Headlines were made just earlier this week when Saudi Arabia initiated talks with China to trade a part of its oil in the Chinese currency yuan. Has the Russia-Ukraine crisis given an opportunity to China to circumvent the dominance of the US dollar and boost its own currency? Needless to say that Beijing is closely monitoring the situation.
Aravind Yelery, Senior Research Fellow at the Peking University and visiting Faculty at Fudan University, Shanghai told India Narrative that for China displacing the US dollar has been a long-term strategy.
“The current global tension has just come as an opportunity to China to boost its own currency and reduce the dominance of the US dollar in global trade. If dollar remains the dominant currency on the global platform, collateral damages are easily possible,” Yelery said. “If geopolitical contours change, currencies naturally will play an important role,” he added.
“Now if Russia is left out, China with the large size of its economy, will play a more dominant role. Russia’ dependence on China will increase and Russia will not mind it,” Yelery said.
Al Jazeera in a report quoting sources said that talks with China over yuan-priced oil contracts have on for the last six years but have accelerated now as the “Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom.”
Russia is already looking to deepen its non-dollar denominated trade ties with other countries including Beijing. In 2021, trade between Russia and China was estimated at about $147 billion, though the European Union topped the chart for Moscow.
Russia, one of the biggest producers of oil and gas in the world and is one of the largest exporters of wheat, has set a target of taking bilateral trade with China to $250 billion by 2024.
The exclusion of Russia from the SWIFT payment system could also further strengthen China’s indigenously developed alternative cross border payment system — Cross-Border Interbank Payment System (CIPS).
A US based news organisation said that the Russia-Ukraine crisis “is unwittingly helping Beijing, including distracting the U.S. from its China challenge.”