Russia's efforts to de-dollarize are slowly succeeding

RUSSIA / FSU POLITICS - In Brief 06 Aug 2019 by Alex Teddy
Russia is successfully reducing its use of the USD. Putin is determined to make his country less vulnerable to US sanctions. Last year Russia got rid of half its USD holdings. However, there is only so far Russia can go in de-dollarizing since the USD is the go-to currency in so many sectors especially oil.For four quarters in a row Russia has increased its use of EUR. EUR is used more than the USD in trading with Europe and China. EUR is used for 42% of trades with the EU up from 32% in the first quarter of 2018. However, USD usage in imports barely changed. Russia is not the only country that wants to turn away from USD. The EU is very keen to promote the EUR as a world currency. Russia's international trade is with USD 687.5 billion a year. Almost half of Russian trade is in USD. Only 5% of Russian trade is with the United States. So if the USD is not used for trading with anyone besides the USA then in principle Russia should be able to reduce USD usage hugely - although many commodities markets are conventionally traded in USD. Russia suffers delays in using USD. Companies check with US authorities to see if transactions will breach sanctions. Russian trade with China is USD 108 billion. Almost a third of that is in EUR. Trade in RMB is difficult because there are limits on how much RMB foreigners can take out of China.Russia's trade with India is worth only USD 11 billion but growing. RUB is used for three-quarters of this. Much of this is defense sales to India.

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