Russia’s Strategic “De-Dollarization” Push in Trade with China and India

Russia has taken significant strides in reshaping global trade dynamics by conducting the majority of its trade with China and India in national currencies, moving away from reliance on the U.S. dollar. President Vladimir Putin recently revealed that over 90% of trade with China is now settled in rubles and yuan, while more than 50% of trade with India follows a similar pattern.

The Shift to Local Currencies

This transformation comes in response to sweeping Western sanctions imposed on Russia after its 2022 invasion of Ukraine. These sanctions restricted Russia's access to international financial systems like SWIFT, compelling the nation to explore alternative payment methods. By prioritizing local currency settlements, Russia aims to safeguard its economy, reduce dependency on dollar-dominated trade, and strengthen ties with key partners.

Record Trade Growth with China

Trade between Russia and China has surged to unprecedented levels. In 2023, bilateral trade hit a record $240 billion, and projections for 2024 indicate further growth. Yuan's prominence in this trade has skyrocketed:

Exports to China: Yuan usage grew from 0.5% in 2021 to 16% in 2022.

Imports from China: Yuan utilization increased from 4% in 2021 to 23% in 2022.

Simultaneously, the role of the U.S. dollar in Russia-China trade has plummeted from 46.8% in 2021 to virtually zero by 2023. Reflecting this trend, Russian banks now hold more reserves in yuan than in dollars.

India’s Gradual Adoption of Local Currencies

While India has been slower to embrace local currency settlements, over 50% of its trade with Russia now bypasses the dollar. This change aligns with a broader global "de-dollarization" movement, reducing exposure to dollar-centric volatility and geopolitical risks.