De-dollarization: How Oil is Shifting Global Power
A confidential Kremlin memo circulating among senior Russian officials this year proposes a return to settling trade in U.S. Dollars, a dramatic reversal of policy pursued since the 2022 invasion of Ukraine, according to a Bloomberg report. The proposal is reportedly linked to potential economic cooperation with the United States contingent on a resolution to the conflict in Ukraine.
The document outlines seven areas where Moscow believes its interests could align with a future U.S. Administration, with the resumption of dollar-denominated settlements being among the most significant. This would mark a substantial shift from the efforts undertaken by President Vladimir Putin to reduce reliance on the U.S. Currency and strengthen financial ties with countries like China and India.
Since the imposition of Western sanctions following the invasion of Ukraine, Russia has increasingly relied on alternative currencies, particularly the Chinese yuan and Indian rupee, for international trade. Over 60% of BRICS trade is now settled in local currencies, a trend that could be impacted by a Russian return to the dollar, according to reporting from the Economic Times.
The Kremlin memo details potential collaboration in several key sectors, including long-term aviation agreements involving U.S. Manufacturing, joint oil and liquefied natural gas (LNG) projects – including offshore and complex reserves – and preferential conditions for U.S. Firms re-entering the Russian consumer market. Nuclear energy collaboration, including projects involving artificial intelligence, and partnerships in critical minerals like lithium, copper, nickel, and platinum are also proposed.
A key element of the proposed partnership centers on energy. The document suggests a “fossil-fuel first” strategy, with the U.S. And Russia potentially transitioning from rivals to partners in the global energy market. This includes joint investments in natural gas and offshore oil exploration. Russia possesses substantial reserves of critical minerals, including nickel and palladium, essential for U.S. Technology and aerospace industries.
The potential shift comes as the relationship between oil prices and the U.S. Dollar appears to be evolving. Historically, there was no clear correlation between the two, and after the 2008 financial crisis, the relationship was often inverse. Though, recent analysis from the European Central Bank suggests that the emergence of the United States as a major oil exporter has contributed to a more consistent positive correlation, meaning oil prices and the dollar now tend to move in the same direction.
The Kremlin memo argues that rejoining the dollar system would help stabilize Russia’s foreign-exchange market and reduce balance-of-payments pressures. The proposal also suggests a promotion of fossil fuels over low-emission energy approaches, a position that contrasts with current U.S. Energy policy.
U.S. Officials have previously indicated that sanctions relief could be considered as part of a peace settlement in Ukraine. However, the Kremlin document reportedly goes beyond this, proposing a broader and deeper economic cooperation. As of today, the U.S. State Department has not issued a public response to the reported Kremlin memo.