"This Is A Trend": Increasingly More Russian Companies Set To Drop Dollar, Switch To Chinese Yuan

Tyler Durden's picture




 

As we have been reporting (and forecasting for the past several years), the Eurasian anti-US Dollar axis is rapidly taking shape, with recent events catalyzed and certainly accelerated by US foreign policy in Ukraine, which has merely succeeded in pushing Russia that much closer, and faster, to China. The latest proof of this came overnight when the FT reported that Russian companies are preparing to switch contracts to renminbi and other Asian currencies amid fears that western sanctions may freeze them out of the US dollar market, according to two top bankers.

According to Pavel Teplukhin, head of Deutsche Bank in Russia, cited by the Financial Times, "Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies and to set up accounts in Asian locations."

Andrei Kostin, chief executive of state bank VTB, said that expanding the use of non-dollar currencies was one of the bank’s “main tasks”. “Given the extent of our bilateral trade with China, developing the use of settlements in roubles and yuan [renminbi] is a priority on the agenda, and so we are working on it now,” he told Russia’s President Vladimir Putin during a briefing. “Since May, we have been carrying out this work.”

“There is nothing wrong with Russia trying to reduce its dependency on the dollar, actually it is an entirely reasonable thing to do,” said the Russia head of another large European bank. He added that Russia’s large exposure to the dollar subjects it to more market volatility in times of crisis. “There is no reason why you have to settle trade you do with Japan in dollars,” he said.

The chief executive of a Russian manufacturer that derives 70 per cent of its revenues from export in US dollars said his company had done the groundwork to move its contract settlements to different currencies in the event of further sanctions. “If something happens, we are ready to switch to other currencies, for example to the Chinese yuan or the Hong Kong dollar,” he said.

While the move to open accounts to trade in renminbi, Hong Kong dollars or Singapore dollars "highlights Russia’s attempt to pivot towards Asia as its relations with Europe become strained", is hardly surprising given recent events, one wonders how much of last night's sudden bout of renminbi strength may be due to Russian capital inflow. And while that particular move was certainly more driven by the PBOC and recent rehypothecated metal concerns pushing Chinese imports lower, the biggest question is how will Russian demand for the Chinese currency impact what has been a clear trend in recent months by Chinese authorities to weaken the national currency.

The punchline, again, is that what Russia is doing is merely the appetizer of what other G-20 countries, many of which already angry at the US over IMF voting power shennanigans, may end up doing in their own bilateral trade arrangements with China which suggest even further de-dollarization as the Renminbi becomes progressively more important on the global FX stage.

"It looks like this is not just a blip, this is a trend," said Mr Teplukhin of Deutsche Bank. He added that Russian companies were able to hedge the risk of further US sanctions by “changing the letter of their contracts to allow them to change currency if it is necessary”.

But perhaps most important are the next steps laid out by the Kremlin which has explained under what conditions it will "de-dollarize" more:

Some politicians have suggested Moscow should respond to western sanctions by entirely “de-dollarising” its economy. But while in recent discussions with big business about how to make the economy less vulnerable the government has advocated listing back home and settling more trade in currencies other than the dollar, it has rejected more extreme measures.

 

“As long as Russia is not subject to systemic sanctions, which could bring an artificial limit to our economy’s access to dollars . . . then I don’t think Russia will take any steps in order to bring about artificial de-dollarisation,” said Andrei Belousov, economic adviser to Mr Putin.

In other words, as we said all along, more western sanctions, more dropping of the USD. And now Russia has the trump card, because if it wants to show the world that the Russia-China axis does not need Uncle Sam's greenbacks, it just needs to be more "aggressive" toward Ukraine setting off new sanctions, and being "forced" to de-dollarize that extra bit more. Rinse, repeat.

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Mon, 06/09/2014 - 07:55 | 4836478 HamRove
HamRove's picture

US : MOAR SANCTIONS!!!!!

Mon, 06/09/2014 - 07:58 | 4836482 RafterManFMJ
RafterManFMJ's picture

US foreign policy - like a retard in a china shop.

Mon, 06/09/2014 - 07:58 | 4836486 economics9698
economics9698's picture

Fuck the tribe.

Mon, 06/09/2014 - 08:15 | 4836521 SWRichmond
SWRichmond's picture

let's see...who have we not pissed off yet...

anyone who cannot see that America is being deliberately dismantled does not have their eyes open

Mon, 06/09/2014 - 08:20 | 4836531 lakecity55
lakecity55's picture

"Backdoor Barry." What a guy!

Mon, 06/09/2014 - 08:33 | 4836572 GetZeeGold
GetZeeGold's picture

 

 

The most transparent president.......EVA!

Mon, 06/09/2014 - 08:36 | 4836578 Badabing
Badabing's picture

This is all related, the Chinese need to unwind the copper and aluminum paper fraud so commonly used by western banks for price control.

To do so they need to spend currency, do you think China will use the Yuan when they hold a trillion in $?

Is it the Yuan that’s strengthening or the Western Reserve Currency weakening?  

http://www.zerohedge.com/news/2014-06-08/pboc-hits-panic-button-strengthens-currency-most-20-months

“This is a Trend” I suggest we start using the Yuan also….. oh wait!  

What else can we use?

Mon, 06/09/2014 - 08:51 | 4836602 THX 1178
THX 1178's picture

The petrodollar meets it end.

Mon, 06/09/2014 - 09:06 | 4836644 philipat
philipat's picture

Next step, China, as the world's largest importer of crude, goes to the Saudi's (Who are already pissed off with the US) and says, "Hi King, as the world's largest importer of crude, we would like to pay you in RMB". Thanks, we thought you would see it our way....

Mon, 06/09/2014 - 09:11 | 4836660 Winston Churchill
Winston Churchill's picture

Already an inked deal.

Just waiting on the Shanghai FTZ to be up and fully running.

Mon, 06/09/2014 - 14:31 | 4837860 Harlequin001
Harlequin001's picture

We are now unofficially back on the gold standard, but this time without a UK bank 'Fix'...

Mon, 06/09/2014 - 10:03 | 4836849 Citxmech
Citxmech's picture

And the response to that just might be a renewed Arab Spring in Saudi maybe?  Why do y'all think we're cozying up to all these shit disturbers anyway?  They are our new army of bezerkers.  Not very controlable - but useful, nonetheless.

Now, if one of our carriers off the coast gets vertilated with a Sunburn from somewhere - that'll might be a gamechanger.

Mon, 06/09/2014 - 10:55 | 4837038 BorisTheBlade
BorisTheBlade's picture

China can both pay in RMB and USD. In fact, China might become alternative supplier of USD to any craving it for any reason, they have nearly 2 trillion of those.

Sanction this.

Mon, 06/09/2014 - 10:09 | 4836725 _ConanTheLibert...
_ConanTheLibertarian_'s picture

I love the smell of burning petrodollars in the morning.

Mon, 06/09/2014 - 09:16 | 4836677 Eeyores Enigma
Eeyores Enigma's picture

It matters not what currency all these announcements choose. Everything in the world is priced in DOLLARS!!!!!!!!!!!!!! even all of these other currencies.

After we have another world war who ever wins (as if) can set the rules for all the other countries. Lets see..... who has the biggest military.....times 10?

Mon, 06/09/2014 - 10:14 | 4836888 Peak Finance
Peak Finance's picture

That's not how it works. 

PRICE does not matter.

IF you are a country and you have to pay for something in dollars, you need to somehow get your hands on those dollars in order to pay your bills, you need a foreigh income in USD (swaps and such) or you need to buy dollars on the open market.

If you are going to pay (settle) in RMB, this means that you do not need to buy or in some manor get your hands on USD at all, which drops net demand for the dollar. 

That's why all of these stores are such a big deal, it's a chipping away at the need to use the dollar.

About the comment on war, well, we are completely broke. So, iF we go to war, we go to war financed with printed dollars, and it all just comes down that much faster. Plus, iF it't not really clear now that the military is a paper tiger then you have not been paying attention. 

Mon, 06/09/2014 - 10:20 | 4836919 Government need...
Government needs you to pay taxes's picture

Agree on the military being a paper tiger.  As soon as drones were pumped as the next big thing, I perceived our military was rapidly weakening.  Drones can't hold ground.  They are cheap, and most are slow.  The US is losing its space capabilities as well.  Perhaps it is for the best, our leadership couldnt recognize the moral high ground if they happened to be standing on it (which they haven't been for a LOOOONG time).

Mon, 06/09/2014 - 11:32 | 4837152 angel_of_joy
angel_of_joy's picture

Drones are just the Iphone equivalent of the US military technology...

Mon, 06/09/2014 - 12:03 | 4837257 DaveyJones
DaveyJones's picture

I can't believe an empire would end by running its currency and military into the ground and having everyone hate it.  

Mon, 06/09/2014 - 10:45 | 4837006 headhunt
headhunt's picture

The flip side is that China does not want to strengthen their dollar (RMB), this undermines their ability to manufacture and export. It is more important to them that they maintain their strong internal economy then to help Putin get even with the USA.

Putin is alone on his economic gangplank and does not know it.

Mon, 06/09/2014 - 11:51 | 4837220 Panafrican Funk...
Panafrican Funktron Robot's picture

You are thinking inside a box of obfuscation.

It's this simple:  to the extent that you control energy, you have geopolitical power.

Now think through who controls what/how much domestic and international energy resources.

Mon, 06/09/2014 - 14:32 | 4837861 headhunt
headhunt's picture

Ah energy... the porn of economies.

If you can monopolize the energy needs of your neighbors you can set your price and bully your neighbors - for a while.

Mon, 06/09/2014 - 13:56 | 4837675 SDShack
SDShack's picture

Your scenario ONLY works if the trade involves USSA dollars. China has effectively become strong enough on their own to cut out the middleman. If you set up direct trade agreements between the buyer and seller (neither in this case being USSA), then you can dictate the transaction in only those currencies. The trade happens outside the USSA dollar, so your entire premise falls apart. You are still thinking in a USSA dollar centric world... and that is soooo 90's.

Mon, 06/09/2014 - 14:11 | 4837767 headhunt
headhunt's picture

It is not my scenario but the physics of economies, China has no desire to have its currency as the international fiat dollar.

They would not be able to hold the RMB at artificially low values which enables them to manufacture and export to the world which keeps their economy vibrant, growing and more importantly their people happy.

With a strong RMB, things go to hell in a hurry for China and they would not allow that to happen just to please Putin. 

Mon, 06/09/2014 - 19:46 | 4838998 MeelionDollerBogus
MeelionDollerBogus's picture

There is no physics of economies.
You are a creature of faith & no evidence supports your assertions or projections. None.

With a strong RMB China buys up the resources of Earth and may have a 1000-year dynasty uncontested by America, Russia or anyone else.

Tue, 06/10/2014 - 07:24 | 4839880 headhunt
headhunt's picture

With a strong RMB Chinas manufacturing and export advantage vanishes and so does their income/profit.

No money, no 'buys up the resources of Earth' - there is a physics to everything in this universe.

Tue, 06/10/2014 - 18:21 | 4842131 MeelionDollerBogus
MeelionDollerBogus's picture

If you really think there are physics of economies you must back up this claim.
#1 equations
#2 solid physical evidence proving the equations, relations, laws & theories
To date what's been published has turned out to be nonsense. Chaotic unpredicable factors in distribution of prices, supplies, demand, creation of new inventions gone to market & loss of desire then for older technologies and/or resources, & changes of markets due to war, all have failed to be matched to equations, laws, theories as a "physics".

China doesn't want an export advantage. China wants an IMPORT advantage. They want resources IMPORTED more than anything else.
Income/profit is not to be measured in dollars, yuan, yen, euros, but in tonnage of copper, gold, silver, grains, and of course barrels of oil.
You've completely misread the situation.
Stronger yuan = buy ALL the resources of the Earth.
Export-advantage = NOT buying enough resources of the Earth.
Can't have it both ways. One must exclude the other in the fiat realm.

Even me with my scatterplots,
http://flic.kr/p/f5bHkJ
http://flic.kr/p/ikyjpz
http://flic.kr/p/kppK2Z
I have simply shown the relation of "how things are right now" not how they always have been (they haven't) or will be (they won't). And no one on here's been posting charts more advanced than mine.
Even the only other contributing editor posts I've seen with scatterplots has failed to break them down into time-windowed trends or has plotted things which have no relation (as visible in the plots) and then made a long article about nothing to follow.
Such scatterplots show only that there's no relation to use & therefore to conclude perhaps to ignore one or all of what was plotted to invest in OR to consider profit in each to be mutually exclusive over a specific time window.

It's on you to show your homework, data sources & math.
My data source for spreadsheet imports is http://www.freestockcharts.com as it permits CSV data export.

Mon, 06/09/2014 - 19:44 | 4838990 MeelionDollerBogus
MeelionDollerBogus's picture

China absolutely wants more purchasing power from their yuan. Absolutely.
What they don't want is to let US dollars get the better of them in the process.
This is how you get both jobs done at once: devalue utility & confidence of USD while raising yuan's purchasing power, which is definitely a top goal.
You're delusional to conclude the opposite.

Putin is not alone: he has most of the globe on his side economically, by land area & by populace.

Mon, 06/09/2014 - 19:42 | 4838979 MeelionDollerBogus
MeelionDollerBogus's picture

Nothing I pay for is priced in US dollars. Many places around the world locally reject US dollars.

You'll see this expand. you're delusional to think things are forced into dollars for us all. Delusional.


America does not have the biggest military. The most man-power is with the Chinese. The biggest nukes is with the Russians. Welcome to Hell: you thought you were the big kid but you're #2 at best.

Mon, 06/09/2014 - 11:31 | 4837149 turnoffthewater
turnoffthewater's picture

What did we do before the Bretton Woods reserve currency? Oh maybe, every country had to compete. What a novel concept. Amazing grace (no reference to the left or right or for the middle if that matters, ok?). Oh sorry, just amazing (thats for everyone)! Get in the soup line and don't talk, say anything or think freely (just feel grateful)

Mon, 06/09/2014 - 19:38 | 4838973 MeelionDollerBogus
MeelionDollerBogus's picture

Unleavened cheese on every platter!

Mon, 06/09/2014 - 08:11 | 4836511 NidStyles
NidStyles's picture

That is an insult to retards and Chinese shops everywhere.

Mon, 06/09/2014 - 11:58 | 4837246 BanksterSlayer
BanksterSlayer's picture

Unless the true agenda of of the Obama White House IS to destroy the dollar, as Kyle Bass told us long ago. If that is case, then the sanctions are working beautifully. 

 

Kyle Bass, January 2013:

http://youtu.be/7a4wxIUPq6o

 

Mon, 06/09/2014 - 19:36 | 4838963 MeelionDollerBogus
Mon, 06/09/2014 - 07:58 | 4836485 prains
prains's picture

US : FOLD !!!!!!!!!!!!!!!!!!!!

Mon, 06/09/2014 - 11:40 | 4837191 Freddie
Freddie's picture

Putin is a man.  Obama and American Democrat voters are worms along with the RINOs and their NWO bosses.

Mon, 06/09/2014 - 22:27 | 4839368 Seek_Truth
Seek_Truth's picture

"I will make those who are of the synagogue of Satan, who claim to be Jews though they are not, but are liars--I will make them come and fall down at your feet and acknowledge that I have loved you. - Revelation 3:9

Mon, 06/09/2014 - 07:56 | 4836480 buzzsaw99
buzzsaw99's picture

switch the the yuan which is pegged to the dollar. funny.

Mon, 06/09/2014 - 08:01 | 4836491 fonzannoon
fonzannoon's picture

Yes it is, I wish someone would elaborate on the impact, or lack of, of that.

Mon, 06/09/2014 - 11:29 | 4837138 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

buzzsaw hit on the head. The Yuan is pegged to the dollar. As long as that is true, the USD is NOT in trouble. Drop the peg, the USD will then be in trouble.

IMHO, the Yuan is worthless and built on endless debt with commodity rehypothecation as ZH has mentioned before. Let it float and it will turn into Chinese toilet paper.

Mon, 06/09/2014 - 12:09 | 4837275 Panafrican Funk...
Panafrican Funktron Robot's picture

The Yuan is artificially repressed by the USD peg.  A Yuan float would see a substantial reval higher in forex terms relative to the dollar.

Re: Buzz/Fonz's question, why does it matter, it still has everything to do with demand for the USD currency.  If demand for USD currency continues to drop, and demand for yuan continues to rise, even if the yuan is pegged to the USD, it's still a very damaging situation to the USD hedgemony.  Keep in mind that the pegging action does not mean that China then has to buy a bunch of USD in order to justify the pegged price.  What this does mean is that the multinationals will increasingly have to buy up yuan.  Summary:

As the flows move from the USD to the yuan:

1.  Both the USD and Yuan will drop in forex price relative to other currencies.

2.  China will see a very large increase in demand for their artificially low price currency.

3.  US will see a comparatively much smaller increase in demand for their low price currency.

4.  Effect:  Chinese printing will have a substantially more positive real economic effect (that is much more widely dispersed among the economic strata) on their domestic economy vs. US printing (which will concentrate further in HNW circles).

 

Mon, 06/09/2014 - 12:14 | 4837290 Panafrican Funk...
Panafrican Funktron Robot's picture

Note also that #2 creates tremendous pressure to reval the Yuan higher in order to stem domestic inflation, which oddly enough would just further boost yuan demand and subsequent inflation.

Mon, 06/09/2014 - 12:45 | 4837390 Matt
Matt's picture

I suspect the Yuan would be far more volitile. Without capital controls, trillions could flow out of China to be invested all over the world. The Yuan could tumble as easily as it could soar without fixed exchange rates. Especially if they have massive bail-ins.

On the upside, a situation like this shows that corporations would never allow one world currency, to allow a single central authority to determine whether they can exist or not.

Mon, 06/09/2014 - 19:33 | 4838954 MeelionDollerBogus
MeelionDollerBogus's picture

Trillions of yuan already flow out to invest in farms, mines, etc., around the world but it's the Chinese government doing it.

You'd have to compete with them for those resources.

Mon, 06/09/2014 - 12:54 | 4837417 headhunt
headhunt's picture

Sorry the economic physics will never allow the RMB to remain low if they are to become a settlement currency.

Mon, 06/09/2014 - 08:01 | 4836492 DaddyO
DaddyO's picture

Until it isn't!

The SDR is the final outcome of all this posturing.

Everything financial is being destabilized to create the "NEED" for a stabile transaction medium separate from the USD.

This past week, LeGarde made some comments about the IMF and China, opening the door to furthering the move toward Yuan as the replacement of USD for now.

As things get more turbulent, watch for the offering of the SDR as the substitute.

DaddyO

Mon, 06/09/2014 - 08:08 | 4836507 Winston Churchill
Winston Churchill's picture

Crap or shit sandwich sir ?

Nothing like having a choice.

Mon, 06/09/2014 - 09:51 | 4836806 RaceToTheBottom
RaceToTheBottom's picture

Kirkland or Sharman, which TP would you prefer?

Mon, 06/09/2014 - 12:09 | 4837276 DaveyJones
DaveyJones's picture

and the review for your next album, Shark Sandwich, was just a two word review, "shit sandwich."

where's that? they can't print that

Mon, 06/09/2014 - 12:46 | 4837394 headhunt
headhunt's picture

which one is warm?

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