Russia and China sign agreement to bypass dollar

The finance minister of Russia and the governor of China's central bank struck an agreement earlier this month to switch to domestic currency trading. The two countries have agreed that payments between the two countries should no longer be settled in dollars, but in rubles and yuan. This was announced by the Russian financial newspaper Izvestia on Friday well-known, which is based on a letter from the Ministry of Finance in Russia.

The letter states that both countries want to trade in national currencies to strengthen their economic security. It also states that work is already underway on new payment systems that should make this possible. Anatoly Aksakov, chairman of a Russian committee for financial markets, told the newspaper Izvestia that a system similar to the international SWIFT payment system is being considered.

Aksakov added that the two countries need to further develop their capital markets so that fluctuations in the exchange rate between the ruble and the yuan can be absorbed. He expects that this could increase the percentage of payments in rubles to China from 10% to 50%. Russia's VTB Bank and the Trade Bank of China should play a prominent role in the development of a new payment system, Izvestia writes.

Russia wants to reduce dependence on the dollar

In recent years, Russia has taken more and more steps to become less dependent on the dollar. The U.S. currency is still the main international currency, but Russia criticizes the way the United States handles that position. Russian President Vladimir Putin said earlier this month that the role of the dollar should be reviewed as it is increasingly used as a means of political pressure. Sanctions against Russian banks and companies are hampering international payments.

The central bank of Russia has also taken measures in recent years. Last year, for example, it increased its dollar reserves significantly reduced in favour of reserves in euros and yuan. Central banks are also buying more and more gold as a hedge against the dollar. In addition to China, Russia is also trying to promote trade in its own currency with allies such as Iran and Turkey. These countries are also increasingly seeing the dollar as a problem and are therefore looking for alternatives.