The Russian invasion of Ukraine has changed the calculus not only of nuclear superpower politics but future economic and financial relations for years to come in ways that few can predict.

The news of US and European financial sanctions and freezing of central bank assets and the use of the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, payment system to punish adversaries has been a wake-up call that will make many countries to seriously consider alternatives to a dollar-denominated transactional world.

Whether this will turn out to be realistic or merely wishful thinking to those whose sovereign pride and national decision-making has been emasculated, such as Russia, is still far from certain. But the seeds have been planted that the current dollar hegemony might be challenged, with all that it entails.

Russia is now considering cutting major ties with the West, as Dmitry Medvedev, former president, prime minister and deputy head of Russia’s Security Council, shrugged off a set of crippling sanctions that the US, the EU and other allies slapped on Russia as a demonstration of Western “political impotence.”

Medvedev says the sanctions could offer Moscow a pretext for a complete review of its ties with the West, suggesting that Russia could opt out of New Strategic Arms Reduction Treaty, or START, nuclear arms control agreement that limits the US and Russian nuclear arsenals.

It has become clear to some nations opposing Washington that the only way to try and assert any semblance of national sovereignty is to progressively abandon the dollar. The number of countries that are beginning to see the benefits of a decentralized system, as opposed to the US dollar system, is increasing, with some countries trying to bypass the dollar payment system. The recent suspension of parts of Russia’s financial structure from SWIFT has accelerated such discussions from those fearful that this could also happen to them.

The famous saying that countries, and by extension companies, do not have permanent friends but permanent interests, is apt as demonstrated by the recent US- Venezuelan talks to ease oil export sanctions on Venezuela. This is exemplified by the exit of many companies from Iran after the US imposed sanctions on the country and firms doing business with it, as is the case with America’s new Russian sanctions.

The bewildering ebbs and flows of regional and international geopolitical alliances and divisions add to economic and financial risk for investment decisions.

Questions then arise for Gulf oil producers on the central issue of diversifying their economies away from reliance on crude. These questions center on whether the investment decisions they take create a true non-oil goods and service base, preferably export led, which are not dependent on the vagaries of high oil prices and government incentives.

The use and direction of revenues are crucially important to the future well-being of single resource economies. Do they use cash from these resources primarily as part of a financial diversification through investments abroad in a variety of assets, hoping to gain above-average financial returns?

Or, do these countries primarily use funds for economic diversification, investing in domestic infrastructure, and local job generation projects, with possibly lower short-term economic returns until the projects can stand on their own feet before being weaned away from government support? If long-term financial diversification is the primary route, which currency should funds be placed in given that many have dollar-pegged currencies?

Will Gulf countries be dissuaded to divest Russian assets? According to Bloomberg, both the UAE and Qatar have decided to keep their Russian assets held by their respective wealth funds Mubadala and the Qatar Investment Authority.

The deep pool of relatively liquid assets denominated in dollars has given sovereign investors and countries engaged in international trade a large incentive to keep their currency reserves in dollars, as there are currently few alternatives. The use of the international clearing system, whether in US dollars or the euro, are important mechanisms in world trade.

By accelerating this process by the removal of Iran from SWIFT (paving the way for the Chinese alternative, known as CIPS or Cross Border Interbank Payment System) and imposing sanctions on weaker countries like Iran and Venezuela, has rung alarm bells, but imposing this on Russia is in a league of its own. The US Federal Reserve Chair Jerome Powell has recently testified to Congress that China might speed up plans to insulate against the American dollar.

The number of countries beginning to see the benefits of a decentralized system, as opposed to the US dollar system, is increasing, with some countries trying to bypass the dollar payment system altogether through barter trade or payment in national currencies. Today, the use of cryptocurrencies, like Bitcoin and a blockchain-based tokenized system, could play a role in not only avoiding sanctions, but ultimately helping Russia and other countries around the world in similar situations, to create their own equivalents to SWIFT. With the news that both Mastercard and Visa have ceased operations in Russia,  several Russian banks announced plans to start issuing cards using the Chinese UnionPay card operator, an international payment system founded in 2002 in Shanghai and operating in 180 countries.

A hundred years ago the power of the greenback was referred to as dollar diplomacy. After World War II, and especially after the fall of the Soviet Union in 1989, that power evolved into dollar hegemony. But after all these years of sweeping success, is dollar dominance coming to an end? Time will tell.

• Dr. Mohamed Ramady is a former senior banker and Professor of Finance and Economics, King Fahd University of Petroleum and Minerals, Dhahran.