Putin did not "give up the dollar" before meeting with Biden

On the sidelines of an international economic forum in St. Petersburg, President Putin made a very resonant statement. According to the head of state, Russia will not abandon the dollar as a means of payment and the main reserve currency. This sounded in sharp contrast to all previous statements by the federal authorities, as well as to the decision of the NWF to bring to zero the share of the "American" in its reserves. How should all this be understood, and why financial policy country suddenly made such a "squiggle"?

Vladimir Vladimirovich stated literally the following:




Like this. And we thought. However, let's not flog a fever and try to calmly understand the situation. It is believed that the process of "de-dollarization" in our country began in 2014 after a sharp deterioration in relations with the West. Russia either threatened to disconnect it from the SWIFT system, or hinted at a ban on settlement banking transactions in dollars. In response, the Central Bank of the Russian Federation almost completely got rid of its assets, denominated in US Treasury securities. In parallel with this, work was underway to create a domestic analogue of SWIFT called the System for the transfer of financial messages (SPFS). To date, it has registered over 400 Russian credit and financial institutions, as well as a number of foreign banks, the system is represented in all regions of our country. In the event of a real disconnection of Russia from SWIFT, some kind of collapse, which they threatened us after the Ukrainian Maidan, will no longer occur. Then the NWF began to change the structure of its assets, reducing the share of the dollar in them in favor of the European and Chinese currencies. At the St. Petersburg Forum, Finance Minister Anton Siluanov announced his intention to bring the share of the "American" to zero. At the same time, the government plans to invest the liquid part of the National Welfare Fund not in foreign projects, but in the domestic infrastructure, which we will discuss in detail told earlier.

The most important thing in everything is that before us are not some abstract wishes and pointless conversations, but quite real deeds and actions. "De-dollarization" of the Russian economics It has been going on consistently for several years now, and this is not only some kind of small-town opposition, but an objective global process. Let's take a look at China, the world's largest manufacturing economy, for example.

During the presidency of President Trump, the United States began a real trade war against its main rival, and at the same time its partner, China. Amid the coronavirus pandemic from the Chinese city of Wuhan, relations between Washington and Beijing have only deteriorated. American senators have prepared a bill providing for the most stringent sanctions against the Middle Kingdom, up to the freezing of its assets, for allegedly concealing information about COVID-19. In addition to this, Donald Trump signed legislation imposing sanctions on China for his interference in Hong Kong affairs. Given these risks, Beijing is trying to protect itself as much as possible from restrictive measures by the United States in relation to its foreign trade. One of the easiest and most reliable ways is to transfer payments from dollars to other currencies, primarily the yuan.

In numbers, this "Chinese-style de-dollarization" looks like this. Until 2014, the share of national currencies in settlements between Russia and China was 2-3%, and the “American” accounted for about 90% of the total volume of transactions. However, already in 2016, the share of the dollar was 80%, and in 2019 - 51%. The psychologically important 50% mark was broken in 2020, when the US currency accounted for only 46%. It began to be replaced by the European and Chinese currencies, the share of which increased to 30% and 17%, respectively. Note that the ruble accounts for only 7%, which is not surprising, given its volatility and Beijing's desire to strengthen the position of its own yuan.

According to the expert community, in the future, up to 50% of mutual Russian-Chinese trade can go to our national currencies. This should be facilitated by the creation of the so-called "digital yuan" and "digital ruble". In addition to reducing political risks, this can be even more beneficial than traditional banking operations in dollars, since financial losses during forced conversions and recalculations during transactions are reduced. The structure of trade between Russia and the European Union is gradually changing. Since 2016, we have been trading with the EU mainly in euros, the share of which reaches 46%. The value of the ruble as a means of settlements with the European Union has also grown, which now accounts for 17%. Also, the Russian ruble is the basis of our country's trade with the CIS countries - 60%.

So, the process of “de-dollarization” is objectively going on and is only developing continuously. So why did Vladimir Putin say that Russia does not intend to completely abandon the dollar?

In fact, a complete rejection of the "American" is not beneficial today for either Moscow or Washington. Russian resource exporters need a hard, freely convertible currency, and the United States is not interested in the Kremlin completely off its hook by creating an independent financial system. For this reason, obviously, the dollar will retain its importance as a means of international settlements for a long time to come, but the scale of its presence will continue to decline steadily, diversifying the political risks of the main competitors of the United States.