National Security

Cutting Off the American Dollar, Russia and China Move Toward a ‘Financial Alliance’

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Russia and China are moving toward a "financial alliance" by decreasing their use of the U.S. dollar, the Nikkei Asian Review reported Thursday.

In 2020's first quarter, the share of transactions using the U.S. dollar between the two countries dropped below 50 percent for the first time, while the euro and each country's own national currencies combined to comprise more than half of transactions—a historic high.

This change marks a massive drop off from the peak of dollar usage in their bilateral relationship. In 2015, the two nations used the American dollar in approximately 90 percent of their transactions.

Moscow and Beijing's growing partnership helps the countries dodge American rulemaking in the international financial system. As transactions using the U.S. dollar are ultimately cleared through American banks, Washington has the ability to track and freeze international transactions.

One expert claimed that Russia and China's developing financial ties mark a "breakthrough moment" toward a de facto alliance between the two authoritarian regimes.

"The collaboration between Russia and China in the financial sphere tells us that they are finally finding the parameters for a new alliance with each other," Alexey Maslov, director of the Institute of Far Eastern Studies at the Russian Academy of Sciences, said. "The alliance is moving more in the banking and financial direction, and that is what can guarantee independence for both countries."

Recently, Russia and China have also taken steps to strengthen their military and security partnerships. The two countries have coordinated operations in the Arctic to counter U.S. influence in the region, and have also touted a possible partnership in space. Meanwhile, both nations have vested national interests in defending the Assad regime in Syria, Iran, and Maduro's communist government in Venezuela.

"Indeed, the Xi-Putin partnership is arguably the most dangerous relationship on the planet today," Foundation for Defense of Democracies expert Tom Joscelyn wrote in July. 

"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," he added.