By Ted Baumann, Offshore and Asset Protection Editor, The Sovereign Investor:

The international financial system is based on the U.S. dollar. The greenback is both the world’s “reserve currency” — the one everyone wants to hold when things go bad — and the principal means of exchange. The vast majority of transactions between companies, countries and people are denominated in dollars.

As my investment-oriented colleagues regularly discuss on this page, the dollar’s dominance isn’t unchallenged. The Chinese yuan, in particular, has pretensions to become a second global currency, one so widely used that transactions unrelated to China could be conducted in yuan.

But there’s another challenge on the horizon … a new international interbank system that could create important opportunities — or chaos — for the world economy, depending on how the proverbial ball bounces.

Not So SWIFT

You probably know the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system as that little jumble of letters and numbers you need every time you send money to a foreign bank account. It’s the global banking system’s address book and postal system. SWIFT has more than 10,000 members in more than 200 countries, and handles more than 15 million messages daily.

But even though SWIFT is based in Belgium, and subject to EU law, the U.S. government claims legal authority over all SWIFT transactions denominated in U.S. dollars — even if those dollars never enter a U.S. bank account — because they are ultimately “backstopped” by the Federal Reserve.

So when European banks used SWIFT to facilitate dollar-dominated transactions between Iran and third parties, the U.S. fined those banks billions of dollars for violating U.S. sanctions against Iran, even though no money passed through the United States. They eventually got Iran kicked off the SWIFT system altogether.

The Inevitable Blowback of Russia’s New Interbank System

Iran isn’t in a position to challenge the United States. But when the U.S.’ most loyal ally in Europe, the United Kingdom, called for Russian banks to be ejected from SWIFT during the height of the Ukraine crisis, the two Anglo countries met their match.

A few weeks ago, Russia announced its intention to launch an alternative to SWIFT by May 2015. Russia’s new interbank system would dominate transactions in rubles, with conversion to and from U.S. dollars at either end. For example, an Iranian government agency could use dollars to buy rubles, transmit them via the Russian system, and have them paid to a supplier in Europe who then converted them back to dollars.

Short of hacking into the Russian system, the U.S. would have no way of knowing who was paying what to whom or for what reason.

Opportunity or Curse?

It’s not hard to imagine the opportunities this could present — and I’m dead sure the IRS and other U.S. agencies are doing so right now. One relates to “terrorist” financing and sanctions-evasion. But there are others.

For example, “U.S. persons” could send funds to a FATCA-compliant bank overseas, withdraw them, convert into rubles, and have them sent across the Russian interbank system to a non-compliant bank. They would then be outside the international tax reporting system the U.S. is trying so desperately to construct.

But a Russian interbank system would also be an important part of the framework for an alternative global economic and financial system that rejects U.S. rules. Indeed, Russia has already joined the New Development Bank, an alternative to the International Monetary Fund and the World Bank.

The participating countries (Russia, South Africa, China, India and Brazil) comprise more than 3 billion people, 41.4% of the world’s population, and account for more than 25% of global GDP. It’s not hard to imagine them constituting an alternative trading bloc similar to the old Soviet-aligned countries of the Cold War.

Is a Divided World a Better World?

Despite its many contradictions, the globalization of trade, production and consumption has been the most important factor in the economic growth of the last half-century. The fact that (almost) the entire world has become a single producing, trading and consuming entity has lifted billions of people out of absolute poverty and created untold riches.

A world split into two (or more) competing economic blocs simply could not do as well as the one-world economy we have created. The U.S. government and its sponsors in the corner suites of Wall Street and corporate America know this very well.

That’s why I believe that the Russian announcement is a feint intended to remind the U.S. — especially U.S. capitalists — that the world economy can’t be both global and subject to unilateral U.S. rules at the same time. If the U.S. goes too far with its bullying, it runs the risk of breaking the global economy that has made some of us very rich indeed.

If the Russian system actually comes into being, it may well present some unusual opportunities for people looking for financial freedom and privacy. But I’m not sure the cost will be worth it. By Ted Baumann, Offshore and Asset Protection Editor, The Sovereign Investor

And Russia has some big issues: the plunge in the price of oil and the impact of the sanctions are ransacking its economy and finances. Read… Dreadful Chart of Russian Ruble vs Probability of Default

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