Some Russian firms are trying to deal in something other than dollars. Even if they succeed, their quest will only be a testament to the dollars standing.
Its not clear whether the move from the dollar is a real trend or just talk. There is certainly some talk. Deutsche Banks Russia chief and the chief executive of Russian state bank VTB were quoted by the Financial Times on Monday as saying there was growing interest in using the Chinese yuan and other Asian currencies, in large part to avoid possible sanctions. Last month the chief executive of Gazproms oil division said that many clients had agreed to switch from payment in dollars to payment in euros and yuan.
Russia may follow Iran, another target of US official ire, in promoting a de-dollarisation of the energy and commodities markets. But sanctions are not the only reason to break free of the dollar. Rising economies such as China would like to escape the sway of US monetary policy and swings in the dollars value.
The dollar, however, looks almost as powerful as ever. Otherwise, Russian firms wouldnt be so worried. The United States doesnt make it into the top five destinations for Russian merchandise exports, buying less than three per cent of the total, according to the most recent World Trade Organization figures. Yet three-quarters of Russias exports are fuels and agricultural and mining products, which are all still usually denominated in dollars.
Little wonder if Russian companies want to deal in yuan with China, Russias second-biggest trading partner. But while this may circumvent the US currency, the alternative still shows the extent of Americas global sway. After all, the yuan is informally linked to the dollar, while the Hong Kong dollar another alternative said to be under consideration is explicitly pegged to the US currency.
The Americans exorbitant privilege will not last forever, even if US politicians become less irresponsible. When the new economic powers become powerful enough to impose a new arrangement, they will do so. But so far, the dollar remains firmly on its perch.
