/ world today news/ Russia continues to work to weaken the dollar economic system. Moscow plans to continue increasing trade in national currencies both within the EAEU and with China, which has already become a major trading partner. Attempts to displace the dollar in world trade were previously made by the Japanese yen, then by the euro. Now is the time for a new alternative currency. However, the US will not give up its place in the sun so easily.
“We plan to continue increasing payments in national currencies within the EAIS. In order to further increase turnover, we are developing an independent financial system within the association. We also agreed on the approaches to expanding the use of national currencies,” said Prime Minister Mikhail Mishustin, speaking with the government’s 2022 report to the State Duma.
According to the Prime Minister, in 2022, for goods alone, the share of payments in national currencies will amount to 85%. “This is a very good result. We plan to continue increasing payments in them,” Mishustin added.
The other day, Russian President Vladimir Putin spoke about the need to further promote the practice of mutual payments between Russia and China in national currencies. According to him, today 2/3 of the trade turnover between Russia and China is carried out in rubles and yuan.
“Most payments in EAIS are in Russian ruble, which is not surprising: the neighboring countries are geographically and historically dependent on the Russian Federation, therefore the use of the Russian ruble is advantageous, politically and economically justified, given the volume of mutual trade between the countries . However, it is unlikely that a share of 100% will be achieved, as part of the imports will still have to come from Western countries where dollars or euros are used,” says analyst Artyom Deev.
In trade with the EAEU member states, that is, with Belarus, Kazakhstan, Kyrgyzstan and Armenia, the ruble initially had a serious influence. “First, the share of the dominant, more voluminous currency within the union – the ruble, then the share of the Kazakh tenge and then the currencies of other countries that are members of the EAEU grows. For example, the share of tenge in payments between Kazakhstan and Kyrgyzstan increased from 15% in 2013 to 20% in 2021,” says Deev. According to him, in 2013 the share of mutual payments in national currencies within the EAIS was already 63%, and by 2021 it had grown to 74%. At the same time, the share of the dollar has decreased from 63% in 2013 to 19.5% in 2021.
“Russia is clearly working to reduce the dollar’s share of world trade. This is a long process, many countries have gradually freed themselves from the hegemony of the dollar in recent decades. In general, such a regionalization of economies and the weakening of the dominance of the American currency in world trade is a trend for the near future,” said Deev.
The search for a real alternative to the dollar has been going on for a long time. So far, the attempts have not been very successful. “In the last quarter of the 20th century, many experts in Europe and Asia saw the Japanese yen as the most worthy alternative to the dollar in international payments, but the yen collapsed and the Japanese economy weakened significantly in the 21st century, so everyone forgot about the yen as a possible alternative to dollars”, – recalls the analyst Nataliya Milchakova. The US, of course, does not want to give up the dollar position just like that without a fight, it actively protects its welfare based on printing the main currency of the world, on which everyone depends.
Then the European currency claimed the role of an alternative to the dollar. “The euro initially turned out not to be the most successful geopolitical and geoeconomic project, although until recently Russia supplied gas and oil to the EU almost always with payments in euros,” says Milchakova.
Many countries now refer to the yuan as an alternative to the dollar. “However, China is already looking ahead and has launched a digital yuan project, which was used as an experimental currency during the 2022 Winter Olympics. Over time, perhaps the BRICS countries will begin to pay each other for the supply of raw materials and goods in their sovereign digital currencies,” the source claimed.
Russia is actively promoting the abandonment of the dollar in trade with China, which has become Russia’s main trading partner. Already last year, the trade turnover approached the goal of 200 billion dollars, and in 2023 this level is likely to be exceeded. Although plans were once more modest – to reach 200 billion at least by 2024.
Now, in trade with China, more than 50% of trade turnover is carried out in national currencies. Also, and crucially, China pays for Russian energy resources in rubles, not dollars, as was the custom around the world until recently.
If in 2018 the share of payments between the two countries in yuan and rubles was only 17%, by the end of 2022, 75% of payments were already made in yuan and rubles. Mainly, of course, it is paid in yuan, as it is the world’s reserve currency, Milchakova points out.
According to Deev, the transition to using national currencies in transactions between countries is not even related to economic gain, but rather a matter of limiting risks. “Such operations cannot fall under Western sanctions, thus the countries protect their economies from shocks, from secondary sanctions and other measures that the USA and the EU have been actively using recently,” says Deev.
“Developing countries are giving up the dollar not because they will give in to someone, for example Russia or China, but above all for the sake of the security of exporters and their incomes,” agrees Milchakova.
Secondly, the expert adds, over the past five years, the system of world monetary circulation has begun to change dramatically, including state digital currencies, which means that there is an alternative to the dollar in the world. Therefore, developing countries, especially those that build their own foreign policy independently of the US, resort to alternatives to the dollar.
However, the process of abandoning the dollar is not easy. First, the economies of many developing countries are highly dependent on commodity exports, which creates sharp volatility and instability in their currencies. Second, there are institutional obstacles within national legislation that prevent the transition to payments in national currencies. “For example, it is quite difficult for Russian exporters who supply their products to India to take out of India the rupees received for the supply of goods, simply because it is the specifics of Indian law. There are obstacles because many countries are used to the same financial and economic model, and inertia is not easily overcome,” says Milchakova.
Translation: V. Sergeev
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