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China Signs Non-Dollar Settlement Deal With Russia’s Largest Bank

China Signs Non-Dollar Settlement Deal With Russia’s Largest Bank thumbnail

Slowly – but surely – the USD’s hegemony is being chipped away whether by foreign policy faux pas, crossed red-lines, or economic fragility. However, on Day 1 of Vladimir Putin’s trip to China it is clear that the two nations are as close as ever. VTB – among Russia’s largest banks – has signed a deal with Bank of China to pay each other in domestic currencies, bypassing the need for US Dollars for “investment banking, inter-bank lending, trade finance and capital-markets transactions.” Kirill Dmitriyev the head of Russia’s Direct Investment Fund notes, “together it’ll be possible to discuss investment in various projects much more efficiently and clearly,” as Russia’s pivot to Asia continues to gather steam.

 

As RT reports, Day 1 for Putin is going well…

VTB, Russia’s second biggest lender, has signed a deal with Bank of China, which includes an agreement to pay each other in domestic currencies.

 

“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” says the official VTB statement.

 

The deal underlines VTB Group’s growing interest in Asian markets and will help grow trade between Russia and China that are already close trading partners, said VTB Bank Management Board Vasily Titov.

But it’s not just the banking relationships…

In the first day of a two-day trip to China Russia’s President Vladimir Putin said the two countries will be increasing their bilateral trade to reach a new level.

 

Our countries have done a huge job to reach a new historic landmark…. China has firmly settled in a position of our key trade partner,” Putin said.

 

Putin also said that trade turnover between Russia and China grew almost 2 percent during 2013 to reach about $90 billion.

 

“If we sustain this pace the level of bilateral trade of $100 billion will be reached by 2015 and we’ll confidently move on,” Putin said.

 

Increasing investment cooperation is crucial, Putin added.

 

 

“Together it’ll be possible to discuss investment in various projects much more efficiently and clearly,” as Interfax quotes Kirill Dmitriyev the head of Russia’s Direct Investment Fund.

Nothing lasts forever… remember…

zerohedge



42 Comments on "China Signs Non-Dollar Settlement Deal With Russia’s Largest Bank"

  1. noobtube on Tue, 20th May 2014 12:14 pm 

    When the petro-dollar dies, the United States will not be far behind.

  2. Plantagenet on Tue, 20th May 2014 12:54 pm 

    When oil dies, Russia won’t be far behind.

  3. bobinget on Tue, 20th May 2014 1:12 pm 

    Not so fast. nootube.
    Last time I looked there were still Englishman, Frenchman, Spaniards, etc. Are their lives so much better or worse than Americans or Dutchman?

    Another thing, when was the last time you bought something of high value using only CASH?

    The world MAY indeed be moving away from USD’s but I’ll betcha most currencies will be obsolete… someday.

    Travelers these days insert plastic in any ATM and, for a fee are returned currency of choice.
    In no time, vegetable vendors will simply scan a person’s card in their phone and digital money gets transferred. In Africa were few have bank accounts the phone IS a wallet. In developing world, recharging the phone means not only the battery but digital currency as well.

    The underworld, tax dodgers, will resist this of course.
    But because technology won’t go away and IRS’s around the world want a piece of you actions, paper money will someday become a fond memory.

    I would argue it will be commodities that will become icons of vale.

  4. Northwest Resident on Tue, 20th May 2014 1:23 pm 

    When the petro-dollar dies, global economic meltdown and mass riot/chaos will not be far behind.

  5. Malarchy on Tue, 20th May 2014 2:05 pm 

    It’s not just the underworld and tax-dodgers; there are many “normal” people who do not trust governments, banks, computers and the IRS, and for whom physical cash in the hand is becoming a symbol of defense and defiance against the state.

  6. noobtube on Tue, 20th May 2014 2:17 pm 

    The whole premise of the petro-dollar is the use of violent, military force to protect the Saudis (and to take whatever the US can get through military violence).

    Once the United States military is shown to be a paper tiger, the petro-dollar is finished.

    At that point, all the United States global corporations (Coke, Disney, GM/Ford/Chrysler, Bank of America/Chase/TBTF, Monsanto, Dow, Union Carbide, etc.), immediately lose most of their value.

    They cannot compete with the local populations without the support of the murderous, brutal, United States military.

    Without the United States military, there is no United States… at least not as we know it.

    Think Rome and the Roman military. Look what happened there.

    While there may still be British, French, Spaniards, and Dutch… the conception of themselves changed after they lost reserve currency status (usually from war).

    The United States is not a country, or a nation per se. It is an experiment. And, it is a failed one.

    The world will continue, but without the deadweight of supporting the United States.

  7. J-Gav on Tue, 20th May 2014 2:25 pm 

    Northwest – I share your outlook that the demise of the petro-dollar means a major shift is on the way. Questions remain though. Will it be abrupt, gradual, managed or completely chaotic?

    I’m not sure an overnight collapse of the dollar’s (still present) “extravagant advantage” (in the words of a former French president) would be to anybody’s benefit. Consequently, a gradual shift away from it seems more likely to me. Russia and China don’t hold all the currency cards. The BIS and Western Central Banks will also want to have their say.

    So I expect some backroom negotiating (already underway?) in an attempt to ease the inevitable transition. It’s clear to much of the world today that the policies thus far driven by the Fed, the IMF, the ECB and Co, (i.e. get everybody in debt, impose austerity and then privatize the hell out of everything) is a dead-end. Clinging to it will only lead to tragedy and conflict. Do enough people in high places have enough wisdom to avoid the worst-case scenarios? Stay tuned for the next episode … which should give us a clue.

  8. Northwest Resident on Tue, 20th May 2014 2:44 pm 

    J-Gav — A managed and incremental shift away from the petro dollar and into a world “reserve” currency would be a major feat, in my opinion. I admit that I could be wrong in my belief that the global economy is hanging by a thread right now, and that we are well on our way to global financial collapse (think banker who has jumped off of a tall building and is contemplating how much longer before he hits the bottom). IF I am wrong about that, and TPTB in the world in fact have a firm grip on the global economy and a plan to keep BAU going well into the future, then it I guess it is possible to negotiate and strategize a shift away from the petro dollar and into a global currency. I just don’t think there is time for that. It will be interesting to see how it all unfolds over the next year or two, won’t it?

    noobtube — You probably don’t realize it, but your angry spiteful rantings paint a clear picture of you as an insane person. I used to work in the emergency psychiatric hospital while I was trudging my way through college, and I met many truly insane people who made a lot more sense than you do. No doubt, you’re a bitter lonesome loser of epic proportions holed up in your mother’s basement, just bursting with anger and resentment. I pity you.

  9. Plantagenet on Tue, 20th May 2014 2:58 pm 

    Shifting from the dollar into a world “reserve” currency doesn’t make any sense, since the dollar already is the world “reserve” currency. No doubt at some point a different currency will someday take over from the dollar, but right now all the alternatives (euro, yuan, yen, ruble, etc.) have even more flaws than the dollar.

  10. GregT on Tue, 20th May 2014 3:05 pm 

    Plant,

    When oil dies, all countries will have already been in a state of massive turmoil for a long time.

    Russia has over twice the proven reserves than the States and less than half the population. They also consume about 1/10th of the oil that the US does. So pointing figures at Russia makes little sense, as usual. Better to start making plans for yourself, and stop worrying about other people, living on the other side of the planet, that you have never met, and probably know nothing about.

  11. Plantagenet on Tue, 20th May 2014 3:14 pm 

    GregT,

    Oil is already dying and countries are already in a state of massive turmoil—haven’t you noticed? Conventional oil production peaked in 2005—

    Yes, Russia has large oil reserves. No, Russia won’t be be able to escape the effects of peak oil, especially when the country is controlled by a small clique of oligarchs whose main concern is siphoning off as much of Russia’s oil wealth for themselves as is possible.

  12. rockman on Tue, 20th May 2014 3:27 pm 

    Perhaps I’m just a simple country geologist but when the US buys oil from Canada, México and Venezuela are they going to be paid in rubles, pesos, Yuan, pounds, etc. Or in dollars as they have been from the beginning? Of course if the value of a Lonnie increase relative to the US dollar the Canadians will want more dollars for the oil. But hasn’t that been the case all along?

    So China pays Russia in their own currency…how does that effect the US? Until the change China was paying Russia in dollars. But not physical dollars…just digits on a computer they would swap their Chinese digits for. Or I suppose they were actually using some of those many tens of $billions in US currency they already hold.

    I’m sure China buying Russian oil/NG will have some significant ramifications. But some are forecasting the end of the US economy without explaining how that would how that would come about.

  13. GregT on Tue, 20th May 2014 3:28 pm 

    Plant,

    Oil may be close to dying, but it is nowhere close to being dead. Yes, some countries are already in a state of turmoil, but your country and mine, are not in states of turmoil quite yet. The end of the petro dollar will speed the process up though, for us. Not Russia.

    “No, Russia won’t be be able to escape the effects of peak oil, especially when the country is controlled by a small clique of oligarchs whose main concern is siphoning off as much of Russia’s oil wealth for themselves as is possible.”

    Sounds very much like every other country Plant, so why single out Russia? All that I am saying is, that in all likelihood Russia will weather the peak long after most other countries. Unless of course, WW3 breaks out, then all bets are off.

  14. Northwest Resident on Tue, 20th May 2014 3:30 pm 

    I think the Russian will fare far better than Americans in a total collapse scenario. Orlov makes the same point. For one, the Russians do not depend on energy-intensive JIT delivery for their food or products. Little of what the Russians eat and consume is shipped in container ships from the other side of the planet. They much more than Americans have maintained their ties to the land, with simple gardens and country daschas where they can grow their own food. Also, most Russians already own the property they live in — not big mega-mansions or 1800 square foot ranch houses, but small easily heated and efficient apartments. Next, Russians as a culture are MUCH more cohesive than Americans — they almost all get around using public transportation, their family and friendship ties tend to be much stronger and well established than in America. And of course, the Russians are truly energy independent. Finally, the Russians have a long and illustrious history of a political system ruled by a strongman and his henchmen, with a small middle class and all the rest happy working as peasants. It is in their mentality, their cultural make-up. They’ll revert quickly to tried and proven cultural structures developed through the ages. In America, we’ll just fall apart with all kinds of prima donnas and religious zealots and criminal hotheads making their plays for power and control.

  15. Plantagenet on Tue, 20th May 2014 3:37 pm 

    Hi Greg T:

    If you don’t know about the Russian oligarch who are illegally stealing billions of dollars of Russian oil revenue and socking it away buying London mansions and soccer teams, Greek Islands, and even a US NBA franchise, then I suggest you start looking into it. Its quite a fascinating story.

    Start with Putin’s favorite oligarchs—try googling Roman Abramovich, Alexander Abramov, Oleg Deripaska, Mikhail Fridman, Mikhail Prokhorov, Alisher Usmanov, German Khan, Viktor Vekselberg, Leonid Michelson, Vagit Alekperov, Pyotr Aven, and still Vladimir Potanin and/or Vitaly Malkin. CHEERS!

  16. GregT on Tue, 20th May 2014 3:41 pm 

    Rockman,

    The cash that you have sitting in your bank account, is not in the form of paper dollars. If the Fed pegs inflation at 3.5%, and your bank pays you 1% in interest, you are in effect losing 2.5% on your ‘investment’. The 2.5% is free money that the government can create out of thin air, that does not need to be payed back.

    Every dollar in existence, that is begged, borrowed or stolen, has been subjected to a hidden tax, whether in paper form, coins, or an entry on a computer.

  17. Northwest Resident on Tue, 20th May 2014 3:47 pm 

    There must be half a million computer programs in the world specifically programmed to execute based on the US dollar. The fact that so many computer programs would have to be rewritten, retested and updates delivered to so many places makes me think that moving away from the “petro dollar” is about as realistic as the world moving away from Microsoft operating systems — a lot of people would love to do it, but it is more trouble than it is worth.

  18. GregT on Tue, 20th May 2014 3:57 pm 

    NWR,

    The US dollar in those programs is only a symbol ($). It is the rate of exchange that matters, and those rates are constantly being updated in real time. Not just for the $, but for all currencies, commodities, stocks, bonds, etc.

    Nothing more than numbers.

  19. GregT on Tue, 20th May 2014 4:05 pm 

    Plant,

    Are you saying that American, Chinese, Greek, Mexican, or any other country’s oligarchs, aren’t doing the same things as the Russian oligarchs?

  20. eugene on Tue, 20th May 2014 4:06 pm 

    I don’t know much but figure I know as much as the rest. The dollar has been used to dominate world markets and, for many, much to their regret. There’s a whole helluva lot of dollars out there that will come home to roost when this thing is done. As they come home to roost, the dollar will lose value and as it does so, inflation will rage. The loss of dollar hegemony will be devastating. I figure it’s called justice.

  21. Perk Earl on Tue, 20th May 2014 4:14 pm 

    I think other countries may get their wish and continue to move so far away from the USD it is no longer the world reserve currency, but it may be a case of be careful what you wish for. Yes, it will hurt the US economy but it will certainly also hurt the world economy as the value of said currencies will be lower in comparison.

    It’s like the team relying on Babe Ruth as the clean up hitter, deciding that it’s better for the line up to be randomly determined. Some days the shortstop bats 4th, but other days the catcher does. The net result is less runs driven in per game, just as there will probably be less overall economic advantage to using less currencies for exchanges. In other words, world GDP will drop, but psychologically it may benefit countries thinking the currency playing field has been leveled.

  22. Perk Earl on Tue, 20th May 2014 4:17 pm 

    I meant that to read, “lesser currencies for exchanges.”

  23. GregT on Tue, 20th May 2014 4:21 pm 

    We are talking mainly about standards of living here. Being able to siphon percentage points off of every dollar in existence, adds to the US standard of living. People around the world are supporting the average US citizen’s way of life. When this extra ‘money’ is no longer being generated, it will be the US citizen himself, that will have a greater burden of debt.

    The entire purpose for a global reserve currency, was to regulate trade imbalances, and to stop countries from waging financial ‘wars’ on other countries.

    When the US dollar was taken off of a gold standard, and allowed to be inflated, the entire reason for a reserve currency was lost. The USD is no longer a stable currency, it is being taxed away through monetary inflation. Anyone who uses the USD is being taxed at the rate of inflation, for the sole benefit of the US of A.

  24. Northwest Resident on Tue, 20th May 2014 4:24 pm 

    Speaking of dollar collapse, I just ran across this article and found it right on topic:

    Dollar on the Brink of Disaster-John Williams

    “You are not seeing an annual deficit of $400 or $500 billion dollars. You are really seeing something close to $6 trillion. That is beyond control, and it raises the question of long term solvency of the U.S. It is a big concern for the global markets. It’s really the reason why nobody outside the United States wants to hold the dollar. Now, look at the U.S. economy, it is turning down. Economic strength is a big factor in the value of a currency. As the renewed downturn gains wider acceptance or wider recognition, that will intensify the selling pressure. When someone starts selling, it’s going to be a race for the door, and I am looking for a dollar selling panic to be the trigger for the onset of hyperinflation.” What we are seeing in inflation now is a pickup in inflation, but it’s not a hyperinflation. Massive dollar selling–that will be the trigger for the hyperinflation.”

    usawatchdog dot com/dollar-on-the-brink-of-disaster-john-williams/

    True, or not?

  25. J-Gav on Tue, 20th May 2014 5:22 pm 

    So many IOUs which will never be paid.

  26. Perk Earl on Tue, 20th May 2014 5:31 pm 

    “What we are seeing in inflation now is a pickup in inflation, but it’s not a hyperinflation. Massive dollar selling–that will be the trigger for the hyperinflation.”

    That may cause added inflation, but I’m thinking continued QE will be needed to reach the point of hyper-inflation.

    QE has been reduced to 45b a month from 85b and is slated to continue to taper 10b a month, however Yellen keeps repeating a mantra of it depends on the economy. Well, 1st qtr. GDP was .01% and by some accounts I’ve read it was more like minus .6 to .8%, but supposedly that was the winter’s fault. 2nd qtr. is suppose to pick up I guess due to better weather, but if GDP comes in low again, it seems likely Yellen will go back to pass another round of higher QE amounts. I’m curious to see what they go back to, i.e. 85b or who knows.

    We are at a point where QE is charging up the wealthy and that seems to be the last game in town. The downside is if they keep printing dollars it seems like it will lead to hyper-inflation (which of course always occurs quickly once it gets started). When that might occur is hard to say and depends on how much is printed.

  27. GregT on Tue, 20th May 2014 6:00 pm 

    From Wiki;

    “Hyperinflations are usually caused by large persistent government deficits financed primarily by money creation.”

    Exactly what we see happening with the Fed right now. Massive debt coupled with low interest rates, the only option is to raise the rate of monetary inflation.

    “A sharp decrease in real tax revenue coupled with a strong need to maintain the status quo, together with an inability or unwillingness to borrow, can lead a country into hyperinflation.”

    Hyperinflation is caused by a loss of confidence in the value of a currency. If more people actually understood that they are losing net worth by depositing money into a bank account, they would be buying goods now, rather than waiting until their dollars will buy less later. Fortunately, at the moment, most people have little to no understanding of inflation, so the panic has not begun, yet.

  28. Makati1 on Tue, 20th May 2014 6:55 pm 

    Perhaps people are waking up to how their money/lives is/are being stolen by the big banks and government? Those oligarchs now control the US and most other countries. They too have seen the future and don’t want it to be tied to the US Charmin. Of course, the Euro is in the same bad condition, held up by the American banks and Fed.

  29. GregT on Tue, 20th May 2014 9:49 pm 

    ” Of course, the Euro is in the same bad condition, held up by the American banks and Fed.”

    Yes Makati,

    And so is every other currency controlled by the central banking cartels. Which is now the vast majority of countries on the planet. Of course there are some holdouts, coincidentally the very countries that have been/ are being overthrown, invaded, or bombed into the Stone Age, by the military industrial complex.

    Strange how that is.

  30. Davy, Hermann, MO on Tue, 20th May 2014 9:55 pm 

    you all act like there is an exit strategy to the dollar…there is and it is called collapse. enjoy

  31. Makati1 on Tue, 20th May 2014 11:03 pm 

    Food for thought:

    “… As impelled as the Fed is to protect the large banks that sit on the board of directors of the NY Fed, the Fed has to protect the dollar. That the Fed believed that it could not buy the bonds outright but needed to disguise its purchase by laundering it through Belgium suggests that the Fed is concerned that the world is losing confidence in the dollar.

    If the world loses confidence in the dollar, the cost of living in the US would rise sharply as the dollar drops in value. Economic hardship and poverty would worsen. Political instability would rise.

    If the dollar lost substantial value, the dollar would lose its reserve currency status. Washington would not be able to issue new debt or new dollars in order to pay its bills.

    Its wars and hundreds of overseas military bases could not be financed.

    The withdrawal from unsustainable empire would begin. The rest of the world would see this as the silver lining in the collapse of the international monetary system brought on by the hubris and arrogance of Washington. …”

    http://www.globalresearch.ca/the-fed-is-the-great-deceiver/5382966

    And the beat goes on…

  32. Perk Earl on Tue, 20th May 2014 11:23 pm 

    It’s like Nicole Foss says we are now in a period of ‘extend and pretend’. Extend the financial system by any desperate fiscal measure possible, coupled with pretending we can still have BAU ad infinitum in spite of no longer having cheap oil.

    I really wonder for how much longer this charade can be perpetrated. But just as a side note to show you just how gullible people can be, besides their willingness to be cornucopians while we charge headlong towards a cliff, here’s something I saw on TV that brings it all home:

    There’s this show; the Carbanero Effect. A modern version of candid camera. This guy Carbanero is working in a store, and he tells this man he’s going to bring out an antique from the 70’s. So he brings out this duck decoy and starts to fit the feet on and then the head – he then lowers it and pulls up a real duck. By then several people have gathered around and he keeps spinning this yarn about how it is a animatronic bird and he’ll need to replace the batteries later – then at some point the duck turns it’s head 180 and he says, see that was impossible so you know it’s animatronic. Out of around 8 people, not one rejected this absurdity. They all just looked on with one woman really buying it.

    These are the people the government needs to fool that all is well – so how hard it that? LOL! They are the cornucopians believing all will be well. Most people just continue their lives not being worried one iota about peak oil. Should be quite an awakening once those dolts snap out of it.

  33. Makati1 on Wed, 21st May 2014 12:56 am 

    More food for thought:

    “…While much of the world was distracted by the supposed clash over Ukraine between Russian strongman Vladimir Putin and Western politicians, the International Monetary Fund announced a bailout of the new Ukrainian regime denominated in the IMF’s increasingly influential proto-global currency known as Special Drawing Rights, or SDRs. Analysts are warning that the developments could have profound implications for the global monetary system and the economy — and especially for the United States, which is stealthily being set up for economic calamity as the U.S. dollar continues on the road to losing its prized status as the world reserve currency.

    The controversial planetary entity and its Western apparatchiks, along with various communist and socialist dictatorships and the United Nations, have long been agitating to ultimately dethrone the embattled U.S. dollar. Top-level American officials at the U.S. Treasury and the Federal Reserve have been helping them along. The dollar’s place as the global reserve currency would be filled by the IMF’s SDR, currently composed of a basket of currencies that includes dollars, British pounds, euros, and Japanese yen. The IMF, the UN, and multiple national governments have all openly advocated precisely such a plot in reports and statements made in recent years. The Obama administration, meanwhile, has exploited the Ukraine crisis to further empower the IMF while reducing U.S. influence. …”

    http://www.thenewamerican.com/economy/item/18207-imf-bailout-for-ukraine-and-a-new-world-currency

    And the beat goes on and on…

  34. simonr on Wed, 21st May 2014 3:41 am 

    Putting my tinfoil hat on.

    if you want to move an economy away from JIT economics to a more resilient method.

    Wouldn’t inducing a period of inflation do the trick.

  35. GregT on Wed, 21st May 2014 8:13 am 

    “Wouldn’t inducing a period of inflation do the trick.”

    Well if it would, it certainly hasn’t for the last 43 years.

  36. simonr on Wed, 21st May 2014 8:19 am 

    Hi Gregt

    I can see records (UK) back to 1989 all had inflation rates in single digits.
    Not sure when JIT took off, but I believe it was in the thatcher years.

    when inflation starts to rack up, it makes no sense to sit on capital, far better to borrow and invest in widgets.

    Simon

  37. GregT on Wed, 21st May 2014 10:00 am 

    Simon,

    Are you talking inflation as in cost of living, or inflation as monetary policy?

  38. simonr on Wed, 21st May 2014 10:31 am 

    Hi Greg

    Not sure I am qualified to comment on that.

    I just know that JIT is not as attractive in high inflation.
    In high inflation times, the value of the stock you hold increases and the value of money (inc. debt) decreases, so if high inflation became the norm for a while (years) you would find companies starting to hold stock again and moving away from JIT practices, which would coincidentally make them more resilient to peak oil.

    whether this is planned is a whole other thing

  39. GregT on Wed, 21st May 2014 11:21 am 

    Cost of living is affected by many factors, one big one of course, is energy costs.

    Monetary inflation is a planned policy. Monetary inflation is not in double digits and has remained somewhat stable for the last 4 decades. Low single digits.

  40. baptised on Wed, 21st May 2014 11:41 am 

    I like Northwest 3:30 comment. May I add when the SHTF racism will rise to the top quickly.

  41. GregT on Wed, 21st May 2014 12:42 pm 

    Simon,

    “I just know that JIT is not as attractive in high inflation.”

    I agree with your premise. Unfortunately you are describing the very circumstances that lead to hyperinflation. People dump currencies for goods, which increases money velocity and drives the prices of goods up. Which in turn causes people to dump even more currency to buy goods, and on and on.

  42. simonr on Wed, 21st May 2014 1:05 pm 

    Hi Greg

    not a pretty scenario.

    I did say I had my tinfoil hat on though 🙂

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