"May affect the economic leadership of the United States": the States are concerned about the policy of Russia and China to abandon the dollar

The United States plans to explore the prospects for de-dollarization in Russia and China.

Such information is contained in the report of the US Congressional Research Service.

According to representatives of the department, for more than ten years now, Moscow and Beijing have been striving to reduce the use of the dollar in their economies.

So, according to the authors of the study, countries are trying to protect themselves from the sanctions of Washington, as well as to reduce the influence of the economic and monetary policy of the States.

“Although Russia and China have somewhat reduced the use of the dollar in their trade, both countries, like most others, still rely heavily on the dollar ... However, over time, if efforts to de-dollarization bring results, this could affect American sanctions, the American economy, as well as the global economic leadership of the United States, ”the report says.

American analysts recalled that since the Second World War, the dollar has remained the dominant reserve currency in the global market.

This fact, in turn, allows the United States to maintain a leading position in the international financial and economic arena, experts say.

"The dominant position of the US dollar in cross-border transactions gives the United States unique significance and leverage through policies such as financial sanctions that impede access to the US financial system or the use of the US dollar in international trade," the report's authors emphasize.

Nevertheless, in the past few years, the share of the dollar in world reserves has been systematically decreasing.

So, if back in 2015 the American currency occupied about 66% of the total volume of global financial reserves, then by the end of 2020 the indicator dropped below 59%.

This is evidenced by the data of the International Monetary Fund.

One of the reasons for the observed dynamics was the trade wars conducted by Washington during the presidency of Donald Trump.

Viktor Supyan, professor at the Faculty of World Economy and International Affairs at the Higher School of Economics, shared this opinion in a conversation with RT.

According to him, the introduction of a number of tariff restrictions by the United States in relation to its partners had a negative impact on the position of the dollar as the main reserve currency of the world.

“Under Trump, the United States pursued a not completely balanced, chaotic policy in relations with its partners - it introduced sanctions against European allies, Canada, and also the countries of Southeast Asia.

Nobody liked this, of course.

As a result, in order to insure themselves against such unpredictable actions in the future, states began to actively switch to settlements in national currencies, ”Supyan explained.

In addition, the decline in the share of the dollar in global reserves may be associated with the growth of multipolarity in the world economy.

This point of view in an interview with RT was expressed by the analyst of FG "Finam" Alexey Korenev.

“The world is becoming multipolar, and countries are increasingly beginning to negotiate with each other, bypassing the United States.

I think this trend will continue, because the dominance of the American currency puts states in the position of being dependent on a certain "boss" in the person of the States.

Nobody wants this, especially Russia and China, ”added Korenev.

Beijing way

According to American analysts, now the dollar still remains an important component for the Chinese economy, and the US national currency occupies about 50-60% of the reserves of the Asian republic.

Experts attribute this to the fact that the United States is the largest sales market for goods from China.

In addition, Beijing still predominantly conducts payments for exports to other countries, as well as in the framework of the One Belt - One Road project, in dollars.

Meanwhile, China is actively taking steps to de-dollarize its economy.

In particular, the country is trying to increase the use of the yuan in trade deals with its partners, including Russia.

Note that over the past seven years, the share of settlements in national currencies between Moscow and Beijing has grown almost tenfold.

If back in 2013-2014, countries carried out 2-3% of all transactions in rubles and yuan, then by the end of 2020 the corresponding figure was about 24-25%.

This was previously stated by the Russian ambassador to the PRC Andrei Denisov.

In addition, Beijing has repeatedly shown interest in further developing the national payment system and promoting its own digital currency.

As noted by American analysts in their report, through such initiatives, China is trying to create alternative options for the global economic, financial, trade and technological networks, which are currently controlled by the United States.

“I believe that the global influence of the United States will decline, simply because they are physically unable to maintain the dominant that they previously possessed.

In this regard, China is a very powerful economic power, it is growing more and more actively every year and is likely to overtake the United States in the coming years.

Next in line is India.

It is assumed that by 2035 India will take second place after China, displacing the United States in third, "said Alexey Korenev.

Russian insurance

Russia, in turn, stepped up efforts to de-dollarize the economy in 2014, when Washington imposed sanctions on Moscow over the situation in Ukraine.

Subsequently, the United States began to increase sanctions pressure on Russia due to unsubstantiated "malicious actions" attributed to it, which included, for example, "interference" in the American elections.

• AFP

• © Stefani Reynolds / GETTY IMAGES NORTH AMERICA

As analysts from the Congressional Research Service note, in the issue of de-dollarization of the economy, Moscow is focused on three areas.

We are talking about reducing the share of the dollar in reserves, reducing the volume of settlements in the American currency when conducting trade operations, as well as creating its own national payment system.

Thus, Russia is trying to protect itself from the risks of new restrictions.

Natalya Milchakova, deputy head of the Alpari information and analytical center, spoke about this in an interview with RT.

“Within the framework of the sanctions rhetoric, Russia may prohibit operations with the dollar, at least to legal entities. This option is likely, it is not completely ruled out. The issue of disconnecting Russia from the international payment system SWIFT has also been repeatedly raised, which may complicate payments in dollars and other reserve currencies for export goods. So, on the one hand, de-dollarization is an attempt to hedge himself, ”Milchakova said.

In 2014, Russia, as an analogue of SWIFT, developed the Financial Messaging System (SPFS).

As noted in the Central Bank, the platform guarantees the uninterrupted transmission of payment orders within the country and abroad.

Also in 2014, after Visa and Mastercard stopped servicing the cards of several banks that fell under Western sanctions, a decision was made in Russia to create a National Payment Card System.

In addition, as part of de-dollarization in 2018, Moscow began to actively sell US debt securities.

Then, from March to May, investments in American bonds decreased by more than six times - from $ 96 billion to $ 14.9 billion, as a result of which Russia left the list of the largest holders of US government debt.

According to the latest data from the US Treasury, in May 2021, the figure dropped to $ 3.8 billion.

In addition, over the past three years, the share of the dollar in the international reserves of the Central Bank has more than halved - from 45.8% to 21.2%.

At the same time, the share of the euro increased by almost a third - from 21.7% to 29.2%, and the yuan - fourfold, from 2.8% to 12.8%.

Along with this, in June 2021, the Ministry of Finance and the Central Bank announced their decision to completely abandon the storage of funds of the National Wealth Fund in dollars.

Risk assessment

Against this background, American experts note that if Russia and China in the future still manage to "significantly reduce the use of the dollar", for example, by increasing the share of trade settlements in another currency or developing a digital currency, the United States may face certain "consequences."

In this regard, analysts have formulated several questions for their possible consideration by the United States Congress.

In particular, they are concerned about what factors could contribute to the success of de-dollarization policies in Russia and China, and what are the signs that the global role of the dollar may be under threat.

In addition, experts raised the question of whether Congress should oblige the US Treasury Department to prepare an annual report on the use of the dollar in the international economy.

"If so, should this report address the issue of the use of sanctions and the role of the dollar?"

- concluded the representatives of the research service.

• Reuters

• © Rick Wilking

One of the key challenges for the American currency in the foreseeable future may be the refusal of Moscow and Beijing from the dollar in payments for energy resources.

This opinion was shared by the head of the laboratory for the analysis of institutions and financial markets at the Institute for Applied Economic Research of the RANEPA, Alexander Abramov, in an interview with RT.

“If Russia and China manage to move the dollar in the field of settlements for oil and gas in the global market, and they convince producers in the Middle East to trade and price oil and gas not only in dollars, but also in another currency, then it will be an unpleasant surprise for the United States. ", - said Abramov.

A similar point of view was previously expressed by Russian President Vladimir Putin during a speech at the St. Petersburg International Economic Forum in early June.

As the head of state noted, the withdrawal of oil companies from settlements in dollars "will be a very serious blow" to the American currency and its status.

At the same time, the Russian leader declared his unwillingness to use de-dollarization in "political fights."

“We're not going to do this.

But the very logic of the development of the world economic system, the world monetary system, suggests that a plurality of reserve currencies is needed to guarantee the security and stability of the world economy and financial system.

We are thinking about this carefully, ”Putin stressed.