Global powers Russia and China are gearing up to push their currency in world trade to jolt the US dollar, considered to be the default currency unit for international trade, a British economist said Wednesday.
According to Simon Hunt, "de-dollarisation" is gathering pace in EU and Asian trade markets with the likelihood of China and Russia's currencies (Russian Rouble and the Chinese RMB) being linked to gold and the eco-strategic alliance the two world powers are forming.
"Russia is selling oil and gas in currencies other than US dollar undermining the importance of the American petro-dollar. It is also converting its export revenue into physical gold," Hunt told IANS at an event organised by Confederation of Indian Industries here.
According to World Gold Council, Russia became the sixth largest economy to have gold reserves pegged at 1,187.5 tonnes while China ranks seventh with the official figure of reserves at 1,054.1 tonnes.
"Gold is a still a premiere currency where no fiat money including the US dollar can match it," he said.
Hunt said while the US dollar is on its way to decline in European Union (EU) as the recent move from the Swiss National Bank to push the Euro in ECB policy signals "mistrust with American policies and the world being US dollar," the superpower perceives the SCO and BRICS blocks as a viable threat to its hegemony.
According to the economist, China is swapping currencies and keeping Russian companies liquid by taking equity positions in state-owned enterprises, making loans and advances both within China and between the two countries.
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Hunt said a large group of countries centred on the Shanghai Cooperation Organization (SCO) and BRICS together with other emerging countries are keen to replace the US dollar with other currency formats with Russia getting the headway.
"The new world (developing and non US-allied nations) no longer wants to be dominated by America and want to divest themselves from being beholden to the US dollar," he said.
The Rouble, however, continues to be dependant on oil which may push Russia to enter actively in the geo-political scenario in the middle-east to push for strong oil prices while China will use loans in US dollar to convert it into assets measurable in RMB to push out the US dollar from its international transactions.
However, 32 percent comprising $4 trillion of China's forex is in US bonds.
China and Russia have also effectively switched to domestic currencies in trading using the financial tools comprising of 'swaps and forwards' amounting $25 billion to minimise the use of US dollar.