The Western propaganda of ‘isolating’ Russia aside, there is little gainsaying that Russia’s global clout has increased manifold in the wake of its military conflict with Ukraine and its NATO allies. For the West, Russia’s exit from Europe (e.g., the European energy market) due to sanctions strangely meant ‘the end’ of the Russian economy, politics, and military strength and ‘the ultimate victory’ of the West. Surely, this was a gross miscalculation, as the West never possibly imagined a fundamental – and such a rapid – Russian economic relocation from the Global North to the Global South. For the past two years, Russian policymakers have made sure to find not only a new market for its oil, but Russia’s interaction with most of the world outside of Europe is turning that world into a geopolitical powerhouse insofar as it is able to indirectly defeat the Western agenda of making Russia become geopolitically irrelevant. But this role has not come about automatically. The Russians, in fact, have been cultivating it quite vigorously.
In the first 8 months of 2023, Russian officials have been to several states in the Global South, including Angola, Burundi, Eritrea, Eswatini, Kenya, Mali, Brazil, Venezuela, Nicaragua, and Cuba. This is in addition to the interaction the Russian diplomats have with many other countries via multilateral forums such as BRICS and the recent Russia-Africa summit. The list is far from exhaustive, but the impact these visits have left is certainly wholesome.
Up from just 2 percent in 2021, India’s oil imports from Russia have already reached 20 percent in 2023. But India is not just a buyer of Russian oil. As a leading BRICS member, India is also overseeing the group’s expansion into a formidable geopolitical player that might become the key source for a new, multipolar world order – an order that, way more than the present US-led order, could fulfil India’s ambitions to become a leading global player.
But India is far from the only case, as most of the countries in the Global South interacting – and deepening – their ties with Russia do not see the conflict in Eastern Europe as their problem per se. Of course, the collective West wants, rather forces, them to oppose Russia, but this is becoming increasingly difficult within a global context framed by an increasing realisation that the West can no longer have its cake and eat it too.
While the West continues to attempt to revive the Cold War logic to build blocks, this is unlikely to work. For one thing, the line dividing the world is no longer ideological, which could have put countries neatly in one group as opposed to another, i.e., pro-capitalism and pro-communism. The line dividing the world today is economics and trade, i.e., whether you can, or you should, buy Russian oil and/or whether you can, or should, continue to trade with Russia. Of course, the collective West does not consider Russia – and China – ‘democracies’ in the western liberal sense. But it does not matter much for the Global South when it comes to doing business and as long as it serves trade.
Of course, the West can still impose sanctions on countries that defy Western policies, but the increasing possibility of conducting trade in non-USD currencies is fast taking the wind out of the Western ability to force policy changes across the Global South. For instance, over 80 percent of Russia-China trade is now settled in local currencies, with Russia increasingly relying on China’s RMB to settle most of its trade.
Pushing the politics of de-dollarization, Russia’s President Putin signed an order in March 2022 requiring “unfriendly” countries to pay for oil and gas in Rubles. According to the media reports citing official figures, 54 separate entities have already opened accounts for this purpose. This is only an encouraging situation for underdeveloped and developing nations looking to boost their economic fortunes. They can conduct trade and business in alternative currencies and bypass the Western-dominated financial system. This is having a boomerang effect.
For instance, in the ASEAN summit held in May 2023, Indonesia, which is Southeast Asia’s largest economy, agreed to promote the use of local currencies for trade. This step is not limited to trade within the region or the bloc. In fact, ASEAN hopes to increase trade within the bloc, deepen regional financial integration, strengthen financial resilience, and bolster regional value chains. ASEAN Finance Ministers will next develop an ASEAN Local Currency Transaction Framework to implement its LCT (LCT) plans. The BRICS summit held in South Africa in August also agreed to make an accelerated use of local currencies via a new payment mechanism called BRICS Pay.
The central banks of the Philippines, Indonesia, Malaysia, Singapore, and Thailand are already using QR code payment systems for payments for goods and services between the countries. This also means a transaction in Thailand using an Indonesian app will be paid through a direct exchange between the rupiah and the baht, thus bypassing the US dollar as an intermediary and neutralizing its ability to block trade in any way.
Therefore, the key reason why countries like Russia continue to draw support from the Global South in the face of Western pressure is not just anti-Americanism in the world. The response is also – and equally well – rooted in the fact that Russia, alongside China, is leading the politics of alternative currencies; therefore, its acceptance across the Global South has increased manifold. In addition, trade ties with Russia in local currency arrangements do not come at the cost of the countries’ strategic autonomy. In fact, the use of local currencies promotes autonomy, i.e., by allowing countries to operate without external (US) pressure, at a level and in ways the world has perhaps never seen the US dollar become the financial hegemon after 1945.
Is this bad for the world? From the Western perspective, the use of local currencies will gradually, but surely, erode their hegemony. From the non-Western perspective, this can only be good news, since the increasing use of local currencies will not only mean more trade but also more value for their currencies and/or less value of the US dollar in the long-run, ultimately changing the world and shifting the centre of power.
Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook”.