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Russia-China Trade Treaty Impact on US Dollar

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on 3 July 2015

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Transcript of Russia-China Trade Treaty Impact on US Dollar

Russia-China Trade Treaty Impact on US Dollar

US Cons
Another step to diminish the influence of the dollar
Less demand for dollar means less ability for US to borrow capital
Less ability to influence international affairs

China Pros
Less reliance on US Dollar
Less ability for US to interfere with affairs
Good Trade: China gains needed energy and military equipment from Russia

China Cons
China has strong trade ties with the US and EU and its involvement with Russia could threaten that.

Russia Pros

Less reliance on US Dollar
Less ability for US to interfere with affairs
Gives Russia new trading partner and trading center in wake of sanctions over sanction of Crimean
Good Trade: Russian gains capital backing from China
New avenue of trade for Russian gas as European demand has plateaued and may shrink in the future (Pizzi, 2014)

Russia Cons
“Small step in the grand scale of things” (Pizzi, 2014)
Gas sales to China are less profitable than gas sales to Europe

and James Segrest
John Beiler, Richard Heffner, Michael Sara,
May 2014

• Putin announces plan for closer ties with China in a new Eurasion union.

• Agreement on Cooperation, 400 billion dollar, 10 year deal deal for Russia to supply China with natural gas

• Experts predict direct exchange from Chinese Yuan and Russian Rubble bypassing US dollar which is usually used in oil trades.

• Russian and Chinese Bank agree to pay each other in domestic currency.

• Russian Prime Minister Dmitry Medvedev claims US & EU sanctions will require Russia to use ruble for trade (Clintch, 2014)

• “Our countries have done a huge job to reach a new historic landmark,” Putin said on Tuesday, making note of the $100 billion in annual trade that has been achieved between the two countries (Pizzi, 2014)

US Dollar Index 79.50
October 2014
• Agreement signed between Russia and China to use swaps and forwards in order to “reduce the influence of the US Dollar on foreign exchange rates” (RT.Com, 2014)

• Russia & China for CNY150 billion

• Russia & China sign new double tax treaty

US Dollar Index 85.90
May 2015: US Dollar Index 96.25

• Russia celebrates 70th anniversary of defeat of Nazi Germany in WWII

• Russian President Vladimir Putin and Chinese President Xi Jinping signed numerous trade deals.

• Russia's Sberbank granted a credit line from China Development Bank

• Chinese invest in high speed rail from Moscow to Volga City

From (Radio Free Europe, 2015)

United States

Clintch, M. (2014). What Russia-China relations mean for the dollar, CNBC. http://www.cnbc.com/id/101705303

Pizzi, M. (2014). Russia, China sign deal to bypass US Dollar. Aljazeera America. http://america.aljazeera.com/articles/2014/5/20/russia-china-bankdeal.html

Radio Free Europe.(2015). Russia, China Sign Trade Deals To Deepen Ties. http://www.rferl.org/content/russia-china-trade-deals/27001913.html

RT.com. (2014). Ditching US dollar: China, Russia launch financial tools in local currencies. http://rt.com/business/218315-china-russia-ruble-yuan/

Trade between China and Russia has been on the rise since 2009...
China has been Russia largest Asian trading partner for several years...
Here we see a quick run down of goods exchanged between these two powerful countries...
Russia annex's Crimea from Ukraine in March of 2014
The US and EU respond with sanctions on Russia
Russia and China have long feared the US has too much power to meddle in their affairs based on the usage of the USD. The Crimean based sanctions force Russia into action
US Pros
USD is the staple trusted trade currency and it will take a long time for it to be overthrown as such.
The US dollar has remained strong and actually has increased in value since Russia, China, and organizations like BRICS have attempted to replace it.
Full transcript