💸 The blocking of the reserves of the Bank of Russia by Western countries, coupled with large-scale financial sanctions against Russian banks and companies, have raised the question of whether the advantages of dollarization can be offset.

The non-economic risks of US dollar transactions and dollar-denominated assets have become apparent to everyone, especially to central banks.

The share of the American currency in international reserves has been steadily declining over the past decades, but this has been happening quite slowly. If in the early 2000s about 70% of the reserves of the world’s central banks were in US dollars, since 2020 it has been below 60%. There was no drastic reduction in US dollar reserves in 2022. Its share in reserves fell by 0.44 percentage points, while its share in interbank transfers even increased.

The main reason for such rigidity in the seemingly understandable increased political risks is the lack of serious alternatives that can absorb significant amounts of savings from central banks.

The de-dollarization of the global financial system will continue. This will be facilitated primarily by the development of technology in the financial sector. The development of automated trading platforms helps to reduce the cost of exchanging one currency for another. Central banks will seek to conduct direct clearing with each other, not directly using the currencies of developed countries.

In the future, the digital currencies of central banks can also be used for international transactions, reducing costs for economic agents. However, this is a rather slow process, writes Marsel Salikhov.

https://valdaiclub.com/a/highlights/de-dollarization-myth-or-reality/

#Valdai_WorldEconomy #dedollarization #dollar #economy #currencies

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💰 The US dollar (USD) as the major currency of international financial transactions and its use as global strategic reserve is key to US hegemony. This monopoly is being challenged for the first time.

Countries outside the collective West desire to shift away or at least diversify from using the dollar for international transactions and as strategic reserve currency. This collective anxiety of the global majority has accelerated after the US sanctioned Russia and froze billions of dollars of Russian strategic reserves.

The use of multiple national currencies in trade, of energy and food imports, are steps towards diversification and risk reduction. This gives countries outside the collective West options and choices that have become available as multipolarity consolidates. As dollar transactions decline, the value of US based strategic reserves will also decline – since the two are linked, writes Anuradha Chenoy.

https://valdaiclub.com/a/highlights/the-future-of-the-dollar-and-india-s-perspectives/

#ModernDiplomacy #dollar #dedollarization #BRICS #India

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🇷🇺🌍 What measures could help solve the problems of establishing foreign trade with the Arab world amid the current difficult situation facing Russia?

Among them, we highlight the following.

1️⃣ The use of the national currencies of the Arab countries, which are advantageous in terms of their characteristics, as a means of payment in bilateral trade between Russia and foreign countries. For example, using the UAE dirham in Russian-Indian trade to avoid the “imbalance trap” between exports and imports. From April 4 this year, trading in futures using the UAE dirham-Russian ruble and Indian rupee-Russian ruble currency pairs began on the Moscow Exchange.

2️⃣ Choosing the optimal national currencies of non-Arab countries to ensure transactions with Arab countries such as Syria. The issue of using the yuan was discussed in Damascus on April 29, 2023, at a meeting between President Bashar al-Assad and the representative of the Chinese government for the Middle East, Zhai Jun.

3️⃣ Promotion of digital currency projects with Arab countries with the technical assistance of Russia (similar to the Russian-Iranian agreement of 2018).

4️⃣ Encouraging Arab participation in multilateral financial, economic and investment projects in the BRICS, EAEU and SCO.

5️⃣ Connecting Arab companies and banks to national projects in the Russian Federation, for example, the Financial Messaging System of the Bank of Russia which has been operating since 2014 as an alternative to SWIFT. Currently 469 companies and banks from Russia and 12 foreign countries participate in it.

The dollar’s weakening trend does not mean that there are no challenges which may prevent other currencies from strengthening. The practice of the second half of the 20th and early 21st centuries showed that the transition of foreign economic activity to national and clearing currencies requires not only political will, but also economic conditions, writes Igor Matveev @Remarks_of_Orientalist.

https://valdaiclub.com/a/highlights/de-dollarisation-in-trade-between-russia/

#ModernDiplomacy #currencies #dedollarization

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