Russia is closely monitoring the US economy as discussions of possible debt default intensify, according to Kremlin Spokesman Dmitry Peskov. The US government is currently facing a debt ceiling crisis, and Treasury Secretary Janet Yellen warned on Monday that the Treasury Department will not be able to pay all of the government’s debt obligations if Congress does not raise or suspend the debt ceiling by June 1. While the US has faced similar problems in the past, Russia is closely watching the current situation and has ramped up its de-dollarization efforts after the US seized around $300 billion in Russian central bank assets frozen by sanctions.
This is not the first time that the US has faced a debt ceiling crisis. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit, according to the US Treasury Department’s website. However, past solutions may not be enough to address the current situation, which is compounded by the COVID-19 pandemic and other economic factors.
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If the US were to default on its debt obligations, it could have serious repercussions not only for the US but also for the global economy. The US dollar is currently the world’s dominant reserve currency, and a default could undermine confidence in the dollar and lead to greater demand for other reserve currencies such as the euro, yen, or yuan. It could also lead to higher interest rates, which would increase the cost of borrowing for individuals and businesses.
In anticipation of a possible default, Russia and other countries have been gradually reducing their exposure to the dollar and increasing their use of other currencies. Russia has also been working to create a common BRICS currency with member countries, comprising Brazil, Russia, India, China, and South Africa. The chairman of the State Duma Committee on the Financial Market said last week that an agreement on the BRICS currency can be reached in 2023.
According to Peskov, Russia is closely monitoring the situation and keeping a close eye on all fiscal agencies. This is not surprising, given that Russia has been hit hard by US sanctions in recent years. In addition to seizing Russian central bank assets, the US has also imposed sanctions on Russian individuals and companies, including those involved in the Nord Stream 2 pipeline project.
Russian President Vladimir Putin has been critical of US policies and has said that they will backfire as Russia expands relations with friendly countries in Eurasia, Africa, and Latin America. Putin has also expressed concerns about the US using the dollar as a tool of economic coercion, which has led to increased efforts to de-dollarize the Russian economy.
While it remains to be seen how the debt ceiling crisis will be resolved, the situation underscores the importance of fiscal responsibility and the risks associated with excessive debt. In the long run, the US and other countries will need to find ways to reduce their dependence on debt and address structural issues in their economies. This will require difficult choices and may involve painful adjustments, but it is essential for long-term growth and stability. In the meantime, Russia and other countries will continue to monitor the situation closely and take steps to protect their interests.
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