“There has been an almost complete de-dollarization of bilateral economic relations,” said Russian Foreign Minister Sergei Lavrov during the latest meeting of the Council of Heads of Russian Regions, an advisory body that includes the leaders of all the country’s federal divisions. According to Lavrov, currently, more than 90% of mutual payments between Russia and China are made in rubles or yuan. Last year, this figure was as high as 95%.
On his recent state visit to China, Russian President Vladimir Putin also emphasized this figure along with the fact that from 2019 to 2023, the trade volume between the two countries have more than double: from the equivalent of US$111 billion to US$227.8 billion. “More than 90% of agreements between our companies are made in national currencies, so it would be more accurate to say that bilateral trade currently totals around 20 trillion rubles, or almost 1.6 trillion yuan,” the Russian president told the Chinese news agency Xinhua.
Almost at the same time, Bloomberg reported that advisers to Donald Trump (who will seek a new presidential term in this year’s US election, in November), are studying sanctions mechanisms for countries that try to de-dollarize their economies. The measures could include tariffs and export controls, among others.
For Carlos Correa, executive director of the South Centre organization, dollar dominance causes asymmetry, which has recently intensified due to its use as a geopolitical weapon.
“The dominance of the dollar, and in particular the SWIFT system, allows the United States to block any transfer, any commercial action of countries targeted by their so-called sanctions. This means that countries like Cuba, Zimbabwe, Iran and Venezuela can’t buy basic goods and medicines because potential suppliers foresee the possibility of sanctions,” says Correa.
On May 20, he took part in the 2024 Dialog on BRICS and Reform of the International Financial Architecture, organized in Beijing by the South Centre, the Beijing Club and the China Public Diplomacy Association. The event was attended by 50 experts and academics from China, Russia, South Africa, Brazil, the United States, the United Kingdom, Qatar, Algeria, Uzbekistan, Bangladesh and other countries.
Eighty years ago, the Bretton Woods agreement pegged the US dollar to gold and the currencies of the countries participating in the agreement to the dollar and created the World Bank and the International Monetary Fund (IMF). The agreement was abandoned in 1971, and in 1974, the dollar’s hegemony was renewed through a pact between the United States and Saudi Arabia to sell oil exclusively in dollars. At the time, Saudi Arabia was the third-largest oil producer in the world.
Alternatives
At the next BRICS meeting, to be held in October in the Russian city of Kazan, the report drawn up by the working group commissioned to assess the possibility of a common payment system will be delivered. This task was commissioned at last year’s BRICS summit in Johannesburg, South Africa.
A few months earlier, President Lula had raised the issue at the international level during his state visit to China.
Despite debates and demands about a possible common currency, at least among BRICS members, the option is not yet on the table. For Li Bo, director of the Chunqiu Institute for Development and Strategic Studies in Shanghai, the experience of the Euro Currency Unit could be an example for the group of countries from the Global South, which have already surpassed the G7 in GDP per Purchasing Power Parity, accounting for 35.6% against 30.3% for the group of countries from the Global North.
“The Euro Currency Unit existed for 20 years, and was actually used to stabilize the exchange rate between the main currencies of European countries, and to protect them from fluctuation and external shocks caused by the US or other parts of the world,” explains Li Bo.
“Therefore, this would be a good option for BRICS: to use this mechanism to better stabilize their internal trade,” he concluded.
Edited by: Rodrigo Durão Coelho
