The issue of looking for an alternative medium for financial transactions that can decrease the domination of the dollar in international trade has been a hot topic recently, particularly after the reimposition of U.S. sanctions on Iran and Russia, leading to the rise of critical voices against the greenback and concrete solutions to increase the share of other currencies in trade and financial markets.
Exposed to U.S. sanctions, Turkey and Russia have also recently expedited their efforts to increase the utilization of local currencies in trade transactions.
In a speech on Saturday, President Recep Tayyip Erdoğan said Turkey is preparing to trade with its top trade partners like China,
Russia, Iran and Ukraine in local currencies instead of the U.S. dollar, adding that it was also ready to do the same with European countries. President Erdoğan's effort have garnered support from Moscow as the Kremlin spokesperson said yesterday Moscow aims to use national currencies in trade with Turkey, instead of dollars or euros.
The question of using national currencies in bilateral trade has been discussed many times in talks between Russia and Turkey, Dmitry Peskov told journalists via conference call from Moscow.
"The use of national currencies in mutual trade transactions is a topic that has been raised by the Russian side at various levels, including at the highest levels, for a long time," he said. "President Putin has repeatedly spoken of such a possibility and, moreover, of such expediency. Of course, this is subject to scrupulous study, scrupulous calculations, but this is what we seek in our bilateral trade and economic relations, and what has been repeatedly discussed at bilateral Russian-Turkish talks," he added.
According to the latest Treasury International Capital report, Russia had liquidated virtually all of its U.S. Treasury holdings, selling off the bulk of its U.S. government bonds in just two months, March and April.
In an interview for the Russia-1 TV channel, Russian Finance Minister Anton Siluanov said, "Russia aims to keep reducing its investments in American securities following new U.S. sanctions. He added that the U.S. dollar is becoming an unreliable tool for payments in international trade." The minister also hinted at the possibility of using national currencies instead of the dollar in oil trade.
"I do not rule it out. We have significantly reduced our investment in U.S. assets. In fact, the dollar, which is considered to be the international currency, becomes a risky tool for payments," Siluanov noted.
As Russia is contemplating abandoning the dollar, the recently introduced Chinese "petroyuan" oil futures contract has soared. The Chinese oil futures contract spiked to a new record high last week, when the U.S. reinstated sanctions on Iran. This was the biggest daily move in China's oil futures since the contract's inception in March to an all-time high.
In April, Turkey and Iran issued the first letter of credit in the form of a national currency swap to exchange the Iranian rial and Turkish lira. The swap will ease trade, transactions between the two countries and lower foreign currency risks after both currencies faced depreciation recently. Under this system, there is no need to rely on a third-party currency, like the U.S. dollar or euro, the news agency said quoting Iran's central bank (CBI).
Moreover, Turkey is also preparing to issue first renminbi-denominated bonds this year.