencies of participating countries. Exchange traded commodities were added to solidify this basket.
If we were to expand on this idea today, one can easily see how a concept of resource vaults would fit with this: quantities of rare earths would be stored in vaults, that are then designated as collateral to back up currencies. This is comparable to how gold reserves were used to stabilize currencies under the Bretton Woods agreements from 1944. Regarding the vast quantities of resources in Russian territories, as well as the monopoly on resources established by China’s Belt and Road Initiative, such a system could theoretically be a viable rival to the dollar. There are nevertheless practical and conceptual barriers, which Glazyev seems to ignore.
A first problem appears upon examining how he argues that war with the US is “inevitable”. This he bases on what he calls a “scientific explanation of the nature of this coming war and its inevitability – a conclusion based on objective laws of long-term economic development.” This reminds us of errors committed by historicist and positivist scholars in the previous centuries. The prediction one makes, already influences the social fabric, and thus undermines the “inevitability” of said prediction, as markets and market actors may respond to it. More importantly, we cannot predict, by rational or scientific methods, the future growth of our scientific knowledge, and if there is such a thing as objective laws of economic development, then we cannot act today on what we will only know tomorrow.
Another problem rests in Glazyevs assessment of the economic development of said economic world order. What he provides there, is a historical account and not an objective law governing history. He claims that the “British colonial economic system based on slave labor was overtaken by structurally more efficient economic systems of the US and the USSR.” The Slave Abolition act of 1833 banned slavery in most of the British Empire, followed by more treaties in 1890, 1904 and finally 1925. The economic efficiency of the Soviet Union remains controversial, considering how Lenin and Stalin had conflicting views on how much leeway should be given to entrepreneurship within a communist system. The forth flowing problems with collectivized farming and mass starvation (such as the Holodomor) are well known.
The rise of the US, meanwhile, can be largely attributed to the geopolitical situation. In essence, both World Wars rendered the European nations – which economically dominated the world up to that point – dependent on US import of grains and weapons. This, in turn, boosted the US agriculture and industry. This hegemony was solidified during the interbellum by the Dawes plan and the Young plan. Glazyev claims that both the US and the USSR were “more efficient at managing human capital in vertically integrated systems”. A better explanation for the bipolar economic world order that emerged in the Cold War, is that the European colonial empires ended because the European nations exhausted themselves in both wars. The Soviet Union, however, quickly withdrew from the First World War and used the Second World War to annex new territories that could be economically exploited.
The author then states that China and India will be part of a convergent economic system as “the next inevitable stage of development, combining the benefits of both centralized strategic planning and market economy, and of state control of the monetary and physical infrastructure and entrepreneurship.” Although the raw economic potential of BRICS cooperation is clear – especially when they come together to contest the dollar, as Glazyev foresees – establishing a trustworthy and credible alternativeto the dollar consensus, is still quite another matter.
Studying again the economic history of the Soviet Union, as well as the history of the Great Leap Forward in China, their problems become apparent when compared to the West. The necessary infrastructure was absent but also the very cultural preconditions of free labor and entrepreneurship, in short: both powers lacked the ethos of a people that is required to make a smooth transition from an agricultural society through a mercantile class to an industrial and post-industrial economy. For instance, the US had its own networks of railroads that were created by companies, whereas railroads in Russia were constructed by the French army, to be able to mobilize the Russians faster in the case of war with Germany.
Mao and Stalin tried to create the socio-economic requirements for economic development at the barrel of a gun. The long lasting results are that Russia is largely deindustrialized and dependent on selling fossil fuels, after the wavering attempts by Medvedev to establish a self-sufficient middle class were quenched by Putin’s regime. Meanwhile in China, citizens are forced into productivity – or at least into behavior that the state considers productive – through social credit systems.
So long as the basic cultural requirements of entrepreneurship and trust between citizens and the government are not met – as for instance there is a real and present fear that the government confiscates ones property at a slight ideological aggravation – it becomes challenging to build a trustworthy economic system from these governments. In particular one that can be as robust and resilient as that of the US economic hegemony. Of course we can also argue that the social and cultural preconditions for a strong economic ethos are also being whittled away in the US (and in Western Europe), but that is food for thought in another discussion.
We must keep in mind that China, although it produces semiconductors and high tech requirements for digitalized economies, is still an erratic partner when it comes to patents and intellectual property. It remains unclear how the BRICS will resolve this between themselves, if they are to enter into a more solid innovative partnership. With other words, challenging or even openly refusing the dollar consensus is one thing, but whether BRICS can realistically come to a consensus between themselves, is another.
When it comes to the prospects of the dollar consensus, Glazyev does nail it: “After Russia’s reserves in dollars, euro, pound and yen were ‘frozen’, it is unlikely that any sovereign country will continue accumulating reserves in these currencies.” He then states that the Chinese yuan won’t take its global dominant place, because of its inconvertibility and the restricted external access to the Chinese capital market. He points out that gold as a price reference is constrained by the inconvenience of its use for payment, although Russia does mine plenty of gold.
We underline the accuracy of this assessment, because even when the global economic order does fall apart: gold as payment requires access to gold. That implies the means to secure ons gold against those who would take it by force. In this wild west scenario, where the economic order falls apart, it is then always tempting for those with the means to protect your gold, to take it for themselves, instead. The obvious alternative – which Glazyev does not cover in his interview – is crypto currencies. We may not only be witnessing the demise of the dollar consensus, but maybe even the separation of money and state.
By omitting this crucial aspect in the development of payment practices, Glazyev errs. More so when you take into consideration that he states: “The final stage of the new economic order will involve founding a new digital payment currency through an international agreement based on principles of transparence, fairness, good will, and efficiency.” It is obvious that the problem continues to be: ‘who guards the guardians’, as regimes tend to abuse their monetary power once their currency becomes globally dominant. This will be no different with any alternative presented by BRICS, even foregoing the existing transparency and accountability problems with BRICS governments already outlined. Hence bottom-up monetary initiatives, such as blockchain currencies that do not require top-down governmental supervisors, are more likely to replace the dollar consensus than any BRICS alternative.
He then talks about the BRICS currency working with baskets: “The weight of each currency in the basket could be proportional to the GDP of each country (based on purchasing power parity), which all interested countries will be able to join.” Just how realistic is this, once the Belt and Road Initiative kicks in and the GDP of entire nations will be spent on mandated purchases from China? It is likely that any nation that accepts this deal, loses all remnants of their autonomy and sovereignty. Then again, maybe it is exactly the ongoing loss of autonomy and sovereignty, that would prompt them to take this deal in the first place. The monetary union of the EU in any case does not bode well for the sovereignty prospects of any nation that joins a currency union.
A corresponding problem with these baskets – even if outsiders would seek to join the network – is the question how much “tangible equity ownership in the capital infrastructure”, as Glazyev describes, the Russian and Chinese government ultimately allow outsiders to legitimately and substantially own? He may be right in pointing out that the West has proven fickle by freezing Russian funds and confiscating assets, but this is a double edged sword. Because which force legitimately protects investors from Russian and Chinese governments enacting the same or similar extortion policies?
In any case, the recent sanctions do spur the rest of the non-dollar-block countries into extensive soul searching, and whether a bipolar geoeconomy – the West versus the ‘Global South’ – will truly emerge, remains to be seen. It is however indisputably true that the West has driven Russia towards China throughout the past decade. Glazyev concludes that “common interests of survival and resistance are uniting China and Russia, and our two countries are largely symbiotic economically.”
As a final consideration, let us refer to the influential STRATFOR geostrategist George Friedman, who declared that the American geopolitical interests are challenged once German capital and technology merges with Russian manpower and resources. Friedman even stated that this would mean that the US would lose its global hegemony. Today, indeed it seems more problematic that Russia has delivered itself to China. Coincidentally, Friedman also predicted that Russia would crumble as a military power after 2020.
Nevertheless, the dollar consensus will remain the status quo in the near future. Not because the world appreciates it so much, but because it is not clear that the Chinese alternative is preferable, as Russia may also come to realize with time. BRICS will be powerful, but more due to creating vassal relationships through resource monopolies than through challenging the dollar consensus with a viable monetary alternative. The Belt and Road Initiative and the rise of crypto currencies will be more influential than any alternative currency system envisioned by Glazyev.
 Published 25/2/2022 on: https://newcoldwar.org/sanctions-and-sovereignty/ For the interview, see: https://thesaker.is/events-like-these-only-happen-once-every-century-sergey-glazyev/ (published 27/3/2022).
 https://thecradle.co/Article/interviews/9135 (20/4/2022).
 https://www.aljazeera.com/economy/2022/2/28/in-rare-stand-south-korea-singapore-unveil-sanctions-on-russia (20/4/2022).
 Japan to freeze assets of 25 more Russians over Ukraine invasion | Russia-Ukraine war | Al Jazeera https://www.aljazeera.com/economy/2022/3/25/japan-to-freeze-assets-of-further-25-russian-individuals
 https://thecradle.co/Article/interviews/9135 (20/4/2022).
 Wierd Duk, Poetin straatvechter bedreigt wereldorde, (Amsterdam 2014) 72-73.
 https://thecradle.co/Article/interviews/9135 (21/4/2022).
 Speaking on behalf of Stratfor during the Chicago Council on Global Affairs: https://www.youtube.com/watch?v=QeLu_yyz3tc#t=1267 (5/7/2020).
 https://www.youtube.com/watch?feature=youtu.be&v=xi7M_P2ldsQ&app=desktop (20/10/2015).
 George Friedman, The Next 100 Years - A Forecast for the 21st Century (2009).