21 May 2014, 20:06

Russia and China sign non-dollar settlement agreement

Russia and China sign non-dollar settlement agreement

"De-dollarization" of bilateral trade is one of the main topics discussed during Vladimir Putin's visit to Beijing. The desire to get rid of the dollar is present in official political statements and in agreements signed by state-owned financial institutions of the two countries.

During the first day of the visit, Russian President Vladimir Putin and President of the People’s Republic of China Xi Jinping signed a joint statement on a new stage of comprehensive partnership and strategic cooperation. The mammoth document is over 12 pages long and contains a paragraph dedicated to currency issues. "The sides intend to take new steps to increase the level and expansion of spheres of Russian-Chinese practical cooperation, in particular to establish close cooperation in the financial sphere, including an increase in direct payments in the Russian and Chinese national currencies in trade, investments and loan services," the statement said.

The intention to bypass the US dollar in bilateral trade has been materialized in an agreement signed by VTB, a leading Russian state-owned bank and Bank of China which one of the big four state-owned commercial banks of the People's Republic of China. "Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions," says the official VTB statement.

VTB CEO Anfrey Kostin is one of the most vocal supporters of de-dollarization of Russian exports, especially in the energy sector. In April he said that Russian energy companies "must be braver" in signing contracts in Rubles and regional currencies. Judging by the efforts made by Kostin to create the necessary infrastructure for ruble-yuan settlements, VTB hopes that it will gain the most from Russia's quest to create a "de-dollarized world".

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