The dollar is gradually losing its advantage in Russia’s trade operations with foreign partners. In particular, according to Bloomberg, in export settlements with China, the prevalence of the European currency over the American is becoming more noticeable. Already more than half of the goods purchased by the Celestial Empire in our country are paid in euros. This trend has been beneficial: the rise in the exchange rate of European money has made it possible to build up Russia’s gold and foreign exchange reserves to historical records. Nevertheless, a complete rejection of the dollar threatens to lead not only to an economic, but also a social catastrophe in our country.
The idea of de-dollarization of the external economy has long been condemned in domestic government circles. In particular, at the beginning of this year it was announced that the Ministry of Finance is starting to create a regulatory framework to change the structure of the National Wealth Fund, which will reduce the share of the US dollar by increasing new reserve currencies.
It should be noted that many foreign experts also dislike the dollar. The latest public forecast was announced by the former chairman of the board of directors of Morgan Stanley Asia, professor at Yale University Stephen Roach. According to him, in the near future, the dollar may collapse by 30-35%. In this regard, the European Commission initiated a package of measures to expand the use of the euro in the main strategic areas of the economy, including the purchase of oil and gas. Thus, Brussels expects to weaken the role of American banknotes in the energy sector, in particular, to establish operations to purchase “black gold” in Iran, which was imposed by Washington sanctions.
Summer 2020 turned out to be an extremely unfortunate period for the dollar. In July, the US currency hit multi-year lows, losing 4% against the Swiss franc, 5% against the euro and 6% against the British pound. According to currency analysts, for the dollar, the middle of this year was the worst period of time in the last ten years.
Experts assured that the United States was not capable of waging an economic war against a tenth of the countries of the planet with a population of more than two billion people and a total GDP of over $ 15 trillion. At the same time, any transactions that are carried out in dollars or pass through the divisions of American financial structures automatically fall under the rules of the US legal system. If sanctions have already been imposed on one of the participants in the transaction by Washington, then the market participants will have to choose: either to break off business relations with an unreliable state, in the opinion of the Americans, or to continue business ties with it, but end up on the list of exiles from the global financial system.
Nevertheless, of course, one should not discount the American currency. Until now, about 90% of all world trade operations from one side or another are carried out in dollars. A little more than a third of counterparties are settled in the European currency. Russia’s steps to abandon the dollar have failed to weaken the dominant role of the American currency in the global financial system.
“In order to abandon the dollar in foreign trade settlements, it will be necessary to convert our main export commodity, oil, into other currencies,” says Sergey Suverov, investment strategist of Arikapital Management Company in a statement to The Eastern Herald. “However, it will be practically impossible. Spot trade transactions between the two companies with a reorientation to the euro, yuan, or ruble can be carried out, but the original price will still be based on world quotations in dollars.”
In addition, it will be rather difficult to purchase many imported goods participating in the production chains of Russian enterprises, since the accountants of each plant will have to hire specialists to service such operations – transactions in the “ruble-dollar-yuan” format and vice versa. In this connection, for a long time, perhaps a year or two, the import of medicines that are not available to domestic medical institutions, or other technological innovations that are not yet available to Russian manufacturers, may stop.
“Nobody likes the rising dollar rate. But we are used to it as a necessary part of our life. When calculating the cost of vacation or large purchases, Russians first convert their potential savings into dollars, and only then identify them in their national currency. Without the dollar, Russia will return to the Stone Age, which could lead to the emergence of a black currency market, “Suverov said.