Escaping the Dollar?

“Dollar, dollar, dollar, a dirty green paper!” sneered Vladimir Zhirinovsky, the notorious founder of Russia’s Liberal Democratic Party, as he set fire to a dollar bill in 1998. At the time, his theatrical protest against U.S. currency hegemony and predictions of the dollar’s eventual worthlessness seemed outlandish. Today, his once-fringe calls for de-dollarization—reducing reliance on the U.S. dollar in international trade and finance—have evolved from political theater into systematic policy, particularly in Russia.

The global push for de-dollarization is real, though less dramatic than some media coverage has suggested. What’s more revealing is how different approaches to challenging dollar dominance reflect the technological capabilities of the countries hankering to exit from dollar dependence as much as their political aspirations. Russia and Türkiye exemplify this divide. While both countries frame de-dollarization as a path to a multipolar world order and liberation from U.S. financial dominance, their actual strategies diverge sharply.

Russia, particularly since its 2022 invasion of Ukraine triggered unprecedented sanctions, has pursued de-dollarization through massive investments in alternative financial infrastructure. Its System for Transfer of Financial Messages (SPFS) now handles nearly all domestic transactions, replacing the global banking system SWIFT. Its Mir payment system accounts for half of Russian card transactions. Most ambitiously, Russia is developing a digital ruble as part of a broader push for technological sovereignty, aiming to create an entirely parallel financial system outside Western influence.

But now—with the ruble firmly in freefall after November’s round of U.S. sanctions targeting four of Russia’s largest banks—there are reasons to question the viability of Russia’s maneuvers to exit the dollar and create an alternative reserve currency system. The U.S. blacklisting of Gazprombank plunged the ruble to a low of 115 against the dollar on November 27, in the context of a currency already weakened by international sanctions since 2022.

In contrast, Türkiye offers forceful anti-dollar rhetoric but little concrete action. Lacking Russia’s technological capacity and facing different constraints as a NATO member, Türkiye’s de-dollarization efforts exist more in political discourse than concrete infrastructure development. President Recep Erdogan’s calls to “save” economies from dollar dependence serve more to leverage Türkiye’s position between East and West than to build genuine alternatives to the dollar-based system.

In fact, much deeper structural factors such as delayed banking sector reform, loosely regulated investment markets, and longstanding EU aversion to investment in a risky Turkish economy are obstacles to Erdogan’s de-dollarization ambitions. To some degree, Türkiye’s recent bid to join the BRICS+ bloc underscores the point. Ankara is in no position to act on its own and so is seeking the shade that Russian president Vladimir Putin seems to be offering via his bid to launch a BRICS + digital currency. Yet there are reasons to be skeptical of Putin’s ability to manage the tricky balance between a push for “digital sovereignty” and de-dollarization amid a war in Ukraine that has profound implications for the future of semiconductor supply chains and critical minerals markets. In the end, it may be the rivalry between the U.S. and China, rather than Russia, that dictates the terms of a transition away from the dollar.

Nonetheless, the technological divide between authoritarian and liberal market economies reveals a deeper irony: rather than creating a multipolar world order, de-dollarization efforts are reinforcing a new bipolarity. As countries deliberate over how to align their economic priorities with the established global financial system where the dollar remains the predominant reserve currency, structural barriers such as muddled banking regulations, imbalances of power between central banks and the executive branch of government, and low technological capacity will increasingly determine whether they will seek out alternatives. The result is not multipolarity but rather an emerging disjuncture between those with the capacity to build alternative financial infrastructure and those without it.

In Russia’s approach to de-dollarization, technological capability shapes geopolitical strategy, and vice versa. Since 2014, and accelerating after its 2022 invasion of Ukraine, Russia has methodically constructed alternative financial infrastructure in areas such as payment messaging, consumer payments, and digital currency.

SPFS, Russia's SWIFT alternative, now processes nearly all domestic financial operations. By January 2024, Russia claims, 557 financial institutions across 20 countries had connected to the system, but these figures are difficult to verify. The Bank of Russia no longer publishes its client list, and previously available versions included entities such as South Ossetia and Abkhazia, which few countries recognize as nations. Several states, including Pakistan and the Philippines, reportedly expressed interest in connecting their banks to SPFS, but their current involvement remains unclear.

The system's international expansion has faced significant challenges, among them regulatory pressure from the European Union and United States. The EU sanctioned SPFS in June 2024, prompting countries such as Switzerland to ban participation in SWIFT alternatives. In November 2024, the U.S. Treasury's Office of Foreign Assets Control (OFAC) warned that institutions joining SPFS risk sanctions under Executive Order 14024, charging Russia with designing SPFS with the “express purpose” of evading sanctions and funding its war.

Similarly, Russia’s Mir payment system, launched in 2015, has grown from a contingency plan into a cornerstone of domestic commerce, handling 50 percent of card transactions within Russia. More importantly, Mir’s acceptance in countries from Belarus to Venezuela signals Russia’s ability to extend its financial infrastructure beyond its borders, albeit primarily to politically aligned states.

Most ambitious is Russia’s development of the digital ruble, accelerated by post-2022 sanctions. Unlike Türkiye ’s more rhetorical challenges to dollar hegemony, Russia’s central bank digital currency (CBDC) project involves substantial technological investment and systematic testing with commercial banks. The digital ruble aims not just to circumvent sanctions but to create an entirely new financial rail that could eventually integrate with other countries’ CBDCs, particularly China’s digital yuan. But, again, the viability of a currency—fiat, digital, or otherwise—depends on the strength of its national economy along with the prevailing geopolitical winds.

Significant hurdles, technological and otherwise, remain. The digital ruble is playing catch-up to China’s more advanced CBDC efforts. Public skepticism about state surveillance through digital currency is high, with only 30 percent of Russians expressing interest in using it. Perhaps most critically, Russia’s alternative financial infrastructure still operates primarily within a sphere of aligned states rather than offering true global alternatives to Western systems. The Kremlin’s lock on state-managed oil and gas enterprises like Gazprom and Rosneft and mandatory tithing to Russia’s sovereign wealth fund also impose constraints on proposed alternative financial systems and monetary instruments—digital or otherwise—especially in light of international sanctions. Nonetheless, Russia’s rapid development of alternative financial rails promises to further weaken a sanctions regime that was meant to be a financial stranglehold. Will Russia manage to strengthen the digital ruble enough to rival the dollar? The answer likely depends not only on the ruble’s valuation in conjunction with the dominance of Gazprom and Rosneft in the Russian energy export market, but also on battlefield outcomes in Ukraine and instability in other frontline states where Russia’s military is entrenched, like Mali.

By contrast, Türkiye’s de-dollarization project has proven more rhetorical, sporadic, and constrained. While President Erdogan has proclaimed that “the world is bigger than five,” challenging Western-dominated international institutions and advocating for multipolarity, Türkiye’s actual capacity to build alternative financial infrastructure is hindered by economic and technological limitations, as well as the country’s commitments as a NATO member.

Some constraints are rooted in Türkiye’s persistently shaky economy. Türkiye spends far more on imports and foreign debt payments than it earns from exports and foreign investment—a gap called the current account deficit. While this deficit has improved recently, narrowing to $19.1 billion by July 2024, it still requires Türkiye to constantly borrow from abroad in order to keep its economy running. This dependence on foreign funding makes Türkiye particularly vulnerable to shifts in international investor confidence.

The resulting economic instability has driven Turkish citizens to seek alternatives to their national currency. Inflation, while down from its peak of 75.5 percent in May 2024, remained at 49.4 percent in September, particularly affecting necessities like housing, where rental costs have surged by over 120 percent. This environment has pushed many Turks toward both dollars and cryptocurrencies as stores of value, with crypto adoption rising from 40 percent to 52 percent of the population over the past year and a half, one of the highest rates in the world. Ironically, despite Türkiye’s government’s claims of waging an “economic war of independence,” its citizens are increasingly seeking refuge in alternative currencies.

Lagging Russia’s functioning alternatives like SPFS and Mir, Türkiye’s digital lira project is in its early stages. Türkiye’s central bank has had to rely heavily on external technological partners, acknowledging that essential components like cryptography and specialized hardware are not yet “within [its] expertise.”

The gap between rhetoric and reality shows in Türkiye’s recent efforts to stabilize its economy. The central bank has managed to improve its position significantly, with net reserves reaching $48.8 billion by mid-September 2024 and total official reserves at $152.1 billion. This stability has come in part through deeper integration with global financial markets: portfolio investment has increased 22.4 percent to $118.0 billion compared to the end of 2023, and Türkiye has successfully returned to international bond markets, raising $1.75 billion in its third global bond sale of 2024. Traditional monetary policy has driven much of this renewed investor confidence, not a radical break with the dollar-dominated financial system.

Meanwhile, Türkiye’s recent regulation of cryptocurrencies presents another paradox. While regulatory clarity might bolster crypto adoption, which in turn could theoretically support de-dollarization by providing alternatives to U.S. dollar dominance, Turkish citizens have overwhelmingly opted for stablecoins pegged to the dollar. Türkiye leads the world in stablecoin purchases relative to GDP, with $38 billion in purchases representing 4.3 percent of the nation’s GDP. This flight to dollar-denominated digital assets represents yet another way that attempts to escape dollar dependence may have inadvertently reinforced it.

Unlike Russia, which views de-dollarization as part of a comprehensive strategy to build parallel financial infrastructure, Türkiye’s approach is more opportunistic. Its bid to join BRICS and its rhetoric about multipolarity serve less to create genuine alternatives to the dollar-based system than to maximize Türkiye’s leverage between competing power blocs. As a NATO member that has faced Western sanctions in the past, Türkiye seeks to maintain flexibility rather than commit fully to either financial sphere.

As Türkiye navigates between these diverging financial blocs, the technological divide between them appears set to widen further. The incoming Trump administration’s plans to develop and elevate America’s domestic cryptocurrency industry—including the anticipated appointment of a federal “crypto czar” to liaise with industry and coordinate policy across agencies—signal an intensifying competition over the future of digital finance. These plans align with Trump’s muscular “America First” foreign policy. On November 30, he threatened BRICS+ members directly, warning they would “face 100% tariffs and should expect to say goodbye to selling into the wonderful U.S. economy” if they pursued plans for an alternative to “the mighty U.S. dollar.” This blend of aggressive dollar defense with pro-crypto digital asset policy suggests a new phase in the battle over global financial infrastructure.

Russia and Türkiye’s divergent approaches to de-dollarization point to the emerging shape of global finance. Rather than a complex multipolarity, a few competing blocs are emerging, defined as much by technological capacity as shared geopolitical and economic interests.

Russia’s approach—building alternative payment systems, developing a digital ruble, and creating parallel financial infrastructure—demonstrates both the possibilities and limitations of thoroughgoing de-dollarization. While Russia has progressed in developing alternatives to SWIFT and Western payment systems, these achievements have come at a high cost and primarily serve domestic needs or transactions with willing partners like Iran and China.

Türkiye’s experience, meanwhile, shows how economic realities can force pragmatism even in the face of strong anti-dollar rhetoric. Despite Erdogan’s calls for financial sovereignty, Türkiye has positioned itself between the dominant dollar-based system and nascent alternative financial networks. Its approach to digital currency development and cryptocurrency regulation suggests a future where countries may seek to augment, rather than fully escape, the dominant Western financial order.

This emerging financial geography suggests not a multipolar world of sovereign financial systems but rather one of asymmetric blocs. On one side stands the existing dollar-based system with its established infrastructure, technical standards, and overwhelming network effects. On the other, an emerging alternative system, centered largely around China and Russia, that offers partial independence from Western financial controls—but at the cost of increasing dependence on these new central powers.

For most countries, the choice is not between one or the other, but rather how to position themselves relative to these unequal blocs. The technological and economic requirements for true financial sovereignty—as demonstrated by Russia’s costly efforts and Türkiye’s constraints—are too high for most nations to achieve on their own. The result is not the multipolar order that de-dollarization advocates claim to seek, but rather a world of competing financial spheres in search of a center of gravity in an extremely turbulent time.