Russia's de-dollarization efforts continue, in line with Putin's promise to lower the country's vulnerability to the ongoing threat of US sanctions, with officials eyeing energy exports next.
“We have a very good currency, it’s stable. Why not use it for global transactions?” Russian Economy Minister Maxim Oreshkin said in an interview with the Financial Times on Sunday. “We want (oil and gas sales) in rubles at some point,” he said.
“The question here is not to have any excessive costs from doing it that way, but if the broad ... financial infrastructure is created, if the initial costs are very low, then why not?” Oreshkin mused.
Despite less than 5 percent of Russia's $687.5 billion in annual trade being with the US, it remains that over half of that trade still relies on the dollar, according to Bloomberg figures.
But US sanctions now routinely delay Western companies' business with Russia, given they have to check with the US over whether those transactions are allowed.
Already, Russia's largest oil company has ditched the dollar in new oil trades, and that's only the beginning.
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Reuters summarized the economy minister's latest statements further, "Russia will be able to sell its energy exports in local currency given the popularity of the country’s domestic bonds among foreign investors, who own 29 percent of its ruble debt."
After two waves of US sanctions in 2014 and 2016 — related to the annexation of Crimea and alleged US election interference — Washington most recently barred its banks from buying sovereign Eurobonds directly from Russia, to which Russia's finance ministry responded by saying it would sell more debt to investors from Asia and Europe.
Though ultimately Moscow won't be able to give up the dollar completely, especially related to oil, Putin's desire to ditch the dollar is a trend that will continue to be realized, given the rapid improvement of infrastructure for transactions in alternative currencies.
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Moreover, less than 5% of Russia’s annual trade estimated at $688 bn is with the United States. The bulk of the trade is with China and the European Union (EU).
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London