Author: Sheng Tang Rusong Source WeChat official account: The Shopkeeper’s Dao has been reprinted with authorization
On the 2nd of this month, Sergei Kanavsky, Executive Secretary of the SCO Business Council, told a Russian media: “It is possible and necessary to establish a financial information and payment exchange system in SCO, and it can also solve the problem of dependence on SWIFT faced by SCO member states.” Before that, Russian Prime Minister Mishuskin had proposed to build a financial information exchange system and a new currency settlement system within SCO at the SCO Summit Council.
After the Russia Ukraine war, Russia was restricted by the global trade settlement system, which really restricted its foreign trade. Not every country can conduct local currency settlement or barter with Russia like China and India. And no matter how the settlement is made, we are still used to using the real-time exchange rate of US dollars as the basis for settlement. These practical restrictions are the main driving force for Russia to push forward the new settlement system. Therefore, both relevant Russian technical officials and Russian government officials began to actively promote the establishment of the new settlement system this year. Before the completion of this system, local currency settlement is the best choice for Russia.
On November 29, the China Russia Energy Business Forum was held in Beijing and Moscow by combining online and offline. At this forum, Russian Deputy Prime Minister Novak announced that “the central banks of China and Russia are working hard to establish a settlement system between the two countries that does not use SWIFT.” At the same time, Novak said that China and Russia are developing local currency settlement. From the previous natural gas, to oil, petroleum products and coal resources, they will enter the local currency settlement mode. Note that Novak said that the project is under construction, that is, the project has begun.
The settlement in local currency is based on the roughly equal trade volume between the two sides, or the roughly equal demand for each other’s currency. Otherwise, after the trade deficit is formed, it will lead to the party with excessive export volume owning the currency of the other party, which is obviously unacceptable. Therefore, although local currency settlement is conducive to the close trade relationship between the two countries, it is not a long-term solution. For example, the amount of natural gas, oil and coal that China will import from Russia in the future is huge, and the amount of energy trade we consume must be far greater than the amount of Russian imports of Chinese goods. Russia is unlikely to accept a large number of RMB that it cannot use as its settlement currency. Unless Russia fully opens its domestic RMB market, so that RMB can circulate freely in Russia. But this is also unacceptable for Russia. After all, monetary sovereignty is a very important thing for Russia. Of course, this is extremely important for any country.
Therefore, local currency settlement may solve the problem for a while, and it is still possible to develop new tools to bypass the SWIFT settlement system once and for all.
Now the United States and Russia have become a raging fire. Although Russia has no ability to destroy the US dollar hegemony system, it is the most confident country to do this. First of all, it has begun to de dollarize since 2014. After seven or eight years of adjustment in China, there is basically no US dollar foreign exchange reserves. Secondly, even if Russia wants to use the US dollar settlement system, it is not qualified because the US and Europe have restricted its settlement function in this system. Even if Europe buys Russian natural gas, it must first exchange the money for Russian rubles before trading. Therefore, Russia naturally hopes that a new trade settlement system will emerge.
At present, in addition to the SWIFT settlement system in the United States, the European settlement system in the unmarried girl is still shy and afraid to show up. After the outbreak of the Russian Ukrainian war, it is estimated that the European system, which was originally intended to be used for Iran’s energy settlement, will die. Therefore, if you want to build a new settlement system, China is the best choice in the world. First of all, China is the world’s largest manufacturing country and one of the world’s largest consumer markets. Like Russia, China is not afraid of the threat from the United States. Moreover, over the past few years, all kinds of American pressure on China are enough to give China the impetus to build a settlement system that bypasses the US dollar. From many aspects, China and Russia have great common needs for building a new trade settlement system.
Of course, many people will say, “Isn’t this nonsense? Isn’t RMB internationalization what we have been striving for?”? Of course, it is not nonsense. Internationalization of the RMB is different from building your own currency settlement system. One is the coexistence of weak points, mainly the SWIFT settlement system, in which RMB participates as much as possible. The other is a strong replacement. The trade settlement in this new system is completely different from SWIFT. Even if it can not be replaced, it is also a double peak.
But the Russians also know that if this kind of thing is carried out too quickly, it will inevitably lead to a great rebound in the United States, and also lead to China’s fear. Therefore, when talking about the new system, Vice Premier Novak explained that the new system and the SWIFT system are not contradictory, and can be used by everyone. What Russia seeks is that both systems can be freely selected and switched between member states.
This is very difficult. Why is it so difficult? In fact, everyone knows that this is the lifeblood of the United States. Once threatened, the attack from the United States will be unprecedented. Therefore, Russian Prime Minister Mishuskin and Executive Secretary Sergei of the Shanghai Cooperation Organization (SCO) both proposed to hold activities in the SCO, and the target is precisely the SCO member states. But even within the SCO, if this idea is to be implemented, there will be no small resistance. For example, India and some countries in Central Asia do not have sufficient interest motivation. Because if they agree to this, they will certainly incur pressure and even attack from the United States. China and Russia have strong anti attack capabilities and are not afraid of it, but Central Asia and other countries may not be able to withstand such attacks. Although India can withstand such attacks, it generally does not support such a proposal that may benefit China but does not have many benefits. Therefore, although Russia has repeatedly raised this issue in the SCO, I believe that there will not be many responders, or Iran will become one of the supporters after it formally joins the SCO.
After the news was released, Russia naturally knew that it would be difficult to carry out this matter within the SCO. If the contract is not good, the BRICS may be very difficult. Then, if you want to succeed in this matter, you must find another way. Otherwise, it will always be a blueprint.
The so-called alternative is actually a last resort. This path is actually China and Russia first, and then slowly attract other countries to join. This is just like our real estate development history. Before the pre-sale policy, the house was built and then sold to the buyer. After everyone has enough trust in the developers and national real estate policies, and consumers have enough consumption power, the pre-sale policy can be implemented. Therefore, at present, other countries are reluctant to ask others to join in when they are concerned about whether China and Russia can do this, and whether the United States will fight vigorously for this matter. Only China and Russia are the first to build and operate this framework, and then slowly absorb some foreign trade settlement. Finally, gradually expand their settlement scope. So as to achieve a sense of strength with the dollar settlement system.
The advantage of this is that there is no need for other countries to make a choice first, or to express their support. China and Russia have just built a community and put it there in the first phase. Currently, only China and Russia can live there, but other countries are welcome to rent or buy houses here. How about the supporting services in this community? Or we need to borrow this tool made in China and Russia for some taboos about SWIFT community. It is no problem. All visitors are guests and welcome to be the host. If you can’t live in the future, you can repair the second phase.
From the beginning of November to the end of November, Russia’s position on the new settlement system narrowed from SCO member states to China and Russia. But in fact, it is more precise and operable. Moreover, at the beginning of this month, Sergey only proposed that each member country should be aware of the necessity of the existence of another settlement system. Today, Novak said that China and Russia are already doing this. Comparatively speaking, the progress of this matter is relatively fast. From the beginning of this month to the end of this month, there was a G20 summit and the Asia Pacific Economic Cooperation summit, a high-level meeting between China and the United States, and a plan of the United States to fight the epidemic against China.
China has always done more than said, while Russia has always done what was said here and done what was said there. This time, the Russian side has put forward the idea and construction of a new settlement system one after another. The Chinese side did not say much. For China, the current settlement in local currency with Russia is also good. On the whole, it can not only help Russia maintain its economy, but also further expand the presence of RMB in Russia.
Although the new settlement system is more important for China, it is not so necessary. After all, in China, there are still debates about whether to break the ties with the United States. China is still a beneficiary of the current international trading system, and there is no need to tear up its face. Russia, on the other hand, is anxious for the early arrival of a new dual track world. However, both China and Russia have a common expectation that if we don’t want a dual track system, we’d better let the United States down. However, for any country, this is a goal that is difficult to achieve in the short term.
However, the United States did not control its own hands and once again turned the clouds in China’s pocket, which made the Russians very happy, because in this way, China would obviously be more interested in and motivated by the construction of this project.