Russia has officially confirmed that it is bypassing the U.S. dollar in nearly all trade with its two largest partners, China and India, marking a significant shift in global economic dynamics. President Vladimir Putin revealed that over 90% of trade with China is now settled in national currencies—primarily rubles and yuan—while more than 50% of trade with India also occurs without using the dollar.

This move is a direct response to the West's sanctions following Russia's invasion of Ukraine in 2022, which led to Moscow being cut off from global financial systems like SWIFT. In response, Russia has actively sought alternatives, pushing for local currency use with key allies, China and India, to maintain economic stability and independence.

Russia-China Trade Surge:

Bilateral trade between Russia and China has surged in recent years, with the two nations deepening their "strategic partnership." By 2023, trade hit a record $240 billion, with predictions for even greater growth in 2024. Notably, over 90% of this trade is now conducted in rubles and yuan, a dramatic shift from the past. The share of yuan in Russian exports to China skyrocketed from 0.5% in 2021 to 16% in 2022, while yuan use in imports also surged from 4% to 23% in the same period.

In December 2023, Russian banks held more yuan than dollars, with yuan reserves reaching $68.7 billion, surpassing the dollar reserves, which had decreased to $64.7 billion.

Slower Transition with India:

India's transition is slower but still notable. Over 50% of trade between Russia and India is now conducted in local currencies, a sign of growing support for de-dollarization. India, a major importer of Russian oil and defense equipment, is also exploring alternative currency arrangements as part of its broader trade agreements with Russia.

A Push for De-Dollarization:

This move is part of Putin's long-standing effort to reduce Russia's reliance on the dollar, which he has criticized as a tool for Western political influence. Despite challenges, the trend toward using rubles and yuan in trade with China and India is clear and may signal a broader shift in global trade away from the U.S. dollar in favor of local currencies.

As this transition unfolds, it highlights the evolving power dynamics between Russia, China, India, and the West, with the U.S. dollar's dominance increasingly being questioned.

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