The more America imposes its sanctions on Russia, the more natural is the desire of the latter to avoid the risk of the consequences of these sanctions.
The rejection of the dollar in this regard is something that has been expected for a while, and is happening now.
Russia’s decades-long drive to reduce its dependence on the unpredictable US dollar reached a milestone as the share of exports sold in US currency fell below 50% for the first time ever.
According to central bank figures released late on April 26th, the main decline in the use of the dollar occurred in Russia’s trade with China: more than three-quarters of the dollar turnover was replaced by the euro. According to data for the fourth quarter, the share of the single currency in total exports jumped by more than 10 percentage points to 36%.
Multiple rounds of sanctions and the constant threat of future ones have prompted Russia to look for ways to isolate its economy from US intervention.
The central bank also cut its treasury holdings in international reserves, instead increasing the share of gold and the euro.
The move away from the dollar in trade with China accelerated in 2019, when the major oil company Rosneft switched to the euro. While the share of the single currency in trade with China declined in the first half of 2020, it rose sharply in the fourth quarter.
In April 2021, Washington imposed new sanctions on Russia, including restrictions on the purchase of newly issued sovereign debt, in response to allegations that Moscow was behind the SolarWinds Corp. hack. and intervened in last year’s US elections.
The Biden administration has said it is ready to escalate and strengthen sanctions if the Kremlin does not stop hacker attacks and attempts to intervene in the political process in the United States.
Russia must take urgent measures to reduce the use of the dollar to a minimum to eliminate dependence on “this” toxic source of constant hostilities,” Deputy Foreign Minister Sergei Ryabkov said in an interview in February.
This has, as mentioned above, been a trend for a while. Back in January 2020, Russian Foreign Minister Sergey Lavrov commented on the matter.
“Against the background of the increasingly aggressive use by the US administration of financial instruments of sanctions pressure, Russia continues its policy of a gradual de-dollarization of the economy. Simultaneously with our main partners, including India, we are working on economic and legal mechanisms to reduce the negative impact of restrictions on the development of bilateral trade and investment ties,” Lavrov said.
He explained that the move away from the dollar is due to the unpredictability of Washington’s economic policy and the blatant abuse of the dollar’s status as the world’s reserve currency.
“One of the priority areas is the expansion of settlements in national currencies. In June and October last year, the relevant intergovernmental agreements on settlements and payments were concluded with China and Turkey,” the minister added.
The BRICS countries have previously come to an understanding of the need for central banks to open corresponding correspondent accounts.
Now Russia and India are working on the development of a new intergovernmental agreement on the mutual protection of investments, which should increase the protection of Russian and Indian investors.
“The agreement on a free trade zone between the Eurasian Economic Union and India, which is currently being worked out, is also intended to contribute to this,” said the head of the Russian Foreign Ministry.