Putin Calls for De-Dollarization in Oil Trade

Beginning his new term in office, Russian President Vladimir Putin has made disengaging the US currency from the Russian economy one of his goals, stating that the dollar monopoly is dangerous. The announcement comes as Moscow and Beijing attempt to step up bilateral oil sales and financial cooperation.

Addressing the Russian Parliament following his inauguration, Putin called for “unburdening” Russia’s economy from the dangerous monopoly of the US dollar in the pricing of oil in global commodities markets, Sputnik reported.  

“We used to behave naively, but now we see that the World Trade organization rules are all too often broken, the restrictions are imposed for political reasons, which they call sanctions. Plus more and more of them are imposed to secure its favorite competitive advantages,” he said.

He stated that the new "restrictions", breaking the world trade principles, make the world see that monopoly of the US dollar is dangerous for many regions. According to him, de-dollarization should be promoted on principle, in order to preserve the country’s sovereignty. Putin didn’t name an alternative currency in his speech.

Amid US-led sanctions, Russian energy ties with China have deepened over the last several years, which has resulted in the country becoming China's biggest crude supplier, displacing Saudi Arabia and Angola.  

On January 1 a second pipeline for importing Russia's East Siberia-Pacific Ocean Crude began to pump oil, which doubled China’s import capacity to 30 million metric tons annually, according to China's state-run Xinhua News Agency. The first pipeline supplying crude from Russia directly to its eastern neighbor began operations in 2011.

At the same time, in December 2017, the Russian Finance Ministry announced plans to place an issue of yuan-denominated bonds worth $1 billion on the Russian domestic market in 2018. 

Prior to this move,  Putin endorsed the idea of creating a yuan-denominated investment fund; the idea had been proposed by the Russian Direct Investment Fund and China Development Bank. In July 2017, the organizations agreed to establish a joint 68-billion-yuan (some $10 billion) fund to contribute to direct investments, including within the framework of the China's "One Belt, One Road" strategy.

Separately, Russia and China are considering possibilities for cooperation on the issue of national payment systems, specifically, linking Russia's MIR payment system with China's Union Pay, as Prime Minister Dmitry Medvedev stated recently.