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Currencies
OpinionComment
Brian P. Klein
Brian P. Klein

The View | Why Russia and China’s move to shift world away from the US dollar is doomed to fail

  • Attempts to de-dollarise global trade so Russia can keep selling commodities are running into difficulties while the rouble continues to depreciate
  • The US dollar’s role as a freely exchangeable currency recognised the world over is withstanding attempts to weaken the West

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Egyptians wait at a currency exchange office in Cairo on March 22. The US dollar continues to serve a valued purpose as a freely exchangeable currency recognised in practically every country. Photo: EPA-EFE
Brian P. Klein
Russia has been cut off from the global financial system for more than a month now as its war on Ukraine continues. That has led to calls by Moscow to de-dollarise global trade so it can continue selling oil, gas, wheat and other commodities. It would take rupees, yuan or maybe even barter.
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The result was speculation about the death of the US dollar as China and India considered their now-increasing purchasing power over a declining rouble. Avoiding the US currency, however, will turn out to be far harder than it seems.

Russia’s plan to replace the dollar is already starting to fall apart. Even though Indian Prime Minister Narendra Modi had said he was open to a rouble-rupee exchange for goods – India imports a significant amount of military weapons and natural gas – Moscow then said it wanted gas payments in euros instead.

It turns out Russia doesn’t want Indian rupees. Russian exporters are getting far less for their goods. The depreciating rouble has weakened about 18 per cent against the rupee versus only 12 per cent against the euro.

And while Beijing is a stalwart ally of Moscow and talking up a new Sino-Russian bloc to counter the United States and Nato, Chinese traders have been reluctant to do business with their Russian counterparts over fears they won’t be paid.

04:01

How international sanctions imposed since Ukraine invasion are hitting Russia

How international sanctions imposed since Ukraine invasion are hitting Russia
China’s yuan is unlikely to be a global challenger to the US dollar in the short term because it is still not freely convertible. To rival the US currency as a medium of international business and store of value, its exchange rate would need to be freed from a relatively narrow band set by Beijing. That is still a move too far.
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