Russia reaps the rewards of dumping the dollar.
Russia is now the top crude exporter to China, the largest (or second largest, depending on whom you ask) oil demand growth country in the world.
At the start of the decade, Saudi Arabia enjoyed a 20% share of Chinese crude imports, while Russia was lagging far behind with 7%. Now the Saudis find themselves neck and neck with Moscow for the lead in Chinese market share, with both performing in the 13-16% range. But Russia’s share continues to rise, as The Kingdom struggles to maintain a foothold.
Why? Analysts attribute Russia’s huge market share growth to its willingness to accept yuan, while Saudi Arabia is still clinging to blood-soaked dollars. As Business Insider notes:
Interestingly, part of Russia’s success in China has been attributed to its willingness to accept Chinese yuan denominated currency for its oil.
This is consistent with earlier forecasts about Russia’s market share in China. Bloomberg reported back in July:
“Following Russia’s recent acceptance of the renminbi as payments for oil, we expect more record high oil imports ahead to China,” Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., said in an e-mail, referring to the Chinese currency. “If Saudi Arabia wants to recapture its number one ranking, it needs to accept the renminbi for oil payments instead of just the dollar.”
As both the head of the Eurasian Economic Union (and founding member of BRICS), as well as a major energy exporter, Russia is leading the charge against the dollar. And now other nations are following suit: Iran and India announced last month that they intend to settle all outstanding crude oil payments in rupees, as part of a joint strategy to dump the dollar and trade instead in national currencies.
The dollar is slowing losing its privileged place in international transactions. What this means for the United States is anyone’s guess.