Time For A Non-Aligned Financial System

Crippling the Russia economy by expulsion from SWIFT and freeze on Russian forex reserves have laid bare risks associated with super-power hegemony. Can India give the world a new system?

- Rajiv Ranjan Singh

THE STORY OF Russia-Ukraine war is unfolding like the plot of Homer’s Iliad rewritten by renowned science fiction writer Issac Asimov. Russia, it seems, is orchestrating not only military attacks but also cyber warfare. Ukraine has retaliated with automated drones, while U.S. and E.U. have launched a concerted financial war to contain Russia.

The Russia-Ukraine war is demonstrating a new world order where automation, information technology, control of narrative and finance will dictate the winner of the game of thrones. This is worrying countries that are outside the U.S-led alliance.“If used too widely, sanctions could reverse the process of globalisation that has allowed the modern world to prosper,” former Reserve Bank of India (RBI) Governor Raghuram Rajan has written in a recent essay. Current Governor Shaktikanta Das cautioned about too much reliance on U.S. dollar and said RBI was diversifying its forex reserves.

The important question is: Is India ready for financial warfare if it finds itself on the wrong side of a super power in future? What does the war mean for countries such as India that are not part of the big power game?

De-dollarisation on Cards

Ironically, in war between Russia and Ukraine, U.S. dollar may be the loser as nations realise the importance of diversifying forex reserves. Expulsion of Russia from SWIFT financial system and the decision to freeze Russian foreign exchange by U.S. and its allies have laid bare the glaring risks associated with dollar hegemony for central banks across the world.