- Another delay to a bilateral payments system shows how tough it is to develop an alternative to the US dollar
- But the rise in Russia-China trade means the two countries won’t abandon the mission, analysts say
Russia and China plan to ditch the US dollar and switch to local currencies in international trade but yet another delay to a new system for yuan-rouble settlements shows just how complex it is to develop an alternative to the greenback.
Russia, China and a number of other countries are aiming to cut their dependence on the US dollar, as Washington uses access to the dollar payment system as a weapon to punish nations and individuals for breaking US laws, even outside the United States.
In November, Russian Finance Minister Anton Siluanov said that Moscow and Beijing were finalising a memorandum to settle more bilateral trade in the rouble and yuan.
The two countries were also reportedly in talks to launch a new cross-border system to improve direct payments of trade invoices, and for the use of China’s UnionPay credit card in Russia and Russia’s Mir card in China.
But late last month, Russian media quoted Siluanov as saying that Moscow had decided to step away from Beijing’s proposed plan.
Talks would continue between the two countries’ central banks, as well as between Russia’s Ministry of Finance and China’s Ministry of Commerce, the reports said, without offering details of the plan.
Given the growth in Russia-China trade and their opposition to US sanctions via the dollar payment system, Beijing and Moscow were likely to keep working towards a system acceptable to both sides, analysts said.
Like a growing number of countries, China and Russia are keen to work out an alternative to protect their banks and bankrollers from the US’ secondary sanction power of prosecuting entities that deal with sanctioned companies or individuals from Russia, Iran or Venezuela.
But other nations, such as India, aim to enter a bilateral arrangement to cut their ballooning trade deficit with China. It’s no easy task though – just before the deal with Moscow was put on hold, Beijing rejected an Indian proposal for a rupee-yuan transaction system.