Fragmentation and Bloc Formation: How the Global Economy is Changing

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Sergey Dubinin, former head of the Bank of Russia and Professor of Finance and Credit at the Faculty of Economics at Moscow State University, has delivered an honorary address at the XXV Yasin (April) International Academic Conference. He spoke about the transformation of the global monetary and financial system, as well as the Russian economy.

As Sergey Dubinin pointed out, one of the key trends that has become evident since the pandemic and which remains relevant today is the fragmentation of the global economy. ‘This fragmentation represents a certain stage of globalisation. At first, it was interpreted as deglobalisation, a complete breakdown, but it soon became clear that the situation is not quite like that,’ he noted. Fragmentation is contributing to a slowdown in international trade, the growth of barriers to the movement of goods, services, and labour, as well as restrictions on the spread of technology. These trends are causing concern among many experts.

Sergei Dubinin

This fragmentation is particularly evident in relations between countries. Blocs are being formed that are aligned with either the USA or China. There are also so-called neutral states, intermediary countries such as India or Mexico. ‘They want to act as intermediaries in both trade and financial operations,’ said Sergey Dubinin. ‘Economic relations are developing more actively within blocs. Trade and capital flows between blocs are facing restrictions, particularly in the form of tariffs,’ he explained. Moreover, the recent announcement by US President Donald Trump regarding increased tariffs is seen as a development that reinforces these trends, the expert added.

Against the backdrop of ongoing shifts in the global economy, confidence in American securities has declined. ‘They used to be seen as a safe haven,’ said Sergey Dubinin. ‘That was the advantage of the American financial market—even during a crisis originating in the US, US government securities were considered the safest investment. And huge sums of money were directed there.’ In recent years, however, there has been a noticeable drop in investment in these instruments.

‘We are currently witnessing a heated phase in US–China relations. This could lead to various consequences in both the political and economic spheres,’ the expert remarked. It is therefore important to determine what position Russia intends to take. ‘Lately, we have been hearing a great deal about joint Russian–American economic projects,’ said Sergey Dubinin. One viewpoint is that it would be better for Russia to assume the role of an intermediary country, rather than orienting itself unilaterally towards one side.

The former head of the Central Bank also spoke about the state of the Russian financial sector. He noted that despite numerous sanctions, the position of banks remains stable. In 2024, the net profit of banks exceeded 4 trillion roubles. According to him, there are currently just over 300 credit institutions operating in the market, with only 35 showing losses. He reminded the audience that ‘between 2010 and 2020, a total of 681 banks were closed.’

As a result, according to Sergey Dubinin, a ‘highly concentrated and fairly stable’ system has now emerged. The top ten largest Russian banks, which include systemically important institutions, account for nearly 80% of the banking system’s assets. At the same time, ‘key quality indicators remain quite strong.’