For some time both China and the Russian Federation have understood, as do other nations, that the role of the US dollar as the world’s major reserve currency is their economic Achilles Heel. So long as Washington and Wall Street control the dollar, and so long as the bulk of world trade requires dollars for settlement, central banks like those of Russia and China are forced to stockpile dollars in the form of “safe” US Treasury debt, as currency reserves to protect their economies from the kind of currency war Russia experienced in late 2014 when the aptly-named US Treasury Office of Terrorism and Financial Intelligence and Wall Street dumped rubles amid a US-Saudi deal to collapse world oil prices. Now Russia and China are quietly heading for the dollar exit door.

Russia’s state budget strongly depends on oil export dollar profits. Ironically, because of the role of the dollar, the central banks of China, Russia, Brazil and other countries diametrically opposed to US foreign policy, are forced to buy US Treasury debt in dollars, de facto financing the wars of Washington that aim to damage them.

That’s quietly changing. In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today.

Renminbi in Russian Reserves

On November 27, Russia’s Central Bank announced that it was including the Chinese Renminbi into the central bank’s official reserves for the first time. As of December 31, 2014, official Central Bank of Russia reserves consisted of 44% US dollars, and 42% Euros with the British Pound slightly more than 9%. The decision to include Renminbi or Yuan into Russia’s official reserves will increase the use of the yuan in Russian financial markets, to the detriment of the dollar.

The yuan first began to be traded as a currency, even though it is not yet fully convertible into other currencies, in the Moscow Exchange in 2010. Since then the volume of yuan-ruble trades has grown enormously. In August, 2015 Russian currency traders and companies bought a record 18 billion yuan, about $3 billion, representing a 400% increase from a year earlier.

The Golden Ruble is coming

But the actions of Russia and China to replace the dollar as mediating currency in their mutual trade, a trade whose volume has grown significantly since US and EU sanctions in March 2014, are not the end of it.

Gold is about to make a dramatic return to the world monetary stage for the first time since Washington unilaterally ripped up the Bretton Woods Treaty in August, 1971. At that point, advised by David Rockefeller’s personal emissary in the Treasury, Paul Volcker, Niixon announced Waahinton was refusing to honor its treaty obligations to redeem the dollars held abroad for US central bank gold.

Since that time, rumors have persisted that, in fact, the gold chambers of Fort Knox are bare, a fact that, were it to be verified, would spell curtains for the dollar as reserve currency.

Washington adamantly holds to the story line that the Federal Reserve sits on 8133 tons of gold reserves. If true, that would far exceed the second-largest, Germany, whose official gold holdings are listed by the IMF at 3381 tons.

In 2014 a bizarre event transpired which fed the doubts about US official gold statistics. In 2012 the German Government asked the Federal Reserve to return German central bank gold “held in custody” for the Bundesbank by the Fed. Shocking the world, the US central bank refused to give Germany her gold back, using the flimsy excuse that the Federal Reserve “could not differentiate German gold bars from US ones…” Perhaps we are to believe the auditors of US Federal Reserve gold were laid off in the US budget cuts?

In the ensuing scandal, in 2013 the US repatriated a measly 5 tons of German gold to Frankfurt and announced it would need until 2020 to complete the requested 300 tons repatriation. Other European central banks began demanding their gold from the Fed, as distrust of the US central bank grew.

Into this dynamic the central bank of Russia has been adding to its official gold reserves in dramatic fashion in recent years. Since the growing hostility with Washington the pace has become far more rapid. From January 2013, Russia’s official gold has expanded by 129% to 1352 tons as of September 30, 2015. In 2000 at the end of the decade of US-backed plunder of the Russian Federation during the dark Yeltsin years of the 1990s Russia’s gold reserves stood at 343 tons.

The vaults of the Russian Central Bank, which at the time of the fall of the Soviet Union in 1991 held some 2,000 tons of official gold, had been stripped during the controversial tenure of Gosbank head, Viktor Gerashchenko, who told a startled Duma that he could not account for the whereabouts of the Russian gold.

Today is a different era to be sure. Russia has far and away replaced South Africa as the world’s third largest gold mining country in terms of annual tons mined. China has become number one.

Western media has made much of the fact that since US-led financial sanctions, Russian central bank reserves of dollars have fallen significantly. What they do not report is that at the same time the central bank in Russia has been buying gold, lots of gold. Russia’s total reserves in US dollars have fallen recently under sanctions by some $140 billion since 2014 parallel with the 50% collapse in dollar oil prices, but holdings of gold are up by 30% since 2014 as noted. Russia now holds as many ounces of gold as the gold exchange-traded funds (ETFs) do. In June alone, it added the equivalent of 12% of global annual gold mine production according to seekingalpha.com.

Were the Russian government to adopt the very sensible proposal of Russian economist and Putin adviser, Sergei Glazyev, namely that the Central Bank of Russia buy every single ounce of Russian mined gold at a guaranteed attractive ruble price to increase state gold holdings, that would even more avoid the Central Bank having to buy the gold on international markets for dollars.

A Bankrupt Hegemon

At the close of the 1980’s as they viewed a major US banking crisis coupled with the clear decline in the postwar role of the United States as the world’s industrial leading nation, as US multinationals out-sourced to low-wage countries like Mexico and later China, Europeans began to conceive of a new currency to replace the dollar as reserve and creation of a United States of Europe to rival US hegemony. The European response was creation of the Maastricht Treaty at the moment of the reunification of Germany in the beginning of the 1990’s. The European Central Bank and later the Euro, a severely flawed top-down construction, was the result. A suspiciously successful bet in billions by New York hedge fund speculator George Soros in 1992 against the Bank of England and the parity of the Pound, managed to knock the UK and the City of London out of the emerging EU alternative to the dollar. It was easy pickings for some of the same hedge funds to tear the Euro at the seams in 2010 by attacking its Achilles Heel, Greece, followed by Portugal, Ireland, Italy, Spain. Since then the EU, which is bound to Washington as well via the chains of NATO, has posed little threat to American hegemony.

However, increasingly since 2010, as Washington attempted to impose the Pentagon’s Full Spectrum Dominance on the world in the form of the so-called Arab Spring manipulated regime changes from Tunisia to Egypt to Libya and now, with poor results, in Syria, China and Russia have both been pushed into each others’ arms. A Russian-Chinese alternative to the dollar in the form of a gold-backed ruble and gold-backed renminbi or yuan, could start a snowball exit from the US dollar, and with it, a severe decline in America’s ability to use the reserve dollar role to finance her wars with other peoples’ money. That could just give the interests in favor of a world at peace a huge advantage over that warring lost hegemon, the United States.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”.