Will Moscow eliminate the dominance of the dollar with the support of friendly countries?

Zein Diab

With the price of the dollar rising to its highest level in 20 years and the Russian ruble achieving superiority over the US currency recently, the monetary policy makers in Moscow are seeking to expand the circulation of the ruble to maximize its value and reduce the dominance of the dollar, by deepening relations Moscow has with friendly countries such as China, India, Turkey, Egypt, Saudi Arabia and the UAE, according to the Investing website.

The Moscow Stock Exchange said that trading volumes in the yuan and the ruble will exceed the dollar’s trading ratios next year, with the intensification of Moscow’s cooperation with Beijing in the financial market.

In a presentation, the Moscow Stock Exchange added that the yuan-ruble trading volume increased 61 times in August, than it was in December 2021, when trading volumes in August exceeded 6.9 billion rubles (US$118 million).

The Russian ruble has managed to record strong gains against the US dollar, since September 7, as it is experiencing a boom period thanks to the unprecedented tightening by Fed officials.

The ruble is currently trading near its highest level since trading on July 25, when the ruble was hovering near levels of 57 rubles for the US dollar and 59.1 rubles for the euro.

Since trading on September 7, the Russian ruble has risen in 12 sessions, compared to a five session rise for the US dollar, an increase of 7 percent. The ruble has increased from 61.5155 rubles to the dollar to 57.2798 rubles to the dollar, during Thursday’s trading.

Since the beginning of the year, the Russian ruble has risen against the dollar by more than 24 percent, from 74.5508 rubles to the dollar at the beginning of this year, to the current levels.

It has now  become one of the best performing currencies against the dollar in 2022.

Russian President Vladimir Putin said, last week, that countries are gradually losing confidence in the US dollar, the euro and the sterling pound as settlement currencies and are moving away from using them.

Even allies are gradually reducing their holdings of the dollar, and this can be seen from the data, and the volume of dollar settlements and savings which are decreasing gradually.

The Russian ruble and the Chinese yuan will be used in gas payments with China in equal proportions, Putin added, stressing that Asian economies are growing faster than Western economies.

Yaman al-Hamaki, Professor of Economics at Ain Shams University, commented the possibility of using, beside the US dollar, in Egypt, the Russian ruble.

Hamaky said, during a telephone interview on the “Hadrat al-Mowaten” program, which is shown on Al-Hadath Al-Youm channel, Monday, that Egypt has mechanisms in international economic transactions that can greatly help it in facilitating exchange and benefiting from the current conditions.

She explained that China was the first to take this path, as it developed currency exchange agreements between  all of its partners in Asia to purchase raw materials from them. 

She referred to the currency exchange agreement between Egypt and China, explaining: “The exchange of currencies with China is through the use of the two currencies, the Chinese yuan with the Egyptian pound, in a certain volume of exchange and funds and through an intermediary to determine the value of the yuan in relation to the pound, often using the US dollar because it is the most traded currency in the world.”

Hamaky stated the benefits of such agreements, saying it reduces the demand for the dollar, deepens international relations between countries and reduces the effects of price fluctuations resulting from violent changes in the value of the currency.

“We do not have to use the ruble. We can activate an agreement to exchange rubles in the Egyptian pound to be used in trade or tourism,” she added.

“The central banks are responsible for this matter, because they are the entities that determine the volume of transactions and the exchange rate of a currency for a another currency,“ she explained.

Egypt was exchanging goods with Russia at one point in time, Hamaky said, referring to the positive impact of this on the development of the Egyptian industry.

The Russian ruble is scheduled to be listed among the currencies used in Egypt as of the end of September, which will positively affect the tourist flow from Russia to Egypt, RIA Novosti reported.

According to the Central Bank of Egypt, as of the end of September 2022, the Russian ruble will be listed among currencies used in Egypt, and this timing coincides with the beginning of the peak tourist season in Egypt, Tez Tour Russian tourism company said in a statement.

The company added that “providing space for travel companies and hotels to accept payments in rubles, among other factors, will undoubtedly have a positive impact on the flow of tourists.”


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