Russian President Vladimir Putin recently indicated that Washington was “making a colossal strategic mistake” by “undermining confidence in the dollar” amid Russian plans to reduce the country’s dependence on the US currency in global trade.
The Russian Ministry of Finance is considering the possibility of switching to the use of the euro with its European trade partners, including in the trade of energy resources, Deputy Finance Minister Vladimir Kolychev said.
“Here, we can see, at least in the initial stage, the main opportunity which can be realized in the short and medium term — the transition to settlements in national currencies with our European counterparts, including settlements involving the euro, and including for the delivery of our energy commodities,” Kolychev told reporters on Monday.
Such a decision would benefit Russia’s European partners in several ways, according to the official. “This would, on the one hand, strengthen the euro’s position as a reserve currency, and on the other hand provide a sort of security for such [energy] deliveries if the US were to make some decisions affecting dollar settlements for our banks and our large energy companies,” Kolychev said.
A transition to euro payments would be simpler, the deputy minister suggested, because the euro is already a reserve currency, and it would be logical to expect interest in this idea from European companies. The official noted that companies facing sanctions already face difficulties in settling their foreign trade contracts due to the “peculiarities of currency control,” and that the use of the euro would help alleviate that problem.
Moscow has recently indicated that while it is not seeking to completely abandon the use of the US currency, it is taking measures to reduce dependence on the dollar by promoting bilateral trade using other national currencies. Last Thursday, Finance Minister Anton Siluanov told reporters that plans in this direction had been prepared and submitted for study by the government. Last month, VTB, Russia’s second-largest bank, laid out a plan consisting of four priority tasks which would need to be implemented in order to reduce the Russian economy’s dependence on the de-facto world reserve currency.
In an address to the Russian Energy Week summit on October 3, President Vladimir Putin said that Washington’s sanctions policy had only served to undermine the dollar’s credibility. The US, he said, was “biting the hands that feeds them,” and “making a colossal strategic mistake” by undermining global confidence in their currency. This past summer, US lawmakers threatened to introduce new sanctions against Russia, targeting the country’s sovereign debt and energy projects, on the pretext of alleged Russian meddling in the 2016 presidential election. Late last month, Bloomberg reported that the bill was unlikely to be passed before the November midterms. Earlier this year, Russia sold off tens of billions of dollars’ worth of US Treasury bond holdings, dropping out of the top-33 biggest holders of US sovereign debt. Russia has also indicated a preference for trade with its other partners, including China, Iran and India, using national currencies.