De-dollarization in Russia is making little progress

RUSSIA / FSU POLITICS - In Brief 07 May 2019 by Alex Teddy

At the start of May the Bank of Russia published a report on the currencies used in international trade by Russia. It demonstrated that commerce between Russia and China is using EUR as well as USD and RMB. There was a 23.5% increase in the use of EUR to pay for Russian goods sold to China in the last quarter of 2018. In that quarter the % of exports to the European Union denominated in EUR rose to almost 39%.Russia has long wished to raise the share of foreign trade denominated in its own currency. The aim is to reduce the impact of sanctions. The share of exports sold in RUR went down in 2018. One of the exceptions is trade with India. Over half Russia's exports to India are in RUR. 70% of trade in the Eurasian Union is in RUR. Steps to de-dollarize are being taken. But the shift to EUR is limited. Selling oil and gas to the EU in EUR is the next obvious step. This would suit the EU too which would like to see the EUR reach parity with the USD as a global currency. A EUR-crude benchmark is something that the EU wants to establish. Russian companies would not need so much in terms of USD holdings then. Russia's central bank has decreased its share of USD assets in sovereign reserves. RMB and gold are sought instead. The RMB is favored since anything to challenge American mastery is seen as good in Moscow and it cements friendship with China.

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