Ruble-yuan settlements booming, set to reshape global finance

Settlements in local currencies between Russia and China now account for 7 percent of the bilateral trade, but the potential for growth is tremendous, experts tell RT. Yuan-ruble trade in Russia has grown 700 percent in a year.

Growing cooperation between Russia and China has become one of the hottest topics in the global economy. It is signaling the emergence of a strong alliance of one the world’s richest and strongest economies, which is expected to reshape the existing western-dominated economic model.

While energy deals between the resource – rich Russia and resource – hungry China look natural, bringing the countries’ finances closer looks like a real challenge to the US dollar system, experts agree, although the transition won’t be quick.

“The transition from the usual scheme of payments in major currencies is not a quick process, but with a certain political will and sufficient mechanisms of hedging currency risks in exports and imports it is quite feasible,”

Aleksandr Prosviryakov, Treasuries & Commodities Manager at PWC, told RT. He added that the first step towards this was the signing of a three-year agreement on currency swap worth 150 billion yuan in October 2014.

Currency swaps allow companies in both countries to use national currencies in mutual settlements. That means the Russian importers can purchase Chinese products with yuan, and the Chinese can make payments in rubles.

READ MORE: Ditching US dollar: China, Russia launch financial tools in local currencies

“We see a pretty rapid intensification of trade in the yuan-ruble currency pair in Russia,”

he said adding that the volume on the Moscow Exchange increased by 8 times in comparison with the previous year, and 6 times in the OTC market.

Prosviryakov said the agreement to supply Russian oil to China through the Eastern Siberia - Pacific Ocean pipeline was the first major project implemented through settlement in local currencies.

An increased use of national currencies by major exporting and importing countries will lead to a reduction in the share of traditional currencies in international payments, he added.

The US dollar still remains preeminent in global trade; more than 80 percent is settled in dollars and 60 percent in international reserves. However, in 2014, the yuan leaped to nine percent of international settlements, which gives a chance that its role in the world financial system will become more important.

“There is a reason to believe that this trend will continue in the coming years and the role of the yuan will increase rapidly not only in international trade, but as the currency of international reserves of the central banks,”

he said.

China's decision to establish and lead the Asian Infrastructure Investment Bank (AIIB) is “the real crux of Beijing's current long-term international economic and financial strategy,”

Brendan O'Reilly, China-based writer and educator told RT.

“Now Beijing is making its own global bank that can compete with Western-dominated institutions,”

he said.

Fifty-seven countries have been approved as founding members of AIIB with Russia expected to become the bank’s third largest participant.

“I think Russia's participation in AIIB will have a positive impact on economic and trade cooperation between the two countries,”

said Prosviryakov. “One of the bank’s main tasks is financing infrastructure projects, a large part of which will be located on the territory of Russia. Investments in infrastructure will contribute to the development of bilateral trade, which will increase the likelihood of achieving the ambitious goal of the two countries to increase the turnover to $200 billion dollars by 2020.”

Even US allies such as Germany and the UK have signed on despite American objections, O'Reilly said.

“If the AIIB succeeds in its long-term goals of supporting Eurasian transport and trade infrastructure, then China, Russia, and many other states stand to benefit enormously,”

he said.

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As global CO2 breaks records, India faces dilemma

New Delhi: During the week of April 6 to 12, average carbon dioxide (CO2) levels touched 404.02 parts per million (ppm), the highest-ever in recent human history - and 15 percdent above the levels of 350 ppm scientists say is ideal for Earth.
The months of February, March and April had monthly average CO2 levels higher than 400 parts per million (ppm), the first time in recorded history all three months have reached such levels, according to the keystone Mauna Loa observatory in Hawaii.
These rising levels have growing relevance for India, as it struggles with a farm crisis brought on by uncertain rainfall, attributed increasingly to climate change, as IndiaSpend recently reported.
India is the world’s third-largest emitter of CO2, the chief greenhouse gas. A renewed push for industrialisation will have to be balanced against further climate change.
The 400 ppm mark is a milestone when it comes to CO2 levels in the atmosphere, and the first day to record such levels was May 9, 2013.
“Current (atmospheric) CO2 values are more than 100 ppm higher than at any time in the last one million years (and maybe higher than any time in the last 25 million years),” said Charles Miller, Principal investigator at NASA’s Carbon in Arctic Reservoirs Vulnerability Experiment after the 400 ppm threshold was passed. “Even more disturbing than the magnitude of this change is the fact that the rate of CO2 accumulation in the atmosphere has been steadily increasing over the last few decades, meaning that future increases will happen faster.”
Ever-upward global CO2 levels
Last April was the first month in human history with an average CO2 level above 400 ppm. April 2015 recorded a level of 403.26, nearly two points higher than the same month last year.
In other words, the records being set by CO2 levels are being consistently reset.
The observatory in Hawaii has been recording CO2 levels since 1958, and annual CO2 levels have risen by 82.58 ppm since then to reach 398.55 ppm in 2014, that’s an increase of 1.47 ppm per year.
Why this matters to India
The rising CO2 levels have been linked by the UN’s intergovernmental panel on climate change (IPCC), in a 2014 report, to rising ocean and land temperatures as well as rising sea levels over the past 35 years.
As to how rising CO2 levels have affected or would affect India specifically, it is not clear. Claims in a 2007 IPCC report that the Himalayan glaciers would melt away in the near future have proven to be not credible. However, as we said, a series of studies have shown that unseasonal rain and erratic weather unsettling the Indian farmer - and the nation’s agriculture, economy and politics - are no aberrations.
Disquieting data bring domestic pragmatism
As the world’s third-largest contributor of greenhouse gas emissions, India may be in a unique position to affect atmospheric levels of CO2. While its total emissions are rising, its per-capita emissions at 1.9 metric tons are a third of the global average, a quarter of China’s and tenth of the USA’s.
The path of industrialisation and urbanisation that India adopts will have a significant impact on the world’s warming and its own health status. Already, 13 of the world’s 20 most-polluted cities are in India.
India’s stance at various conferences, including the Climate Change Conference in Lima in 2014, has been that it was unfair to demand emissions cuts from developing countries. The argument being that these economies were still growing compared to the developed world, and that such emission levels would be unavoidable if they want to catch up.
However, Prime Minister Narendra Modi has set India on an ambitious programme of using nuclear and renewable energy to power its industrialisation, as it attempts to move some of roughly 600 million people working on farms to factories.
“I think if you look at the whole world, and the whole issue of climate change, if there is one part of the world which can provide natural leadership on this particular cause, it is this part of the world,” Modi said in an interview to TIME magazine.
India may take an uncompromising position globally to protect its own interests, but it’s difficult to ignore the warning signs from Mauna Loa.

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