There has been a lot of speculation taking place as to how Russia is planning to create a significant boost to their oil market and subsequently overcome some strict guidelines set out by the United States. One suggestion implies the utilization of the growing power and influence of cryptocurrencies.
The widespread adoption of crypto is now making officials in Russia think about how they can approach their crude oil trade differently. Thus, administrators are looking to move away from the US dollar in their trading and possibly turning to cryptocurrency as an alternative. In October 2017, the Russian Central Bank indicated that it was considering launching a national cryptocurrency following First Deputy Prime Minister Igor Shuvalov’s support for introducing a “Crypto-ruble.”
This move comes as the oil trade in Russia has been deeply affected by sanctions imposed by the United States as a result of the majority of oil using dollars when being traded.
These sanctions, which were put in place by the Trump administration, “Cut the period that U.S.-based entities can provide finance to Russian energy firms from 90 to 60 days and are part of a fresh package of U.S. sanctions that U.S. President Donald Trump approved on August 2.”
The first workaround that Russian officials suggested was to simply use the liquidity of crude oil companies in order to speed up the transaction process. In the case that a Russian firm is pressed for time due to the sanctions, they could simply “dip into their cash reserves.”
Yet, the economic power of a decentralized digital currency is also very attractive. If used instead, it would provide an entire shift in focus on the US dollar and American financiers. A shift from the currency would ultimately mean that Russia and other oil-rich countries might be able to avoid US sanctions as they will no longer rely on the ‘greenback.’
Moving Away from the American Standard
The talk of this potential switch began in November 2017 where there was a yuan-ruble swap worth $25 billion that took place, which could be a massive catalyst for change in the oil industry. The Prime Minister of Russia Dmitry Medvedev said that both countries had plans to utilize their respective currencies going forward in future deals.
Iran has also been looking to approach their oil trading from a similar approach in the utilization of currency swap agreements.
China is another world superpower looking to decrease their dependence on the US dollar, after unveiling a move towards their “petro-yuan” instead of the US dollar when it comes to their trade transactions.
Petro is a new cryptocurrency that Venezuela has developed, as they hope that this will be an easy to circumvent the financial blockade that the current President of the United States, Donald Trump, has placed upon their nation.
It has always been the case that countries would prefer not to use US dollars in trading. If they do something that angers the United States, they are then in an unfavorable business position due to the economic leverage the North American power would have.
It looks like cryptocurrency could indeed be the answer to these issues, as they are entirely decentralized, meaning that no one authority (such as a government or a central bank) has any control over the currency. More importantly, global changes in monetary policy will not be able to destabilize a digital currency.