It will not be so easy to get rid of the dollar. Russia is already beginning to shun the Indian rupee for the payment of its oil.
Long-term dedollarization
The dollar’s status as an international reserve currency is eroding. Vladimir Putin’s efforts are bearing fruit, he who already declared in 2010:
“We should move away from the dollar which enjoys an excessive monopoly as the only international reserve currency. This privilege has unbalanced the global economy and made it vulnerable”he had dropped during a visit to Germany.
Good comrade, the Tsar had even made a foot call to the EU:
“We know there are problems in Portugal, Greece, Ireland and that the euro is a bit wobbly. But, overall, it is a solid and quality currency, which should take its place as a reserve currency. »
A decade later (June 2021), V. Putin accused the United States to use the dollar as an economic and political weapon. “Russia could consider settling oil and gas transactions in other currencies, including the euro”he had threatened.
Warning that it would be a blow for the American dollar, the Russian president had however declared that he had no intention of doing so. And then came the war between kyiv and Moscow.
In September last year, Russia finally stopped accepting the euro, dollar and pound sterling. For three reasons:
-Disconnection of Russia from the SWIFT payment network (for international transactions)
– Freezing of 300 billion dollars and euros belonging to Russia
-The Western embargo on the Russian economy
Since then, Russia has sold a good part of its oil to India, which pays in rupees. But that’s a problem…
The rupee is not the dollar
While the West has come together to try to isolate Russia, India is going it alone, very happy to be able to buy black gold cheaply. Its imports of Russian oil have increased by more than 1100%. Those of agricultural fertilizers of 300% and 200% for coal.
Unfortunately, India does not have so much to offer Russia in exchange. Indian industry does not know how to produce what the Russians need. Its components are top low-end for Russia.
This results in an imbalance in the trade balance. Russia is left with billions of rupees it cannot use.
India’s total exports to Russia have fallen by 12% to $2.8 billion over the past 11 months. Conversely, its imports from Russia have almost quintupled to reach the equivalent of 42 billion dollars.
” It is a problem “Foreign Minister Sergei Lavrov said Friday on the sidelines of the meeting of the Shanghai Cooperation Organization. “We have to use this money. But for that, these rupees have to be transferred to another currency, and that is what is being discussed”.
Indeed, the rupee is far from having the scale of the dollar. Unlike the greenback, it is not accepted around the world.
Internationalize the rupee
India has recently managed to convince a number of countries to accept the rupee as payment.
In other words, Russia will now be able to spend its rupees in several country What are Nepal, Bhutan, Myanmar, Sri Lanka, UAE, Iran, Iraq, Yemen, Bahrain, Oman, Qatar, Saudi Arabia, Syria, Jordan, Lebanon, Germany, Singapore, Kenya, England, Germany and Egypt.
So many countries that mainly have oil and gas to offer, which Russia does not need. But it still opens up the field of possibilities.
Russia would prefer to be paid in Chinese currency (yuan). The reason being that the Middle Kingdom produces many products desired by Russia. In particular smartphones, PCs or motors.
But this idea is struggling to pass on the side of New Delhi. Two Indian banking officials said earlier this year that the Reserve Bank of India (RBI) was not in favor of settling foreign trade in yuan.
Indeed, that would amount to making concessions to its great Asian rival. And despite the mediations of Vladimir Putin, the grievances remain.
The solution would be to use a stateless currency. A currency offering no privilege to any particular country. Bitcoin, which is a currency as well as a (two-in-one) payment system, is the obvious candidate:
Bonus, it is possible to transform its surplus electrical energy into bitcoin. This is what Argentina should do instead of contracting debts with China.
Its immense surpluses of hydraulic energy would allow it to mine bitcoins. Selling bitcoins abroad would reduce the pressure on the exchange rate. (Imported) inflation would be further reduced.
Argentina bans BTC purchases
In a statement released last week, Argentina’s central bank decreed the ban on exchanges from buying bitcoins abroad.
Argentina just doesn’t have enough bitcoin miners. So exchanges have to buy BTC abroad to meet demand. Problem, the central bank of Argentina has no more dollars.
Another problem, the inflation rate has reached 100%… Argentinians keeping their savings in pesos have seen their purchasing power halve in just one year!
Hence the recent poll push by Bitcoin-friendly candidate Javier Milei. The latter aims to let all currencies (dollars, euros, personal, etc.) compete within Argentine borders.
However, only very wealthy people can afford to buy prestigious real estate, master paintings or shares in American or European multinationals. The poor are massacred for lack of possessing desirable assets which appreciate as quickly as inflation.
All this has changed since the emergence of Bitcoin. Unlike a Picasso, it is possible to invest in Bitcoin from 10 dollars.
Chainalysis believes that Argentina is one of the countries where people are adopting bitcoin at the fastest rate. But when it’s too late, it’s too late…
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