De-Dollarization Accelerates - China/Russia Complete Currency Swap Agreement

Tyler Durden's picture

The last 3 months have seen Russia's "de-dollarization" plans accelerate. First Gazprom clients shift to Euros and Renminbi, then the UK signs currency swap agreements with China, then NATO ally Turkey cuts ties and mulls de-dollarization, Switzerland jumps in the currency swap agreements, and BRICS create their own non-US-based funding vehicle, and then finally this week, Russia's oligarchs have shifted cash holdings to Hong Kong. But this week, as RT reports, Russian and Chinese central banks have agreed a draft currency swap agreement, which will allow them to increase trade in domestic currencies and cut the dependence on the US dollar in bilateral payments. “"The agreement will stimulate further development of direct trade in yuan and rubles on the domestic foreign exchange markets of Russia and China," the Russian regulator said.

 

As RT reports,

In early July, the Central Bank’s chairwoman Elvira Nabiullina said Moscow and Beijing were close to reaching an agreement on conducting swap operations in national currencies to boost trade. The deal was later discussed during her trip to China.

 

President Vladimir Putin, during his visit to Shanghai in May, said cooperation between Russian and Chinese banks was growing, and the two sides were set to continue developing the financial infrastructure.

 

“Work is underway to increase the amount of mutual payments in national currencies, and we intend to consider new financial instruments,” Putin said after talks with President Xi Jinping.

It appears the deal is done...

The Russian and Chinese central banks have agreed a draft currency swap agreement, which will allow them to increase trade in domestic currencies and cut the dependence on the US dollar in bilateral payments.

 

The draft document between the Central Bank of Russia and the People’s Bank of China on national currency swaps has been agreed by the parties,” and is at the stage of formal approval procedures, ITAR-TASS quotes the Russian regulator’s office on Thursday.

 

The Russian Central Bank is not giving precise details on the size of the currency swaps, nor when it will be launched. It says this will depend on demand.

 

According to the bank, the agreement will serve as an additional instrument for ensuring international financial stability. Also, it will offer the possibility to obtain liquidity in critical situations.

 

The agreement will stimulate further development of direct trade in yuan and rubles on the domestic foreign exchange markets of Russia and China,” the Russian regulator said.

 

Currently, over 75 percent of payments in Russia-China trade settlements are made in US dollars, according to Rossiyskaya Gazeta newspaper.

*  *  *

And as we have explained repeatedly in the past, the further the west antagonizes Russia, and the more economic sanctions it lobs at it, the more Russia will be forced away from a USD-denominated trading system and into one which faces China and India.

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Seasmoke's picture

Thats the plan !!!....Blame Russia for the collpase

nidaar's picture

"and we intend to consider new financial instruments"

Can you spell G.O.L.D ?

ZerOhead's picture

The NeoLibs better get on the phone to their NeoCon bretheren and come up with a different plan of action FAST

The current course they are on is crazier than Dick Cheney on bath salts...

kliguy38's picture

heheheheh.....goood one.... how bout this one.......DOLLARS DOLLARS ...git your fresh hot DOLLARS....right here.......DOLLARS DOLLARS GIT YOUR FRESH HOT DOLLARS......

Vampyroteuthis infernalis's picture

It appears as if old trading alliances are trumping the WTO and this globalization crap.

g speed's picture

when the boarder between Russia and China is as free as the one between Canada and the US I will believe it's for trade---till then it's a  valve for the oligarchs to move money safely ---imho 

SWRichmond's picture

agreements to cooperate in a crisis in non dollars are central to this entire arrangement and that much should be obvious.  This means a crisis us expected.

 

accelerated cooperation activity among BRICS central banks is also indicative of expectation of a crisis.

Leonardo Fibonacci2's picture

Eyeroller wrote "Obama:  King me."

Should rather be,  Obama: Cock me.

Wilhelm von Pissed's picture

US/Canadian border free?  Try telling that to the boy scout that just had a gun put to his head at the checkpoint.

 

There appears to be a national schizophrenia in this country that still parrots the party-line that we are free.  Nothing could be further from the truth.  The sooner this economy collapses, the safer we, and the world, will be.

 

 

 

Liberum1776's picture

checkmate?  WHAT?  We are playing Checkers you can "Checkmate" in Checkers!!!!!  What da u mean we are playing Chess, Master Putin?

cpnscarlet's picture

I can't spell it as fast as the banksters can naked short the COMEX, however.

As always, this story is gold-negative.

Bendromeda Strain's picture

Naked shorting the COMEX is gold negative? I have checked, and the element could not care less what the desperate paper wankers do. Once again for the terminally obtuse - everything in its time, and gold on sale should CONTINUE to be viewed as a gift.

armageddon addahere's picture

Given what we know of Chinese statistics and business methods and Russian political and financial crises, why would anyone trust their currencies?

Hint: The British pound and the US dollar were trusted around the world because they were backed by gold. When the gold disappeared so did the trust and the power that goes with it.

therevolutionwas's picture

They'll blame me too.  I put my savings in non-dollar investments.  You and me, Putin!

Winston Churchill's picture

It took WWI to collapse the British empire, and the pound.

Purely coincidental timing on the founding of the FedRes.

Even with all the low flying  black swans darkening the skies at midday.

something is still missing.Keeps slipping off my tongue.

Oldrepublic's picture

I wonder when America's Suez moment will arrive

BlindMonkey's picture

I am kicking back on the couch now watching Mad Max on Netflix. Sad to say but it is a training film.

"Nightrider: I am the Nightrider. I'm a fuel injected suicide machine. I am the rocker, I am the roller, I am the out-of-controller!"

Urban Redneck's picture

Suez Canal, Persian Gulf, Black Sea, South China Sea, Caspian Sea, Nicaragua Canal pick your favorite body of water, what difference – at this point, what difference does it make?

Cat Sniper's picture

America's Suez moment may have been Syria.

Liberum1776's picture

Honestly cannot remember the book but a case was made that the USG helped to push WWI using it to weaken the two major powers (Britain and France...yes, they were somewhat major at the time).  The idea was to weaken them to the point the USG could challenge them on the High Seas (Oh, look at that great white fleet coming over the horizon...yes, it predates the war but hey, it was done to make a point to both countries).  End result, the finishing off of both countries as world powers at the conclusion of WWI (1945).

Bossman1967's picture

But Putan wont start a war so here comes ISIs if they wont or cant guess that leaves good ole IRAN

Volkodav's picture

Iran has not started any war in 200 years.

o2sd's picture

Well, 192 years anyway, but what is 8 years between friends.

Jumbotron's picture

This is what REALLY will kick off WW V.  (The previous world wars being the 7 Years War or the French & Indian War.....WW "1"....ww"II".....and the Cold War).

"Nobody puts Baby (dollar) in a corner !"

 

Heads up !   Look for who the proxies in this war will be.  This World War will NOT be a standup fight between the Chi-Roosks and the Americans.  Too much money and material at stake.  Look for the pawns.   HHmmmm.......now where can we find a bunch of crazy ass, well armed pawns armed with both Russian and American weapons......hhhmmmm......somewhere dry and less forested than Viet Nam.  Close to a bunch of oil.........hhhhhmmmm........just where can that be?

Vilonia's picture

I will bet the farm than Vald and XI have their personal (stolen) fortunes in good old American Dollars - just like Saddam did!

August's picture

Eurasian Growth 'n' Income

Vilonia's picture

I will bet the farm than Vald and XI have their personal (stolen) fortunes in good old American Dollars - just like Saddam did!

good man's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... http://goo.gl/bhiamE

Renfield's picture

Is the growth of these swap agreements accelerating? Or am I just noticing it more, but it's still just a handful here and there to lay a trading foundation? I notice that one of Russia & China's agreements did not include currency at all - the terms reported were so much oil for so much equipment, or something like that. Was that a barter agreement? Or is that sort of thing common? I have so many questions and nothing in my experience to answer them, but this is fascinating to watch.

buyingsterling's picture

Trade represents a fraction of capital flows; until there is another sink for the trillions managed by institutions and sovereign wealth funds, the dollar will be the reserve currency.

viahj's picture

wouldn't that would imply that some future 'sink'  (Yuan bonds or Yubles/SDR-like something) would be willing to trade (accept) for dollars?  i think not.  i think that one day all those 'dollar' assets go poof.  got tangibles?

lasvegaspersona's picture

Renfield...seriously

China has swaps with every one but the US. In October they signed one with the EZ. Russia just did India 2 weeks ago and the BRICS bank thingy in Brasil several weeks ago.

It is all systems go for de-dollarization.

THe Saudis are the one remaining piece.

Estrella's picture

Renders, " Was that a barter agreement? Or is that sort of thing common?"

The big advantage to China and Russia is that barter exchanges avoid Federal income taxes.

ekm1's picture

We are about to see the overthrow of Bank Lobby rule and their own president Obama.

 

Neocons of both parties will not tolerate this.

Tectonic changes in Washington DC are inevitable.

ekm1's picture

America has a choice:

 

Bank lobby and dollar trashing

 

or

 

Neocons and strong dollar

 

Make a pick America, can't have both, can't have anybody else, no other choices.

Both sides hate each other to death (and it may be LITERALLY to death)

 

Renfield's picture

ekm, how would the strong dollar option work?

20% rates again? at this point would that even make a difference?

ekm1's picture

No. This is not a matter of debt, this is a matter of excess reserves, of too much dollars

Give me few minutes to type up a short summary

Bossman1967's picture

I keep telling my wife ill take the reserves if there is too much hand it over

ekm1's picture

People confuse Debt with Reserve.

 

Debt is self destructive. Default and gone. Debt is no problem.

 

The problem is Reserves.

 

You see, Fed and Commercial banks create USD reserves, but only the Fed and Gov can EXTINGUISH them. 

 

Since dollar de-link in early 1970s here's USD dollar reserves created:

 

- $19 trillion in pensions

- $11 trillion in deposits

- $7 trillion in the world 

- $4 trillion created by QE

That is officially about $40 trillion

 

Then there is another $20-30 trillion in offshore accounts in about 80 locations in the world, unaccounted for.

http://www.forbes.com/sites/frederickallen/2012/07/23/super-rich-hide-21...

 

That makes it $60-70 trillion sloshing around which can extinguished only by the Fed or Government

 

Now think: World GDP is about $80 trillion which is INSTANTLY claimed by those USD reserves, since most of world output, trade is denominated in USD

 

 

Solution:

Extinguish $10-20 trillion. Not via bail-ins since it will literally be world war, but by bank shutdowns and closures, like offshore banks etc.

There will be some minimal bail-in also.

 

Otherwise, world will simply drop USD, because there is too much of it.

 

Conclusion:

There is too much dollars and there are too many insolvent oligarchs who hold only financial assets who will become poor very soon.

Renfield's picture

Thanks ekm. I am going to have to think over the repercussions of this. I think you're saying (if I understand) that they are going to 'disappear' roughly 15% of the reserves that someone considers their asset? (wonder who those 'folks' would be) I thought it would be pretty much bankers staying the course they are on, but this second approach sounds deflationary to me. Much appreciation for this detail you wrote.

ekm1's picture

Yes, deflationary. Issue is who's assets will go through deflation.

Neocons win,bankers lose

Military hates bank lobby now. They were back stabbed.

 

Whoever has military's backing wins. That is what history says

Renfield's picture

The military would at least get paid that way. Frankly, being at war will not only pay the military (so at least someone's employed) but provide plausible cover for the trade war stuff, bank closures, etc. It would not seem like it was a race to save the currency then, but could be blamed entirely on politics. They would hope with a deflationary event, faith in the fiat might not be lost. It's interesting to think about, thanks for these comments.