If Russia abandons the dollar: implications for the Eurasian Union. The consequences of ditching the dollar are clear

Many countries are trying to move away from dependence on the dollar, which has persisted for decades. China, Russia and India enter into agreements that allow the acceptance of each other's currencies within the framework of bilateral trade, Europe sees the euro as a reserve asset and an international medium of exchange.

Frederick William Engdahl

And if earlier the dominance of the dollar remained, nevertheless it did not carry a mortal threat. However, what has been happening lately is much more serious. And this phenomenon even has an ominous name: de-dollarization.

China, increasingly backed by Russia, is taking decisive steps to create a very viable alternative to the tyranny of the US dollar in global trade and finance. Wall Street and Washington are not surprised by this, but they cannot stop it, writes American economist Frederick William Engdahl.

As long as Wall Street's dirty tricks and machinations could create a crisis like the Eurozone in Greece in 2010, countries with trade surpluses such as China, Japan, and then Russia had no alternative but to buy more Treasuries. USA.

Washington and Wall Street could print endless volumes of dollars, supported by nothing more valuable than F-16 fighters and Abrams tanks. China, Russia and other dollar bondholders actually financed the US wars that targeted them by buying up US debt. Back then, they had few real alternatives.

A viable alternative

Now, ironically, the two countries that have extended the life of the dollar since 1989 - Russia and China - are revealing that most fear alternatives to creating a viable international currency backed by gold, and possibly multiple similar currencies that could diminish the dollar's hegemonic role today. ...

For several years, both Russia and China have been buying huge volumes of gold, mainly to replenish the central bank's foreign exchange reserves, which otherwise are in dollars or euros. Until recently, it was not clear why.

For several years, the largest buyers of physical gold in the gold markets have been the central banks of China and Russia. And it was unclear how deep the strategy they carried out was simply building confidence in currencies amid mounting economic sanctions and Washington's militant trade war.

China and Russia, which have joined their main trading partners in the BRICS countries (Brazil, Russia, India, China, South Africa) and the partner countries of the Eurasian countries of the Shanghai Cooperation Organization (SCO), are going to complete the creation of a new monetary alternative to the dollar.

At present, in addition to the founding members of China and Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and more recently India and Pakistan are full members of the SCO. This is a population of more than 3 billion people, about 42% of the total population of the world, which is united in peaceful economic and political cooperation.

Golden silk road

It is clear that the economic diplomacy of China and Russia, as well as a group of countries of the Eurasian Economic Union, is largely associated with the construction of advanced high-speed railways, ports, energy infrastructure, united by a huge new market, which in less than 10 years will overshadow any economic opportunities in the countries. OECD EU and North America suffering from huge debt.

What was vital, but not entirely clear, was a strategy to free the countries of Eurasia from the dollar and from their vulnerability to further US sanctions and financial war amid dollar dependence. It has to happen.

At the annual BRICS summit held on September 5 in Xiamen, China, Russian President Vladimir Putin outlined the Russian vision of the current economic world quite simply and clearly. He said: “Russia shares the concerns of the BRICS countries about the unfairness of the global financial and economic architecture, which does not take into account the growing influence of emerging market countries. We stand ready to work with our partners to promote reforms of international financial regulation and overcome the excessive dominance of a limited number of reserve currencies. ”

As far as is known, he has never been so outspoken about currencies. And when this is taken into account in the context of the newest financial architecture presented by Beijing, it becomes clear that the world will soon come to a new level of economic freedom.

RMB-denominated Chinese oil futures

China is the largest importer of oil in the world, the vast majority of which is paid in dollars. If the new yuan oil futures gain widespread acceptance, it could be the most important benchmark for oil in Asia, given that China is the world's largest oil importer. This would jeopardize Wall Street's two oil futures, Brent and WTI, which have provided Wall Street with huge hidden benefits so far.

This would be another gigantic manipulative leverage that would be able to eliminate China and its oil partners, including Russia. The introduction of oil futures, traded in Shanghai in the yuan, which recently added to the IMF's basket of reserve currencies, could significantly alter the geopolitical balance of power from the Atlantic world to Eurasia.

In April 2016, China took a big step towards becoming the new global center for gold trading, physical gold. Today, China is the world's largest gold producer, far ahead of BRICS member South Africa and Russia in second place.

Now, if you add the new oil futures, which are traded in China in the yuan with gold backing, it would lead to a sharp shift for key OPEC members, even in the Middle East, to prefer the gold-backed yuan over the dollar-backed oil, which carries the geopolitical risk that Qatar has endured since Trump's visit to Riyadh a few months ago. Notably, Russian state oil giant Rosneft has just announced that China's state oil company China Energy Company Ltd. just bought a 14% stake in Rosneft from Qatar. All this begins to form one clear picture.

Latin America is also taking steps towards de-dollarization

Didn't the clock counting the end of the world for the petrodollar (and the implicit US hegemony) tick down another minute closer to midnight?

Seemingly confirming what President Maduro has warned in the wake of the recent US sanctions, The Wall Street Journal reports that Venezuela has officially stopped accepting US dollars as a means of payment for crude oil exports.

As noted earlier, Venezuelan President Nicolas Maduro said that Venezuela intends to “free itself” from the US dollar: “Venezuela intends to introduce a new system of international payments and create a basket of currencies to free the country from the dollar. And if they pursue us with the dollar, we will start using the Russian ruble, yuan, yen, Indian rupee, euro. "

State oil company PDVSA has told its private partners about a joint venture to open euro accounts and convert existing cash to the main currency of Europe, one of the project partners said.

This is the first step towards the adoption of one or more Euro-Asian currencies, backed by gold, and it definitely looks viable and - for many big players - is welcomed as an addition to the global money supply.

Venezuela shows the growing weakness of the United States. It used to be thought that a small country refusing to borrow dollars should expect a regime change in a short time. Now, everything has changed somewhat.

Take also the emergence of bitcoin and other cryptocurrencies as the preferred monetary asset of the libertarians, and the monetary world suddenly starts looking completely multipolar.

In October, the Russian government embarked on a policy of eliminating dollar payments from the country's economy. What the de-dollarization will lead to and what the consequences can be for ordinary Russians from such an idea of ​​officials - let's talk about this in more detail.

Everyone in the world loves stability, including market relations. The US dollar has always been considered one of the most liquid and reliable assets, backed by the country's economy and its political system. No one doubts that the US economy is the most powerful in the world. Also, the political system of the country is not yet a cause for concern. America wins in comparison with China, where there is no transparency of policy with all the might of the economy and with the countries of Europe with their absolutely transparent economies, but the instability of the political system.

It turns out that for one reason or another, the euro, yuan, another currency cannot be a competitor to the dollar.

Who determines the currency for settlements?

This process is influenced by the entire population of the world and each individual person. Only the citizen decides in which currency to keep his savings. For example, in the Russian Federation these are dollars, euros, rubles, in England pounds sterling, dollars, in China dollars and yuan. The American currency is in circulation all over the world and remains in demand, despite some market fluctuations. Dollars are the easiest to exchange, they can be used to pay almost everywhere, which cannot be said about other types of currencies.

Therefore, the world business uses the American "green" as a universal liquid instrument with a stable exchange rate. It is much more profitable to conclude an agreement in dollars than in national currency, even if these are transactions between the Russian Federation and China. Such agreements balance the rights of the parties better than transactions in rubles or yuan - the exchange rate of these currencies can change dramatically and put one of the parties at a disadvantage, and such situations practically do not happen with the dollar.

Example: Sberbank sold the subsidiary to an Arab investment fund, fixing the deal in Turkish lira to a certain dollar rate. If it were not for the hedging of the exchange rate, Sberbank would have lost a lot due to the sharp devaluation of the Turkish lira.

And, of course, the strength of the dollar is backed by securities. The most liquid are US government bonds (also called Treasuries). The level of reliability of assets is supported by the deposits of many states that own gold and foreign exchange reserves and take every effort to preserve and increase the country's capital.

First factor pushing for the exclusion of dollar settlements - an increase in the turnover of the national currency. The higher the share of the ruble in transactions across the country, the more stable the demand for the ruble on the international foreign exchange market. Also, with the strengthening of the ruble's position, the efficiency of the government's monetary policy will increase, and it will be easier to control inflation.

The second reason- geopolitical tension. This is due to the US economic sanctions against Russia. Nothing prevents the American government from prohibiting payments in dollars with companies from the Russian Federation. A simple order to prohibit transfers through US banks would make any transfer in US national currency impossible. The Russian government is clearly not happy with this situation.

Will the transition in international settlements to rubles and other currencies help?

Restrictions always hinder normal development - this is the law of the market. The Russian economy will feel the constraints very quickly - settlements in US dollars are the simplest and cheapest option. It is possible to force business to work with a reference to the yuan, but besides Chinese companies, no one will agree to this, and the Russian Federation has partners in Japan, India and a number of other countries. Switching to the national currency with everyone is a utopia.

Therefore, there will be delays in the circulation of finance, and as a result of the exchange of currencies, costs will increase, which will immediately affect the cost of goods and services and literally spur inflation. As an example: try to give up the cheap Moscow metro and travel by car all day. You can get there, but taking into account the traffic jams, the trip will be not only slow, but also expensive.

Rumors about converting foreign currency deposits into rubles - where does it come from

Russians are already little surprised. Against the backdrop of numerous negative reports, citizens believe even in the most fantastic rumors and myths. And conversion can also take place, for example, if the country's government categorically wants to get rid of the dollar. In this case, banks simply cannot cope with the volume of payments when people want to cash out their foreign currency savings - there is no such amount of currency in the country. All assets are invested in securities, issued as loans, invested in profitable projects. Therefore, when and if it occurs to depositors to close a foreign currency account, then with a shortage of currency, banks will convert dollars into rubles.

Whether or not to withdraw dollars from the bank- this question is especially acute today. If you pick it up, you can lose interest, not pick it up - who knows what will happen tomorrow and whether we will get our money back. Experts advise converting part of dollar deposits into euros - now the rate is quite attractive and the liquidity of the European currency is beyond doubt.

Second tip- do not invest dollars in long-term projects with low rates. Such profits do not justify the risk of a financial freeze for several years. Deposits for 3-6 months are much more profitable.

Third tip- transfer part of the money to the account of subsidiary foreign structures or to large non-state banks. It would also be good to invest in Eurobonds, shares of foreign companies - in those assets, the liquidity of which has been tested and confirmed by time.

Photos from open sources

There are 3 countries on the planet that previously tried not to use the US dollar as the world's reserve currency. What happened to them and what is happening to the dollar today - let's look at examples.

1. Dollar and the USSR

In the 1940s, following the results of the Second World War, the American dollar was accepted in the world as a reserve currency. The only strong country in the world that then refused to recognize the power of the dollar was the USSR, at the suggestion of Stalin.

Under Stalin, the ruble was backed by gold. I quote:

A decree of the USSR Council of Ministers of February 28, 1950 transferred the ruble to a permanent gold base.

The declared gold content of the ruble was equal to 0.222168 grams of pure gold; the selling price of 1 gram of gold was set at 4.45 rubles.

Stalin also ensured the growth of the economy of the USSR after the Second World War at such a rate that by 1970 would have led to a three-fold superiority of the Soviet Union over the countries of the West. This was announced in Washington and Brussels.

In Washington, this could not be allowed. Therefore, many experts are sure that Stalin's death in 1953 was not accidental. It is impossible to prove this, but it happened too timely, just in the interests of the West.

What happened to the USSR

As a result, Khrushchev became Stalin's successor and in 1961 carried out a reform of the ruble, after which our economy began to develop at a slower pace, which 30 years later led to the collapse of the USSR. This is what happened to our country as a result.

2. Dollar and France

Charles de Gaulle is the national hero of France. He was the first after Stalin to understand that not everything is so good with the American dollar. Moreover, the French currency, the franc, has become another candidate for the title of world currency. And he was backed by gold!

As a result, in 1960, Charles de Gaulle announced the abandonment of the dollar and the transition to international settlements of his country in gold. He then confirmed his line in 1965.

And then he collected dollars in his country, and sent them by ship to the United States, demanding in return to give him gold. Let me remind you that at that time 35 USD was given per troy ounce.

According to various sources, as a result of the sale of dollars, the French treasury was replenished with the amount of gold from 1,650 to 3,000 tons.

Other countries tried to follow the example of Paris, so in 1971 it was announced that the dollar was no longer backed by gold.

What became of France

Approximately 2 years after the return of the French gold reserve to France, de Gaulle ceased to be the head of the country, and died a little later. And this death can also be considered incomprehensible, like the death of Stalin. That is, it is very timely and even indicative for the preservation of the dollar's power.

The result of de Gaulle's work was the withdrawal of France from the NATO military organization in 1966. But today this country is again drawn into the sphere of the Alliance's activities thanks to Washington's "soft policy" to ensure control over the countries of the European Union.

3. Dollar and Libya

Muammar Gaddafi was the head of a country in which the population and freedoms were more prosperous than in some Western European countries. The country possessed huge reserves of oil and gas.

And the time came when Gaddafi stopped believing in the West and announced in 2010-2011 the transition to the "golden dinar" - a currency backed by gold. And he called on other Muslim countries to follow his example.

Strictly speaking, it was not Gaddafi who proposed switching to the golden dinar - this was done 10 years before him. But it was he who could ensure the existence of this currency in 2011, which became a threat to the power of the dollar.

It was a direct competitor to the dollar, and more attractive because of its peg to the precious metal.

As a result, very little time passed, and Muammar Gaddafi was overthrown by militants who introduced themselves as "the Libyan people." Naturally, this happened with the participation of the United States and NATO countries.

What happened to Libya

After the death of Gaddafi, a civil war has been going on in the country for the eighth year. Although General Haftar, the pro-Russian leader of the Libyan army, already controls up to 90% of the country's territory and its hydrocarbon deposits. But minor clashes between tribes do not stop, and Libya's economy has collapsed.

The above countries tried to abandon the dollar in the 20th century. But at the present time, too, not everything is so simple.

Results as of the 21st century. Dollar and Russia

The refusal of the dollar in international settlements in the 21st century was also initiated by Russia. And this was a response to America's actions against our country (the reasons are the situation in Ukraine, Crimea, Syria, as well as sanctions, etc.). Russia simply has no other choice - except to defend itself.

The Russian Federation initiated the abandonment of the dollar, starting in 2018. Finally, this process should be completed within 5 years. That is, until the end of the current term of Putin's presidency - in 2023.

As a result, China, India, Russia, Iran, Syria and other countries (including the SCO and BRICS members) began to ignore the dollar whenever possible. The population of these countries is from 40% to 50% of the planet.

And this means a decrease in purchases of the dollar for mutual settlements between states and a decrease in US income. Even in Europe, they are seriously considering abandoning the dollar when paying for gas supplied from the Russian Federation and switching to the euro.

This process can lead to the undermining of the dollar's power and, as a result, to the undermining of US dominance in the world. Naturally, they will try to prevent this in America. This led to the confrontation between the Russian Federation and the Western countries.

What will happen to Russia because of such a confrontation is not yet known. Therefore, we need to be prepared for any development of events.

Economists assessed the prospect of reducing settlements in the American currency

The authorities are preparing a plan to abandon the dollar for the Russian economy. that Prime Minister Medvedev is going to approve it in the coming weeks. There is no official confirmation of this - however, after the meeting with Vladimir Putin, the author of the idea of ​​de-dollarization, the head of VTB: in general, the president supported him (earlier this was done by the ministers). How will this measure affect ordinary Russians and the country's economy as a whole? We talked about this with experts.

According to the head of the Ministry of Economic Development Maxim Oreshkin, the government wants to develop a mechanism to improve the use of other currencies in foreign trade. The population, according to officials, will not suffer - a complete ban on the circulation of dollars in the country, as it was in the USSR, will not follow.

However, the ruble exchange rate may be under attack. Russia's foreign counterparties, for whom the abandonment of the dollar and the transition to transactions in the national currency will allow them to accumulate significant ruble reserves, will at any time be able to throw this money into the free market and seriously derail the rate of Russian banknotes.

Practically the entire economic bloc of the Russian government is preparing proposals for the de-dollarization of the financial system. The Ministry of Finance, the Ministry of Economic Development and the Central Bank are participating in the work on the document. According to Oreshkin, we are talking about the creation of a set of incentive measures that would make it possible to use other currencies in foreign trade relations. “This kind of operation will be more efficient, convenient and simpler,” the minister is sure.

Recall that for the first time the de-dollarization program was presented to President Vladimir Putin by the head of VTB Bank Andrei Kostin in July this year. The banker stressed that such measures do not mean a complete abandonment of the dollar, but are aimed at expanding the use of the ruble in international settlements. Moreover, currency diversification will not be forced - only those business representatives who really benefit from it will be able to use it. According to Kostin, the gradual de-dollarization of the Russian economy will take at least 5 years.

According to Doctor of Economics Mikhail Delyagin, this will be a forced, not an independent process. “The United States is ready to impose sanctions prohibiting Russian state banks and state holdings to conduct transactions in the foreign market in dollars. The American currency is becoming toxic. The use of the dollar may be prohibited by other countries with which Russia contacts, ”the expert warns.

According to Delyagin, with a decrease in dollar settlements, Russia will become less vulnerable in the event of the introduction of currency sanctions and will be able to quickly establish bilateral ties with other states without using "green". Dependence on the risks of global economic shocks will also decrease, since a diversified settlement system is less susceptible to macroeconomic shocks.

At the same time, experts say, the de-dollarization process may turn out to be laborious and complicated by the reluctance of other countries to leave the dollar. Now the structure of settlements for Russia's foreign trade with other states is approximately the following: in receipts from exports, the dollar accounts for about 70%, the euro - a little more than 14%, and the ruble - about the same. Other currencies account for less than 2%. Import payments are as follows: dollar - 37%, euro - 31%, ruble - 29%, other currencies - less than 3%.

Statistics allow us to conclude that the dollar remains the main currency of Russia's settlements in foreign trade: its share in receipts from exports is almost twice as high as the share of payments on imports. According to Aleksey Korenev, analyst of the Finam Group of Companies, settlements in the US currency are well established throughout the entire world economic structure. They are cheaper than transactions in other currencies and offsets.

“If the contract is extended in time, then due to the stability of the dollar, the absence of losses due to exchange rate fluctuations is guaranteed. Even China, which is in a state of trade war with the United States, is in no hurry to move away from dollars. At the end of 2017, about 88% of the trade turnover between Russia and China in terms of exports and about 74% in terms of imports was paid in dollars, "Korenev notes.

Alexander Kuptsikevich, a leading analyst at FxProa, notes that, although the euro is noticeably lagging behind the dollar, it occupies a confident second place in the turnover of the foreign exchange market of Russian foreign trade settlements. However, there are own pitfalls for the mass transfer of settlements into the European currency. In particular, the Italian national debt has a negative impact on the euro. It has risen to a historic high of 2.3 trillion euros and maintains an upward trend that may exceed 13% of Italian GDP in the future.

“All this puts pressure on the single European currency and undermines confidence in the reliability of the euro,” the expert said. In this regard, there is no reason to rush to "betray" the dollar in favor of the euro, especially since such actions rarely bring profit and carry risks of unjustified losses.

According to Mikhail Delyagin, another risk of abandoning the dollar is the high volatility of the currencies of developing countries. The Chinese yuan is down 6% this year. Turkish Lira quotes were down more than 30%. To settle with counterparties in national currencies, you will need to purchase the corresponding banknotes. Reserve accumulations in unstable currencies will lead to depreciation of funds stored in banknotes, which are not included in the number of reserve currencies of the world. Even if the fluctuations are insignificant. “If we multiply tenths and hundredths of a percent by the volume of trade, we will end up with losses of hundreds of millions and even billions of dollars,” Korenev warns.

In addition, foreign counterparties of Russia who agree to abandon dollar-denominated transactions will have to purchase rubles to settle accounts with companies in our country. We can talk about trillions of rubles. It will be difficult to realize this reserve on the international market. "Even countries friendly to Russia can throw this potential out into the free market, which will lead to a significant collapse of the ruble," Delyagin warns.

Stock traders claim that a number of large domestic companies have already begun to urgently diversify their investments. “Many market players have increased the share of the euro in their portfolios, counting on the transfer of some part of payments to this currency. In August alone, from the three largest Russian banks "flowed" $ 7.4 billion, of which $ 5.9 billion fell on legal entities, "reminds Korenev.

In this regard, according to Alexander Kuptsikevich, reducing the dependence of the Russian economy on the dollar is a long-term strategy that will not significantly support the ruble exchange rate. "On the contrary, such rhetoric will further increase the pressure on Russia from the United States and accelerate the introduction of sanctions, which is negative for the Russian currency," the expert believes.

Although the Russian authorities constantly state that they are working on plans to de-dollarize the economy and rid the largest industries of the American currency, they hardly have the opportunity to do this in fact, writes the Financial Times.

Commenting on the plan to abandon payments in American currency, Kremlin spokesman Dmitry Peskov said that this problem is urgent not only for the Russian Federation, but also for other countries. “This is an issue that is on the agenda,” he said in September.

“Saying it may be easier than doing it,” the British newspaper believes, however.

Russia is highly dependent on the export of raw materials and energy - and in these markets, the overwhelming majority prefers the dollar. And the Kremlin is unlikely to convince its Western partners to trade in the volatile Russian currency.

It is unlikely that the ruble will enjoy particular success among Russia's eastern partners, primarily China and India.

Many Russian financiers and politicians are constantly voicing the dream that the Chinese yuan should become the main reserve currency instead of the US dollar. Whether the People's Bank of China itself wants this, these dreamers do not ask him.

“The Americans will be just happy if Russia dumps all its dollar reserves, because this will lower the price of the“ dollar ”and thereby spur exports from the United States. But the list of catastrophic consequences for Russia is so long that it makes no sense to voice it all, "he told Ridus earlier, commenting on the" first swallow "of the anti-dollar campaign - the September statement of VTB head A. Kostin.

Initiatives of this kind show a complete lack of strategic long-term vision among those who put them forward, the expert continues.

“If Russia demands from the buyers of the same oil not dollars, but another currency, they will most likely agree, but on the principle“ any whim for your money ”. This means that all conversion costs and exchange rate risks will fall exactly on Russia, if the American dollar burns our hands so much that we are ready to suffer losses, just not to touch it, "Cherepanov predicts.

Almost all Russian exports and imports are carried out in US dollars, and neither the euro, let alone the yuan, can be compared with the volume of "dollar" trade. This could be done if import substitution in Russia reached 100%. But this is impossible and unnecessary.

All conversations and plans to undermine the dominance of the American dollar should therefore be discussed by psychiatrists rather than financiers, Artem Karapetyan (Yan Art), an expert of the State Duma Committee on Financial Markets, told Ridus earlier.

“Why destroy everything, if this“ everything ”works great, for everyone it is convenient and completely fulfills the functions that are assigned to“ it ”? As a rule, after such questions, the initiators of global financial revolutions fall into a stupor and cannot give a clear answer to them, ”he said.

If the initiators of the abandonment of the dollar believe that they will "punish" the United States by doing so, then they are terribly far from reality. It will probably be insanely painful for them to learn that this very initiative - to prohibit payments in dollars on the territory of the Russian Federation - was put forward by the Americans themselves.

In August 2018, US senators in the bill "On the protection of American security from the Kremlin's aggression" proposed to block the possibility of dollar payments for key participants in the Russian banking system.