Russia’s Central Bank: “US Dollar Is Now An Unreliable Tool”

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Elvira Nabiullina, the Governor of Russia’s Central Bank, has been explaining why Russia has been adopting a position of “de-dollarization” over the past couple of years, a trend that is catching on in other countries including China and the BRICS nations. In broad terms, the issue is to do with reducing the economic and political risk that the contemporary United States poses to countries that do not follow US policies.

Stating that one of the tools to control external risks to Russia’s financial stability was the foreign-exchange reserve, which currently amounts to US$491 billion, Nabiullina also said that last year, the Central Bank of Russia reduced its share of US dollars in its of reserves from 45.8 percent to 22.7 percent. It has also cut its US bond holdings from US$96.1 billion to US$14.4 billion in September 2018, increasing its gold reserves and switching to transactions in other national currencies, such as the Chinese RMB and Indian Rupee.

“We continue the policy of de-dollarisation of the financial system, and the share of foreign currency loans and deposits is decreasing. External debt also continues to decline, having decreased by 12.4 percent over the year. In relations with major trading partners, we cultivate settlements in national currencies. These measures together reduce external risks of both economic and political nature for our country.” Nabiullina said.

The Central Bank of Russia’s overall perspective has been that “the dollar became an unreliable tool for payments in international trade due to Washington’s trade policies and constant sanctions against various countries around the world.”

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That position is gaining credibility – the BRICS nations have committed to introducing a non-US dollar transactional payment system based on cloud technology and using their own mutual currencies, while China and Russia have been developing China’s Union Pay system, which does the same.

However, whether this overall trend is successful is still very much open to debate. A recent article in the Financial Times “Can Russia Stop Using The US Dollar” illustrated the issues very well. Key to the issue is the behavior of China – just at a time when it too faces US sanctions in the form of duties being levied on thousands of Chinese goods. It remains to be seen what will happen. But with the upcoming SPIEF conference, at which both Chinese and Russian Presidents will meet, and the conference theme being ‘Creating a Sustainable Development Agenda’ the push to generate alternatives to US dollar settlement looks likely to continue.

As Konstantin Korishchenko, a former deputy chairman of the Russian Central Bank stated to the FT,

“De-dollarisation is possible to a certain extent, but it is not a question of whether you want to leave the dollar territory, but where are you going to go after that? Euro? Yuan? Bitcoin? What is the model of this next system?There is no one single solution, and there could be multiple choices. Each one has its own costs – we have to balance the costs of staying with the dollar and the costs of finding a new situation.”


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