World Economy & Sanction Tools: Putin Says US Undermining Position as Global Reserve Currency

The Russian president earlier spoke to reporters and relayed that his government is by no means using energy as a weapon against Europe amid the growing crisis, underscoring that Russia solely stands ready to help the region ahead of the looming winter months.

Offering more color on his earlier remarks, Russian President Vladimir Putin commented late Wednesday that the US is effectively undermining its position as the world's reserve currency by using the US dollar as a sanctions tool.

The remarks were made during an exclusive interview with CNBC's Headley Gamble at the end of the plenary session of the Russian Energy Week forum. The discussion touched on a variety of topics, including Putin's presidential term, military blocs and cryptocurrency, among other subjects.

Asked whether the US dollar is moving away from being the world's reserve currency, the Russian president commented that the US is actually "undermining its position" as Washington continues to use the dollar as an instrument of sanctions abroad.

"It is undermining its position as the world's reserve currency," Putin told Gamble. "The volume of settlements in dollars is shrinking, and the volume of personal reserves of the world's countries in dollars is also reducing."

"But we are not interested in completely stopping payments in dollars, and so far we are satisfied with, say, payments for energy resources in dollars, primarily for oil. But if the policy of the American authorities continues, as I have already mentioned, then we will not have to do anything, the United States will itself undermine confidence in the dollar," he noted.

This April 3, 2019, file photo shows a tip box filled with U.S. currency in New York. In these uncertain times, financial advisers are urging clients to not only have an emergency fund but also to consider expanding their rainy-day savings.

© AP Photo / Mark Lennihan

Putin added that the United States, when using the US dollar as a sanctions tool, is making "a very big mistake" that will slowly but surely force entities to move away from the dollar.

"When other countries that use the dollar as a reserve currency or as an instrument of calculation see what is happening, they themselves have anxiety that the dollar can be used in relation to them in the same way," he explained, referring to the sanctions tool.

"And they, too, are beginning to reduce their dollar holdings and use less as a unit of account. The result is that even the closest partners and allies of the United States, in their reserves, are reducing the share of the dollar, this is a statistical fact."

The Russian president pointed out that while the world economy largely depends on the condition of the US economy, Moscow is much more interested in the gaps presented in the present moment.

"The United States is the largest economy in the world, very high-tech. The entire world economy depends on the condition of the American economy, and we are objectively interested in the absence of unrest, leaps there, but this does not depend on us," the president said.

Just before changing gears, he emphasized that Moscow is closely watching unfolding events, and is analyzing and taking the necessary steps to ensure its long-term interests.

AUKUS 'Undoubtedly' Undercutting Regional Stability

The mid-September announcement that the US, UK and Australia would be engaging in a new trilateral defense partnership not too surprisingly ruffled some feathers - none more so than France, which already had its own defense deals with Canberra. Weighing in on the recent pact, Putin noted that its establishment and similar agreements are to a great extent the root of regional instability.

"The creation of blocs, including the mentioned one between the United States, the United Kingdom and Australia, is undoubtedly undermining the regional stability because from my point of view, it is good to be friends between each other but to be friends against someone is bad," he said. "This is undermining stability that we all talk about and care about."

"I hope that what has been done is done, but the situation will not develop according to some unpredictable scenario and will not cause any additional tensions in the region," he said.

The new defense agreement between the three countries, dubbed AUKUS, is said to be designed to protect and defend the trio's "shared interests" in the Indo-Pacific region. Many experts, however, have hinted that the larger purpose behind the deal is to counter China.

Nearly a month after the deal was announced, tensions remain high, although now considered only slightly less tense. At the height of the backlash, France blasted the agreement and recalled its ambassador to the US, at one point going so far as to cancel an event meant to celebrate the long-term US-French partnership.

Keeping Mum on Next Presidential Term

Momentarily broaching the subject of the Russian presidential term, Putin took the opportunity to clarify that his focus is not consumed by the prospect of his continued presidency, but that he is instead working to maintain a "calm" environment ahead of elections.

Putin underscored that while the Russian constitution does allow him to run for another presidential term, he has no interest, at the moment, to divulge his thoughts about the next election cycle.

"No, I prefer to avoid answering such questions, this is my traditional answer," he told Gamble. "There is quite enough time before the next election. The speculations about this issue are destabilizing the situation. The situation must be calm, stable, so that all the state bodies work confidently and look into the future, calmly."

"Yes, the constitution allows me to do this, run for the next term, but no decisions on the matter have been made yet."

'Too Early to Talk' About Cryptocurrency Being Used to Pay for Energy Resources

Asked about the possibility of seeing cryptocurrency used in the near future to pay for resources, the Russian president offered that it was far too soon to say whether digital currency would be strong enough to be a valid form of payment.

A small toy figure and representations of the virtual currency Bitcoin stand on a motherboard in this picture illustration taken May 20, 2021.

© REUTERS / DADO RUVIC

As far as Putin is concerned, cryptocurrency can be a payment unit, but it is too unstable at the moment, making it still premature to pay for energy resources with it.

“It is too early to talk about it, because cryptocurrency, of course, can be a payment unit, but it is very unstable," he told the journalist. "In order to transfer funds from one place to another, yes, but [using it] to trade, especially to trade in energy resources, in my opinion, is still premature."

The president's remarks come as the US has become the global leader in bitcoin mining, following China's recent decision to stop facilitating such transactions, with Beijing implementing an all-out ban on the practice. China's crackdown earlier prompted a dramatic fall in crypto mining that was followed by a bounceback of sorts in the months after the June announcement.

Navalny 'Broke the Law' & Won't Be Placed in 'Exclusive Conditions'

And then there's the case of Alexi Navalny, the Russian opposition figure who was imprisoned following his January return to Russia from Germany, where he received treatment for alleged poisoning.

Gamble promptly brought the interview to a close as he broached the subject of Navalny, inquiring whether the Russian president would be "raising his standard of living," even if he is in prison serving out a sentence.

Russian opposition politician Alexei Navalny attends a court hearing in Moscow, Russia February 20, 2021

© REUTERS / MAXIM SHEMETOV

"The citizen you mentioned is in prison," Putin remarked, before acknowledging that, while Navalny may not be in the "best" living conditions, it's the same conditions that other prisoners are subject to.

"Not the best conditions, but he is not the only one," he said. "In addition to him, there are other people who also violated Russian laws, and we are not going to put anyone in any exclusive conditions, including those who hide behind political activities."

Navalny is currently serving a 2.5-year prison sentence in the Vladimir Region.