Drop the US Dollar

OSINT ANALYSIS 

 RUSSIA AND CHINA DROP THE U.S. DOLLAR

1. The central event

Russia and China have decided to abandon the U.S. dollar in their bilateral transactions and likely in a significant portion of their external trade. This means that payments for energy, raw materials, industrial goods, and technologies will be made in rubles and yuan (renminbi) – local currencies – instead of dollars.

This is not an overnight complete abandonment of the dollar, but a structural shift with cumulative effects.

2. Mechanism of action

Russia–China trade (which exceeded $240 billion USD in 2023) will be denominated exclusively in rubles and yuan. Other countries (BRICS+ members, ASEAN, partners along Belt and Road routes) are encouraged to follow the model. A parallel payment and settlement system is being created, one that avoids the Western-controlled SWIFT system and circumvents U.S. sanctions.

This move follows the freezing of Russian dollar reserves by the U.S. and EU in 2022 – a signal that no dollar holder is completely safe.

3. Why this is a major event

3.1 Challenging U.S. financial dominance

The dollar has been the global reserve currency since Bretton Woods (1944). Nearly 60% of global foreign exchange reserves and 80% of international transactions are conducted in dollars. Russia and China, two of the world's largest economies (combined GDP of approximately $35 trillion USD at purchasing power parity), are breaking this monopoly.

3.2 Moving toward an era of local currencies

Each country will use its own currency in bilateral trade. This reduces dependence on U.S. Federal Reserve monetary policy, eliminates the risk of secondary U.S. sanctions, and lowers long-term global demand for dollars.

4. Immediate and medium‑term global impact

U.S. dollar – Gradual downward pressure; loss of exclusive "safe haven" currency status.

Russian ruble and Chinese yuan – Increased international demand; possible controlled appreciation.

Central bank reserves – Accelerated diversification away from dollars into gold, yuan, and other currencies.

Commodity prices (oil, gas, metals) – Two markets may emerge: one priced in dollars (West) and another in local currencies (East + Global South).

SWIFT system – Relative decline; Russian (SPFS) and Chinese (CIPS) alternatives gain ground.

U.S. sanctions – Reduced effectiveness, as countries can transact without touching the dollar system.

5. Risks and challenges

Exchange rate volatility between rubles, yuan, and other currencies – without a common anchor. Limited liquidity – the market for rubles outside Russia is thin. Risk of global economic fragmentation – two separate financial blocs, higher transaction costs. Potential U.S. response – possible secondary sanctions against banks that transact in yuan or rubles, trade escalation.

6. Strategic conclusion

The decision by Russia and China to drop the dollar is not merely symbolic. It marks the beginning of a new era in global trade – one in which the dollar is no longer the only option.

The effects will not be immediate (the dollar will remain strong in the West), but over a 5‑ to 10‑year horizon: U.S. relative financial power will erode. The Eastern + Global South bloc will operate a parallel monetary system. Inflation in the U.S. may rise (lower demand for dollars puts pressure on money printing).

For small or medium‑sized states (including Romania), this shift means: the need to manage reserves in multiple currencies, higher currency risk, and opportunities to negotiate bilateral agreements in local currency.

Current status: the beginning of a long but irreversible process. The world is moving from financial unipolarity to multipolarity.