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38 I Cover story bne May 2023
reported that Delhi would rather not to settle deals with Russia in yuan and prefers using the UAE’s dirhams.
In April the Reserve Bank of India (RBI) invited additional central banks from
18 countries – including Fiji, Germany, Guyana, Israel, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, the UK, as well as several from Africa, including Botswana, Tanzania, Kenya and Uganda – to open special Vostro Rupee Accounts (SVRAs) that will allow them to settle payments in Indian rupees as part of a massive move to de-dollarise trade. In all the RBI has signed 60 SVRA agreements in the last year.
The UAE’s dirham is another candidate for settling international trade, as
its value is based on oil exports and trading. Russian oil is being increasingly traded on the Dubai exchange and the price quoted in the local currency as an alternative non-dollar market to those in the West for this oil.
The tense relations between China and India have made Delhi reluctant to hold or use yuan. Thousands of Indian and Chinese troops are locked in a standoff along their disputed Himalayan border since 2020, casting a shadow over the whole relationship.
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The dollar is becoming toxic in regular transactions, Russian Deputy Minister of Foreign Affairs Alexander Pankin told reporters on April 25, 2023. Several countries have drastically reduced their dollar reserves while increasing their gold reserves in 2022.
"These trends show that the US dollar
is becoming big, strong, but still toxic for everyday operations. It's not a mainstream trend, but I believe it might become a trend," Pankin added.
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But relations with Moscow have gone from strength to strength. India’s oil imports from Russia have risen from next to nothing in 2021 to 1.5mn bpd now and in the first quarter of this year some Indian refineries have started to pay for their crude imports in rubles, although the details of the interaction between the two central banks is still being worked out.
In the meantime, the UAE’s dirham remains the currency of choice for settling deals. The problem with settling deals using the Indian rupee is that it is only partly convertible – it has to be changed into dollars before it can be changed in other currencies – making it unattractive for Russia.
Digital future
Long term, Russia would like to get rid of national currencies altogether. The Kremlin has already launched a long- term project to introduce a CBR-regulated digital ruble, despite the regulator’s initial mistrust of electronic currencies.
The use of digital currencies in inter- national payments will be completely unrestricted, Russian Finance Minister Anton Siluanov said on April 22.
"We are launching an alternative system of payments based on modern
As bne IntelliNews reported, many countries are increasingly turning to the yuan as an alternative, but the first thing most have done is turn to the most ancient store of value: gold.
The leading Emerging Markets (EMs) have been freaked out by America’s weaponisation of the dollar as the mainstay of its extreme sanctions regime against Russia. For eight decades the dollar has been a diamond hard currency, but overnight Russia’s $600bn worth of hard currency reserves
technologies (digital financial assets, digital currencies)," the minister said. "Digital currencies could be used in cross-border payments. This is just at the earliest phase of discussions, but the future lies with the use of the digital ruble, the digital yuan and other similar currencies. This is a system of payments that is bound by no restrictions. Two parties come to an agreement, make settlement payments, and no other country could step in and freeze such payments," Siluanov noted as cited
by Tass.
Earlier, the CBR said that the entire system of cross-border payments would undergo a transformation and could be based on national digital currencies in five to seven years.
The Russians have also started work on building digital exchanges with their own coins to trade commodities like metal that also provide the backing
of the value of the coin. Like China’s emphasis on using trade to encourage the use of the yuan, Russia is hoping to use access to its vast store of minerals as a mechanism to get commodity traders to start settling deals using
a digital ruble and so abandon money altogether. But that is a very long- term project.
– the fourth largest in the world – was made useless. In a world where central bankers can no longer trust the dollar they have scrambled to bulletproof their own reserves by accumulating the agnostic yellow metal. This radical change has given real impetus to the long-mooted process of dumping the dollar as the preferred currency for international trade and hard currency reserves.
So far only Russia has taken the radical step of selling off all its currency