UltraTech Cement India’s largest cement maker is circumventing the US dollar using Yuan for a Russian coal deal, challenging the dominance of the U.S. dollar in global trade.
With over 10,000 sanctions imposed on the country, its citizens, and its companies, a group of countries led by the United States is presently exerting unprecedented pressure on the Russian economy.
Many of the largest countries (by population and economy) are still trying to adjust to the present situation, ignoring the virtue-signaling, and driving up Russia’s currency and current account balance despite all the media amplification of sanctions threats and vilification of anything Russian by western leaders.
Yet another sign that the new world order is far from as cohesive as Biden believes it to be is that Indian industrialists seem to have no trouble doing business with Putin to acquire their key materials.
The most recent instance comes from India, where UltraTech Cement, the country’s biggest cement producer, is reportedly importing a cargo of Russian coal and paying for it with Chinese Yuan.
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According to the document, UltraTech is importing 157,000 tonnes of coal from the Russian producer SUEK, which was loaded into the bulk carrier MV Mangas at the Vanino port in the Russian Far East. The value of the cargo, according to a cited invoice dated June 5, is 172,652,900 yuan ($25.81 million).
The increasing use of the yuan for payment settlement could support Beijing’s efforts to further internationalize the currency and challenge the dominance of the U.S. dollar in the global trade, as well as shield Moscow from the effects of western sanctions imposed on Russia due to its invasion of Ukraine.
“This move is significant. I have never heard any Indian entity paying in yuan for international trade in the last 25 years of my career. This is basically circumventing the USD (U.S. dollar),“ a Singapore-based currency trader said.
India looked about creating a rupee payment system for trade with Russia, but nothing came of it. For many years, Chinese companies have handled trade with Russia using the yuan.
“If the rupee-yuan-rouble route turns out to be favourable, the businesses have every reason and incentive to switch over. This is likely to happen more,” said Subash Chandra Garg, a former economic affairs secretary at India’s finance ministry.
An Indian government official with knowledge of the situation claimed that the government was aware of yuan payments.
“The use of the yuan to settle payments for imports from countries other than China was rare until now, and could increase due to sanctions on Russia,” the official said.
Finally, we are brought back to what the International Monetary Fund’s (IMF) First Deputy Managing Director Gita Gopinath stated to The Financial Times earlier this year: the recent financial sanctions imposed on Russia for its invasion of Ukraine threaten to undermine the dominance of the U.S. Dollar as the global currency.
Since the United States imposed sanctions in retaliation for its annexation of Crimea in 2014, Russia has been preparing to reduce its dependence on the petrodollar for years.
These plans have only been accelerated by the present Ukrainian crisis, and it appears that the BRICS group as a whole is now prepared to cross the chasm as Bretton Woods III takes shape.
Needless to say, the ramifications are staggering (and, worse, while Zoltan Poszar does not officially express it, it is evident that he believes that a global war is about to break out):
Empires fall and rise. Currencies fall and rise. Wars have winners and losers.
When Wellington beat Napoleon, the trade was to buy gilts. I am no expert on geopolitics, but I am an interest rate strategist and I think the level of inflation and interest rates and the size of the Fed’s balance sheet will depend on the steady state that emerges after this conflict is over. Three is a magic number:
The four prices of money are managed via Basel III and central banks as DoLR.
The four pillars of commodity trading are shaped by war, hopefully not WWIII.
The new world order will bring a new monetary system – Bretton Woods III.
The current dollar-hegemon-based system would face its greatest threat from a payment system based on the BRICS.
The BRICS group, which consists of Brazil, Russia, India, China, and South Africa, is working to establish a new global reserve currency that would be based on the currency basket of the 5 nations, according to Russian President Vladimir Putin, who made the announcement at a BRICS summit earlier this month. The bloc has previously stated that it was seeking to create a shared payment network in order to reduce dependency on the Western financial system.
Even if this is only talk, it serves to highlight how unstable the dollar is. It would be smart for US officials to carefully consider future dollar weaponization.