Key facts:
- Researchers are weighing the idea of sheltering in the Chinese yuan.
- Russia needs structural changes in foreign trade in order to break away from the dollar.
Analysts at the Bank of Russia acknowledged that it will be difficult to replace the US dollar or the euro as currencies for foreign trade. This is unless deep structural changes are made in the negotiations with other countries.
In a report published this week, specialists from the Russian monetary entity indicated that these changes happen because import contracts establish payments in rubles or local currencies of countries allied to Russia, such as China or India, for example.
Currently, most import contracts are executed in dollars, as recognized by analysts. For this reason, they admit, “a certain volume of dollars will continue to be necessary” in the internal market of Russia.
The researchers also acknowledge that negotiations for the use of the currencies of allied countries will depend on the willingness and desire of foreign contractors. The latter still prefers the dollar and the euro for foreign trade, according to analysts.
This means that the demand for dollars and euros will remain in the economy of the Eurasian country for a while longer. Although analysts estimate that it will gradually decrease as Russia excludes these currencies from its imports.
Chinese yuan, an exit to the dollar?
Bank of Russia specialists also explained that as Russia decreases its volume of dollars and euros for imports, the gap could be filled with the Chinese yuan.
However, such a fact would increase the risks of relying on the willingness of China’s banks to process payments or push transactions from Russian participants.
The foregoing, considering that Chinese banks could be sanctioned by the United States or by the countries of the European Union, which already economically punished Russia for invading Ukraine militarily in February 2022.
On top of that, the yuan option would lengthen the execution of foreign currency transactions. And it could also cause an increase in the price of imported goods, according to Bank of Russia analysts.
The largest economies want to get away from the dollar
The recognition by Bank of Russia analysts of the usefulness of the dollar for foreign trade occurs in a context in which several countries, including the Eurasian giant, have joined in a crusade against the greenback.
As Market Times has reported for weeks, a real rebellion of countries is underway that calls for the US dollar to stop being the monetary reference for all trades. China commands that move and began its play by paying for an import of liquefied gas with its own currency, the renminbi, a few weeks ago.
Likewise, the Asian giant joined Brazil to use its local currencies and not dollars for its international trade. China also made trade agreements with Russia, in which the yuan took center stage.
As part of the rebellion, it was reported that the BRICS countries (Brazil, Russia, India, China and South Africa) were working on a new form of currency to replace the greenback for their negotiations.
And added to them, the nations of Southeast Asia, as well as the president of France himself, Emmanuel Macron, demanded – separately – the reduction of dependence on the dollar.
Faced with this scenario, the Russian monetary entity clarifies that, although there are desires to emancipate itself from the dollar, it will not be so simple. After all, the George Washington Bill has ruled the world economy since 1971.
