Russia stops using US dollar for most of its exports to China
RUSSIA's President Vladimir Putin is ploughing ahead with his pledge to reduce dependence on the US currency with the nation switching to the use of the Euro rather than the dollar for exports to China
RUSSIA's President Vladimir Putin is ploughing ahead with his pledge to reduce dependence on the US currency with the nation switching to the use of the Euro rather than the dollar for exports to China.
Slightly more than 50 per cent of the goods China bought from its northern neighbour in the first quarter were priced in Euros, according to Bank of Russia data published recently. The share of the common currency in payment for exports to the European Union increased to 43 per cent from 38 per cent at the end of last year, the data show.
The shift is part of a strategy to 'de-dollarise' the Russian economy and lower its vulnerability to the ongoing threat of US sanctions. It was likely accelerated by a move by Russian oil giant Rosneft PJSC to transfer all export contracts into Euros last year. Fuel is a major component of exports to China, along with timber.
'It seems that these changes correspond exactly with Rosneft's transition to settlement in Euros,' said Dmitry Marinchenko, an analyst at Fitch Ratings Inc in Moscow. 'It's more convenient to settle accounts in dollars though, so you shouldn't expect complete de-dollarisation.'
The data show that Russia still relies heavily on the dollar to pay for imports from the EU and China.
Russia's moves have barely diminished the greenback's dominant role in the global financial system. The share of currency trades in dollars increased to 88.3 per cent in 2019 from 87.6 per cent in 2016, according to the Bank for International Settlements. The proportion of foreign reserves held in dollars has remained steady around 60 per cent over the past decade, reports Bloomberg.