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Russian companies ‘de-dollarize’ and switch to yuan, other Asian currencies

Published time: June 09, 2014 11:54
Edited time: June 11, 2014 09:30
Reuters/Petar Kujundzic

Reuters/Petar Kujundzic

Russia will start settling more contracts in Asian currencies, especially the yuan, in order to lessen its dependence on the dollar market, and because of Western-led sanctions that could freeze funds at any moment.

“Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies, and to set up accounts in Asian locations,” Pavel Teplukhin, head of Deutsche Bank in Russia, told the Financial Times, which was published in an article on Sunday.

Diversifying trade accounts from dollars to the Chinese yuan and other Asian currencies such as the Hong Kong dollar and Singapore dollar has been a part of Russia’s pivot towards Asian as tension with Europe and the US remain strained over Russia’s action in Ukraine.

Since Crimea voted to rejoin Russia, the US government has imposed Cold War era sanctions, which have hurt the Russian economy and have slowed lending and investment activity.

VTB, Russia’s second largest bank, intends to increase the amount of non-dollar settlements, according to the bank’s president Andrey Kostin.

In May, Russia’s biggest gas producer, Gazprom, announced it wants to start trading shares in Singapore, obtaining a listing as early as July, the company said. Just before that Russia’s state-owned gas giant inked a $400 billion gas deal with China.

“Given the amount of bilateral trade volume with China, of course, we are working on the expansion of settlement in rubles and yuan,” Kostin said at a meeting with Russian President Vladimir Putin, adding this is a goal the bank has been moving towards since May.

Russia's Universal electronic card based on PRO100 payment system, RIA Novosti/Maksim Bogovid

A new payment plan

Russia's main tasks are expanding currency operations and creating Russia’s own forthcoming national payment system.

The Central Bank of Russia is working on creating a national payment system, which both China and Japan have already established, and is expected to be up and running within four months.

Alexander Dyukov, the CEO of Gazprom Neft, the oil division of Gazprom, has been very vocal about ditching the dollar over escalating pressure from the West.

"This shows that in principle there is nothing impossible - you can switch from dollar to euro and from euro, in principle, to rubles," Vedomosti quotes Mr. Dyukov.

He has also said the company has discussed with customers the possibility of shifting contracts out of dollars, while Norilsk Nickel told the FT that it was discussing denominating long-term contracts with Chinese consumers in renminbi.

As of now, Russia is not preparing any countermeasures against the West, Putin’s chief advisor to the EU, Andrey Belousov has said.

“As long as Russia is not subject to systemic sanctions, which could bring an artificial limit to our economy’s access to dollars . . . then I don’t think Russia will take any steps in order to bring about artificial de-dollarization,” the FT quoted Belousov as saying.

Another swift move Russia has made towards Asia is the establishment of a joint rating agency with China, to replace more "biased" agencies like Fitch, Moody’s, and Standard & Poor’s.

Comments (102)

 

Kristophr 19.08.2014 05:15

Karl Marx 09.08.2014 15:03

The total value of every gram of gold ever mined, at $1,200/oz, is about 6 trillion dollars.

  

Gold prices have been held at artificially low levels by naked shorts on the COMEX by US banks. And every time they do it, China and Russia grab some of those shorts and take physical possession.

Do not assume that gold will be as cheap as $1200/oz once the COMEX is forced to show empty pockets when they can't deliver the metal on purchased shorts.

 

Kenneth T. Tellis 11.08.2014 00:17

At some point in time the U.S. Dollar will have to be replaced by another currency, just as the U.S. Dollar replaced Sterling soon after the Suez Crisis in 1956. So, that time has come when the U.S. Dollar will be replaced by Chinese or Russian currency, the only question now, is when will this switch over take place?

 

Karl Marx 09.08.2014 15:03

[quote name='just some guy' time='14.06.2014 23:57']
gold is always on the up. so would a 100% gold backed currency
[/quote ]

Last year I did the research. The total value of every gram of gold ever mined, at $1,200/oz, is about 6 trillion dollars. Silver, at about $20/oz is worth about 500 billion dollars. Platinum came in at about 300 billion.

On an average day in America, we have over 9 trillion dollars in our checking and savings accounts.

T here isn't enough gold and silver on this planet to back even our nation's money.

It's time to figure out some other way to "back up" our money. Gold won't do it.

View all comments (102)
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