De-dollarisation: Broadening the Sino-Russian partnership to third countries
On March 21st 2023, Russian president Vladimir Putin announced that Russia will support the development of payments in Chinese RMB for use in trade with Asian, African and Latin American countries.
This latest development following Sino-Russian talks earlier this week signals a deeper entrenchment of the existing swap lines originally extended in 2017 and again in 2020 between Russia and China for an estimated ~$24.5b in bilateral trade. The swap lines enabled bilateral trade between Russia and China to be settled in their respective national currencies in order to circumvent any potential extraterritorial sanctions imposed by the United States. Another benefit the two trading partners enjoy is freedom from exchange-rate pass through as well as inflation-output volatility generated by intermediating trade invoicing via the US dollar.
So, what has changed?
In my book, I advocated the case that the Sino-Russian swap lines and bilateral partnerships would evolve into a platform (enabled by FinTech) upon which to attract multilateral trade for countries wishing to circumvent the dollar in order to realise the above-mentioned benefits. This is also particularly attractive given that the United States penalises third countries through secondary sanctions via fleeting contact.
In short, this latest move represents a precursor to a broader and deeper partnership in forging an extra-systemic trade ecosystem which undermines the United State's soft power influence throughout the second and third world.
All eyes should be laser-focused on the upcoming BRICS meeting in Durban, South Africa in August this year. Speculation that the BRICS intend to formalise an alternative 'unit of account' to act as a ‘synthetic hegemonic currency’ backed by a basket of commodities such as gold and crude have been circulating in recent months.
Understanding the implications of these developments is detailed in my book, Bad Money.
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