Russia: wave of de-dollarization under anti-sanctions

After the incident in Ukraine, Western countries led by the United States began to impose sanctions on Russia. According to historical experience, countries that face collective sanctions from the West will be greatly hurt even if they do not fall into poverty, such as Iraq and Libya. In contrast, Russia can be described as “white and red, different.” On April 28, 2014, sanctions were officially opened. Looking at the public data from 2014 to 2018, we can see that in the past five years, not only has the Russian economy not been declining, but it has been living in desperate circumstances, and there is a tendency of getting better.

Multilateral reforms, both internally and externally
Public data shows that from 2014 to 2018, Russia’s GDP (gross domestic product) growth rates were 0.7%, -2.31%, 0.33%, 1.63%, and 2.25%; except for the economic recession in 2015, the performance of other years Well, the swamp of negative growth as a whole has escaped. Under the blockade of the Western countries headed by the United States, Russia’s economy has performed so well in the past five years, thanks to the “anti-sanction measures” of the country’s strategy, that is, changes in external and internal policies and even reforms.

From the perspective of foreign exchanges, Russia adjusted its policies and policies in a timely manner, selectively strengthened the cooperation with some countries and regions, and tried to rip a hole from the blockade.

Zhang Jianrong, director of the China-Russia-Central Asia Cooperation Research Center of the Institute of International Studies of the Shanghai Academy of Social Sciences, told “Economy” magazine and the reporter of the Economic Network: “Russia’s diplomatic relations have started to turn east. It has continuously strengthened economic cooperation with Asian countries, mainly China, Japan, South Korea, and India, and with the help of the Oriental Economic Forum, will further attract the above-mentioned countries to increase investment in Russia, strengthen bilateral strategic cooperation, and implement large-scale economic and trade cooperation projects. Continuously promote the enhancement of internal economic cooperation and foreign free trade in the Eurasian Economic Union. At the same time, Russia is trying to find breakthroughs in cooperation in the Western system, selectively strengthening cooperation with certain European countries, such as Germany, France, Turkey, etc. The tension caused by the Ukraine problem has sought to restore contact with Europe and break the US blockade and isolation policy. The Russian government even used its natural gas pipeline construction with Europe to expand energy cooperation while splitting some countries in the European sanctions camp against Russia. ”

The Eurasian Economic Union was established in 2015 and its members include Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia. Driven by Russia, the Eurasian Economic Union has signed free trade area agreements with Vietnam, Iran and Singapore. In the future, it will also sign free trade agreements with India, Israel, Serbia and Egypt.

Internally, Russia has taken various measures to stabilize its finances, reform the banking industry, and adjust macroeconomic policies.

Xu Poling, director of the Russian Economic Research Office of the Russian Academy of Social Sciences of the Chinese Academy of Social Sciences, said in an interview with “Economy” magazine and the Economic Network reporter that after the Libyan crisis, Russia has been responding to sanctions to strengthen the economy and strengthen its own strength. Way to enhance immunity to external stress.

“Many measures of Russia’s stable economy are not only for sanctions, but also for the large global economic environment. For example, the Russian government has continuously strengthened control over financial risks and has increasingly stricter compliance requirements for its banking industry. From Since 2000, various types of banks in Russia have been decreasing year by year. By the beginning of 2017, there were only more than 600, and now there are only more than 400. The reduction in the number of banks is mainly to deleverage; previously, there were more than 10,000 banks in Russia. Another example is to reduce the proportion of sovereign debt in the national economy and implement a more stable fiscal policy. In the context of sanctions, the government has money in hand, which helps solve some problems in a timely manner. According to this idea, in 2018, Russia’s finances The surplus (financial revenue minus expenditure) as a percentage of GDP is 2.1%, which is the first surplus since 2011. “Xu Poling said.

In 2018, exports of oil, gas and food contributed a lot to Russia’s finances.

According to the data of the Russian Federal Customs Office, from January to October 2018, Russia’s total oil exports reached 106.59 billion US dollars, an increase of 38.6% year-on-year; in the first 10 months, natural gas exports totaled 39.9 billion US dollars, an increase of 30.9% year-on-year. In the first 10 months of 2018, the country exported 36.79 million tons of wheat, totaling US $ 6.93 billion. Among them, the export volume of soybeans, vegetable oils and chocolates, and oil and fat products all increased to a large extent.

Since the sanctions were launched, Russia has also made major adjustments in its macroeconomic policies. It is particularly worth mentioning the “import substitution strategy.”

Generally speaking, import substitution is a country that adopts strict restrictions on imports, such as tariffs, quotas, and foreign exchange control, to support and protect the development tendency of relevant domestic industrial sectors; select products with greater import demand as the focus of national industrial development, and strive to Replacing imports with domestic production, thereby balancing the balance of payments and restructuring the economy.

In January 2015, Russia promulgated “Priority Measures for Guaranteeing Sustainable Economic Development and Social Stability”, which clearly stated that “promote import substitution and export of non-raw material sectors”, and integrate agriculture and agricultural product processing, processing industries, and housing water and gas. Industries such as infrastructure, machinery manufacturing, transportation equipment manufacturing, and export of high-tech products are the main areas for investment incentives.

In March 2016, the Russian government announced the “Action Plan to Guarantee Socio-Economic Stable Development”, which emphasized the need to provide preferential policies to the automotive industry, light industry, machinery manufacturing and construction sectors and export enterprises.

Import substitution in the food sector was earlier. In 2009, Russia implemented it as a national security strategy. As of 2016, Russia’s self-sufficiency rate in pork, poultry, canned meat, sausage products, flour, pastry, sugar and other products has been maintained at about 90%.

Xu Poling emphasized to reporters: “The effect of import substitution began to weaken after the third quarter of 2017; in 2015 and 2016, the effect of policy implementation during this period was relatively obvious. This is related to the trend of the ruble, when the effect is good This comes at a time when the ruble has depreciated significantly. It is also worth noting that for Russia, import substitution is not the main ‘prohibition of imports, but long-term encouragement of exports.’

Nevertheless, Russia’s economic performance in 2015 was still very poor. In this regard, Zhang Jianrong explained as follows: “In 2014, sanctions against Russia began, and the consequences of the sanctions were not immediately shown, but were concentrated in the second year. At the beginning of the sanctions, Western investment in Russia fell sharply, and the Russian economy There is a shortage of development funds. In 2015, international oil prices also hovered at a low level and bottomed out twice during the year. It was comparable to the time when the international financial crisis broke out in 2008 and 2009. As a result, Russia ’s foreign exchange income further declined. The result is that the internal and external environment is very bad. This year, the vulnerability of the Russian economy was most obvious. ”

Benefit from investment and consumption
As the world ’s major oil producers, Iran ’s crude oil exports have been significantly restricted following U.S. sanctions.

On October 8, Iran ’s oil minister, Bijan Zanganeh, stated that Iran ’s crude oil industry had been left behind due to US sanctions and suffered a fatal blow. Currently, Iran ’s crude oil exports have been greatly reduced.

However, this is not the case for Russia’s crude oil exports.

“Russia’s crude oil exports have two main destinations, one is China and the other is Europe. The sanctions Russia has experienced are not global collective actions adopted by the UN General Assembly, and the sanctions themselves do not limit Russian exports. Rather, the sanctions limit Russia Utilization of Western capital and exploration technology. Even the sanctions leader, the United States, had close to US $ 5 billion in trade with Russia in 2017. In addition, China is also expanding imports of Russian oil and gas, which will help later Yu Nanping, a professor at the Institute of International Relations and Regional Development of East China Normal University, explained this in an interview with “Economy” magazine and Economic Network reporters.

Yu Nanping pointed out that at present, Russia’s economic growth mainly depends on two new drivers: investment, especially investment in the construction industry; domestic consumption.

Traditionally, Russia’s economic impetus has been primarily energy exports. However, as the country’s domestic economy continues to stabilize, its domestic consumption is also rising. This is easier to understand: the more stable the economy, the more stable the growth, and the easier it is for consumption to improve.

The enhancement of investment was accomplished under the conscious guidance of the Russian government. The Russian business consulting website shows that investment in the Russian construction industry is full of vitality. According to the survey results of major investment projects in the country from 2019 to 2021, Russia is implementing more than 4,500 large-scale investment projects with a total investment of about 57 trillion rubles (1 ruble is about 0.11 yuan).

During the five years from 2014 to 2019, when Russia adjusted itself, it reduced its dependence on imported products, and many goods can be completed by relying on its internal production system. This is related to Russia’s relatively complete industrial chain. In addition, Russia is also adjusting the pulling effect of different factors on the economy. For example, it used to rely heavily on energy exports. Although the situation has not completely changed, the role of investment and consumption has been enhanced, and exports of other products have become more important. For example, agricultural products-Russia has become the world’s largest wheat. export country.

“Over the past five years, Russia ’s export structure as a whole has not changed much, but imports have changed. Once, Russia imported a large amount of manufactured goods; after sanctions, imported goods became more expensive and demand decreased accordingly. This is also related to ‘Import substitution strategy corresponds. It can be said that Russia is now a’ domestic demand country ‘. “Yu Nanping stressed to reporters.

Rethinking the true value of the dollar
Among all the anti-sanctions measures implemented by Russia, the hoarding of gold has attracted much attention.

According to data from the Russian Central Bank, as of September 1, 2019, the country’s gold reserves reached 2219.2 tons, accounting for 20.7% of the country’s foreign exchange reserves. This is the first time in 30 years that gold has accounted for more than 20% of Russia’s foreign exchange reserves. At the end of September, Russia’s gold reserves increased again to 2230.4 tons. More analysis points out that Russia’s gold reserves have more than tripled in the past 10 years.

In response, Yu Nanping said, “Russia is on the road to de-dollarization. Russia has questioned the current global financial system and the stability of the US dollar and the sustainability of US debt. Sanctions are aggravating factors. Under the sanctions, Russia cannot use Western financial markets as freely as before, and external financing channels are blocked. Therefore, Russia regards gold as a hard currency, and Russia also produces gold itself. However, it is not only Russia, including China Some other countries are also increasing their gold reserves every year. ”

In order to reduce the economic impact of US sanctions, Russia is seriously considering avoiding the US dollar and using local currency or other currencies as the settlement medium for energy transactions, so as to be as isolated from the current US-dominated financial system as possible. Analysis believes that this may become an important part of “de-dollarization.” Russia ’s Minister of Economic Development, Maxim Oreshkin, said recently that Russia is trying to reduce its dollar exposure and attract investors to use its currency, such as the ruble, to complete energy settlements.

Xu Poling told reporters that the U.S. financial sanctions against Russia are carried out by shutting down the US dollar system. Russian companies cannot use U.S. dollars for financing and it is difficult to use U.S. dollars for transactions; European countries ’sanctions against Russia are very large. To the extent it complies with the requirements of the United States and does not sell technology or borrow money, but the euro’s settlement system has not been closed to Russia. After all, European countries are still very dependent on Russian energy. In other words, Russia is still free to settle in euros. In addition to the local currency, Russia has a large reserve of euros, pounds, yuan and yen. As of the end of September 2018, the yuan accounted for 14.4% of Russia’s foreign exchange reserves.

During the interview, Jia Jinjing, assistant dean and director of the Macro Research Department of the Chongyang Institute of Finance of Renmin University of China believed that Russia did not rely heavily on the US dollar, which is not indispensable, but we can take the opportunity to think about a problem that the US dollar is How useful is the country.

“From a financial professional perspective, any currency is created solely by accounting books. For any non-US company, no matter which country it is in, the liquidity of the US dollar is a matter of capital structure management. It ’s okay to leave the U.S. dollar, depending on whether the company wants to collect U.S. dollars. When are U.S. dollars necessary? Two situations: in the United States; buying things that can only be bought in U.S. dollars, such as airplanes, because even European Airbus ( (Airbus) can only sell airplanes to other countries, and it can only be settled in US dollars. In the past, the international market for oil was basically inseparable from the US dollar, but now it is different. Saudi or Venezuelan crude oil can be settled in non-US dollar currencies; in fact Venezuela is no longer willing to collect US dollars. ”

It is not just Russia that expresses serious mistrust of the US dollar.

In 2014, U.S. regulators issued a sky-high ticket to BNP Paribas, which angered European banking. In July of the same year, the BRICS countries announced the establishment of the BRICS Development Bank in Brazil, and established a BRICS emergency reserve arrangement; this means that in the future, loans between countries and emergency assistance will reduce the use of US dollars.

On October 17, 2019, the governor of the Iranian central bank, Abdul Nasser Hammati, confirmed that Iran and Russia have coordinated the interbank transactions between the two sides and that the two countries “go to SWIFT (Global Interbank Financial Telecommunications Association)” banks The relationship has been established, and both parties can now use their own financial information transmission systems.

The voice of the “de-dollarization” in the international community has been growing, and a series of events also seem to imply that “the hegemony of the US dollar is no longer there”. However, based on its inherent forerunner advantage and its entrenched international currency hegemony, is it possible for the US dollar to be replaced in the short term?

“It’s almost impossible.” Chen Fengying, a researcher at the Institute of World Economics of the China Academy of Modern International Relations, gave the above answers in an interview with “Economy” magazine and the reporter of the Economic Network.

She pointed out: “De-dollarization can be traced back to the beginning of the euro. At that time, some European countries were willing to give up their sovereign currencies and use a unified euro. This was in itself a de-dollarization. After the Wall Street financial crisis, the attitude of de-dollarization It has been gradually strengthened in the international community, but it is only a last resort. Today, the de-dollarization behavior is re-emerging. The stimulus is the appreciation of the US dollar and the severe impact on commodity prices. A number of emerging market countries have been involved in the crisis and funds have flowed into the United States. , And the US government does not need to bear any responsibility. However, we must be clear about what is behind a currency? It is national strength. In other words, it is a country’s power that supports this currency, and power and currency also A system is needed, such as the US dollar and the Bretton Woods system. The status of the US dollar is established by the Bretton Woods system, and no other currency has such a system to elevate itself. ”

What model will the US dollar and other currencies have in the next 20 to 30 years?

Chen Fengying said: “I don’t like other currencies except RMB. Perhaps, by 2035, more and more people will like RMB, and more and more countries will use RMB as an important foreign exchange reserve because the Chinese economy as a whole is Going up has strength. However, at that time, the RMB and the US dollar will not be a ‘replacement relationship, but a diversified existence.’