Russian Prime Minister Vladimir Putin, right, and his Chinese counterpart, Wen Jiabao, shake hands during a document signing ceremony at the Konstantin Palace outside St. Petersburg, Russia, on Tuesday.
(Nov. 24) -- Russia and China plan to start conducting their mutual trade in rubles and yuan in a bid to remove the globally predominant U.S. dollar from the equation, but the move seemed more symbolic than financially significant.
Russian Prime Minister Vladimir Putin announced the decision Tuesday after meeting with Chinese Premier Wen Jiabao in St. Petersburg, adding that rubles had begun to exchange on Chinese exchanges this week and that the yuan will start trading in Moscow next month.
"We are determined to use our national currencies more extensively to settle mutual accounts," Putin said, noting bilateral trade between the two countries has mostly used foreign currencies, mainly U.S. dollars. "This is an important step towards strengthening direct ties in trade and the economy without any losses."
But the currency change -- solidifying a decision last year by Russia, China and other member states of the regional Shanghai Cooperation Organization to minimize the dollar's Central Asian trade role -- may make little difference, at least any time soon.
And it seems unlikely to have any effect on the vast U.S. financial ties with China, which acts as the factory floor for a broad array of goods sold to American consumers and which funds a large amount of U.S. government debt through its purchases of Treasury securities.
The currency switch was overshadowed by energy, customs and other agreements signed by Putin and Wen, and wasn't even mentioned in a list of their meeting's accomplishments released by Putin's office.
And while Putin spent less than a minute of his post-meeting remarks discussing the currency decision, and said nothing at all about the timing of the transition, Wen didn't mention it at all.
Russian trade with China -- at about $45.1 billion this year, according to the official Chinese Xinhua news agency -- makes up a tiny portion of Chinese foreign trade, which came to about $1.5 trillion last year and continues to grow quickly, according to the World Trade Organization.
It is more significant for Russia, which recorded about $600 billion in imported and exported goods and services last year. And Putin has been pushing trade with China as a way of making Russia less economically dependent on Europe.
In the latter years of the past decade, Russia made several attempts to increase the ruble's prominence in global finance at the dollar's expense, but the rapid drop in oil prices during the 2008-2009 financial crisis lessened petroleum-dependent Moscow's clout. And as recently as this week, investors' widespread move into the dollar in reaction to shelling between North and South Korea demonstrated that the U.S. currency remains a perceived haven for traders.
Global currency markets took little or no notice of the announcement, in part because China keeps tight control over the yuan's exchange rate and because worries about the European Union's debt crises are overwhelming much else.
by Joseph Schuman AOL News November 24, 2010
Russia-China Currency Deal Aims -- Sort of -- to Ditch Dollars
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