In further growing signs that both China and Russia are accelerating moves to de-dollarise we note that Vladimir Putin has instructed his government to approve legislation which will make the ruble the principal currency of exchange at all Russian seaports, potentially within a matter of months.
Clearly a transition period will need to be put in place before the switch to ruble settlements given that many companies utilising the port will be subject to foreign currency obligations in such a scenario. It make come as some surprise to some, but Russian seaport activities are currently largely priced in US dollars despite the fact that theie ports are nationalised.
Putin was keen to implement the switch from dollars to rubles as long ago as two years, but the fluctuations in the ruble made this proposition less than attractive for freight companies who were resistant to changing from utilising the US dollar. The beneficial effect of this arrangement is that it will force foreign companies to trade in the ruble which, given the rise in uptake of the ruble, will help to strengthen that currency.
We can speculate with regards to the reasons behind this decision and they are multifold. Russia is growing tired of US foreign policy with regards to the likes Syria, Iraq, North Korea and also Ukraine. In addition relations between Moscow and Washington remain an impossible bridge to build because of the insatiable desire inside the Beltway to brand everything Russia’s fault. The reality is that Russia’s patience has been exhausted so they will continue to de-dollarise, integrate the Eurasian Economic Union (EAEU) and the One Belt One Road initiative (OBOR) and herald the introduction of the Gold backed Ruble and usher in the dawn of sound money once again. The process is an event-driven scenario and we will continue to see the extension of the ruble as a currency of exchange to include e.g. commodities and therefore we should pay close attention given Russia’s role in e.g. the global oil markets.
Finally the actual timing of this development is perhaps the most telling aspect of all given it suggests that the much vaunted “reset” appears to have come more sharply into focus given this and other recent developments. However, we must guard against getting sucked into providing dates because they are and will remain meaningless.