The growing economic transactions between Russia and the Chinese Communist Party (CCP) in fact form a financial alliance that tends to defuse the effects of the dollar on their respective national economies.
During the first half of this year, the two authoritarian regimes decreased the use of the dollar to 46% and at the same time increased the use of the euro and their national currencies to over 50%, reported the Nikkei Asian Review on Aug. 6.
Although in 2015 90% of the negotiations between the two countries used the dollar this percentage declined to 51% in 2019 and the downward trend continued as the United States imposed economic sanctions on Russia and the Chinese Communist Party (CCP).
“Many expected that this would be a military alliance or a trading alliance, but now the alliance is moving more in the banking and financial direction, and that is what can guarantee independence for both countries,” Alexey Maslov, director of the Institute of Far Eastern Studies at the Russian Academy of Sciences, told the Nikkei Asian Review.
In practice, the use of the dollar as the main medium of economic exchange made Russia vulnerable to American sanctions, such as during the annexation of Crimea in 2014.
Through the SWIFT organization, which connects 11,000 banks in 204 countries to monitor international financial activity, these sanctions are enforced by freezing the funds that become the Trump administration’s chosen target.
By circumventing the SWIFT system and the use of the dollar, both Russia and the CCP gain access to a field of action in which the restrictive provisions of the United States do not apply.
Also, their central banks lowered their dollar reserves and bought gold and the currencies of their ally. Russia invested more than $40 billion in gold bars in the last five years.
The two powers have businesses in common that tend to bring them even closer together, for example, their relations with the Assad regime in Syria, with Iran, and with the Venezuelan dictatorial government, as listed by The Washington Free Beacon.
In addition, in the Arctic, they establish joint actions to compete with the United States, just as they seek to do in the search for greater influence in outer space.
For some analysts, this partnership could imply high risk.
“Indeed, the Xi-Putin partnership is arguably the most dangerous relationship on the planet today,” Foundation for Defense of Democracies expert Tom Joscelyn said on July 15.
“Xi and Putin share a deep-seated animosity for what was once thought of as the American-led world order. They see it as a threat to their countries’ efforts to achieve great power status and, just as importantly, their authoritarian ambitions,” Joscelyn added.