US Driving India, China, Russia to Abandon the Dollar; Can EURO Be a Replacement?

Russia and India have signed a defence deal in rubles, sealing the first major non-dollar denominated defence deal for Russia since 1991. New Delhi took a strong stand, in an attempt to resist US pressure in terms of sanctions under Countering America’s Adversaries Through Sanctions Act (CAATSA).

Vladimir Putin, Narendra Modi Ink Much Anticipated S-400 Triumf Deal

As EurAsian Times reported earlier “in exchange for approximately 330 billion rubles, India will get five S-400 regiments of the most advanced air defence system in Russia’s arsenal.” Russia’s military observer, Boris Rozhin described the sale of S-400s in rubles as a ‘message to Washington’. The analyst said that this means India doesn’t depend on Washington on key issues related to its foreign policy.

The US initially tried to hurdle New Delhi and Moscow’s final stage of negotiations and even threatened to impose secondary sanctions on India. The Trump administration also hinted that the US President may skip India’s 2019 Republic Day celebrations, in connection to India’s go ahead with the S-400s deal. But eventually, the US had to budge and India signed a massive deal for purchasing S-400 missiles from Russia. Yes, Donald Trump will still not be visiting India due to internal commitments on the Republic Day.

Meanwhile, China is also trying to push away the dominating US dollar. According to CNBC, since China is the world’s top oil importer, it is logical for the Asian giant wanting to purchase it in its own currency.

Beijing plans to price oil in yuan. But there are challenges ahead as the world is used to dealing in US dollars for decades. Graticule Asset Management Asia (GAMA) Managing Partner and Chief Investment Officer, Adam Levinson has warned that China launching a yuan-denominated oil futures contract will shock those investors who have not been paying attention. The petroyuan has already proven successful.

Forbes has explained it well, “having the dollar as the international reserve currency creates what’s called ‘monetary seignorage’ which is what the US government earns by having all those dollars floating around overseas. It costs almost nothing to print money, but China, Russia and everyone else pay a full dollar in goods and services for that greenback.”

“Moving away from the dollar is a strategic priority for countries like China and Russia, both aim to ultimately reduce their dependency on the greenback, limiting their exposure to US currency risk. And other countries like Iran, Iraq and the EU are doing the same.

But presently, the problem is that there is no other currency that has stepped forward as a good replacement for the US dollar in the global market; the most suitable is the Euro, but that will take time.

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