The Eurasian Economic Union (EAEU), an analogue to the EU in the post-Soviet space, should begin using its own currencies in trade, rather than the Euro and Dollar, which dominate commerce between the member states and China.
That’s a consensus agreed upon at a virtual forum on Monday, dedicated to integrating the five EAEU member states with China’s flagship foreign policy initiative, ‘One Belt, One Road’. Founded in 2010, The EAEU is made up of Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia, and in recent years has actively sought a closer relationship with Asia, especially Beijing.
“To avoid the growing risks, we must switch to national currencies,” said the Eurasian Economic Commission’s Minister for Integration and Macroeconomics, Sergey Glazyev. “This work is underway, and we are consistently increasing the share of payments in national currencies, both in the EAEU and abroad, although it remains modest. For example, only half of payments in the EAEU are made in national currencies, and with China, the share of payments in rubles and yuan is even less – 15%.”
According to Glazyev, moving away from the world’s two most-traded currencies is not about “separating politically,” but instead protecting EAEU member states’ economies from a situation they have no control over.
In the first quarter of 2020, trade between Russia and China in dollars fell below 50 percent for the first time to 46 percent, a significant decrease from 75 percent in 2018. In 2015, the share of the American currency in bilateral transactions between Moscow and Beijing was even higher – at 90 percent. However, despite movement away from the dollar, foreign currencies still dominate trade between the two Eurasian superpowers.
The dollar’s reduced role in international trade can mainly be blamed on the ongoing trade war between the US and China. Beijing’s turn away from Washington has also coincided with the Kremlin’s de-dollarization policy, which began back in 2014 as a result of Western nations imposing sanctions on Moscow over Crimea.
Speaking at the virtual conference, Viktor Dostov, president of the Russian Electronic Money Association, explained how using the dollar incurs extra costs on EAEU members.
“Now, if I want to transfer money from Russia to Kazakhstan, the payment is made using the dollar. First, the bank or payment system transfers my rubles to dollars, and then transfers them from dollars to tenge,” Dostov said. “There is a double conversion, with a high percentage taken as commission.”
In August, Russian analyst Alexey Maslov told Japanese publication Nikkei Asian Review that Moscow and Beijing’s ditching of the US dollar could result in the creation of a “financial alliance” between the two nations. With two other EAEU nations – Kyrgyzstan and Kazakhstan – having a land border with China, the economic bloc’s imperative to move toward national currencies in cross-border trade is even stronger.