Comment by Riaz Haq on June 29, 2022 at 8:36am

#India's Top Cement Maker Paying for #Russian #Coal in #Chinese #Yuan. India tried setting up an #INR payment mechanism for #trade with Russia, but that has not materialized. Chinese businesses have used the yuan in trade settlements with Russia for years https://money.usnews.com/investing/news/articles/2022-06-29/exclusi...

India's biggest cement producer, UltraTech Cement, is importing a cargo of Russian coal and paying using Chinese yuan, according to an Indian customs document reviewed by Reuters, a rare payment method that traders say could become more common.

UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino, the document showed. It cites an invoice dated June 5 that values the cargo at 172,652,900 yuan ($25.81 million).

Two trade sources familiar with the matter said the cargo's sale was arranged by SUEK's Dubai-based unit, adding that other companies have also placed orders for Russian coal using yuan payments.

The increasing use of the yuan to settle payments could help insulate Moscow from the effects of western sanctions imposed on Russia over its invasion of Ukraine and bolster Beijing's push to further internationalise the currency and chip away at the dominance of the U.S. dollar in global trade.

The sources declined to be identified as they are not authorized to speak to the media. UltraTech and SUEK did not respond to a request seeking comment.

"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.

The sale highlights how India has maintained trade ties with Russia for commodities such as oil and coal despite the western sanctions. India has longstanding political and security ties with Russia and has refrained from condemning the attack in Ukraine, which Russia says is a "special military operation".

It was not immediately clear which bank opened a letter of credit for UltraTech and how the transaction with SUEK was executed. SUEK did not respond to a request seeking comment.

India has explored setting up a rupee payment mechanism for trade with Russia, but that has not materialized. Chinese businesses have used the yuan in trade settlements with Russia for years.

For Indian trade settlements using the yuan, lenders would potentially have to send dollars to branches in China or Hong Kong, or Chinese banks they have tie-ups with, in exchange for yuan to settle the trade, two senior Indian bankers said.

"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.

India's bilateral trade with China, for which companies largely pay in dollars, has flourished even after a deadly military clash between the two in 2020, though New Delhi has increased scrutiny on Chinese investments and imports, and banned some mobile apps over security concerns.

An Indian government official familiar with the matter said the government was aware of payments in yuan.

"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.

---
Business units of Russian coal traders in Dubai have become active hubs for facilitating deals with India in the recent weeks, as Singapore has grown wary of provoking western nations that invoked sanctions against Russia, said multiple coal traders based in Russia, Singapore, India and Dubai.

Comment by Riaz Haq on July 5, 2022 at 8:32pm

#India's #payment giant #NPCI has #SWIFT alternative for 32 million #NRIs. UPI (Unified Payment Infrastructure) linkage with other nations will anchor #trade, #travel, #remittance flows between countries & lower the cost of cross-border transactions https://www.livemint.com/news/india/payment-giant-npci-has-swift-al...

The company that built India’s digital payments backbone plans to make it cheaper and easier for the nation’s 32 million expatriates to bring their money home.

Indians overseas remitted $87 billion last year, the biggest inflow for any country tracked by the World Bank. The remittances market, where it costs $13 on average to send $200 across borders, is ripe for disruption, according to Ritesh Shukla, chief executive officer of NPCI International Payments Ltd.

“We have displaced cash in India to a large extent and are now looking to repeat the success in cross-border corridors," said Shukla. “Overseas Indians can use our rails to remit money inwards straightway into their bank accounts, and for the markets where Indians travel frequently, we will build acceptance for our instruments."


Successful overseas forays by NCPI would give India a home-grown alternative to SWIFT, the Belgium-based cross-border payment system operator, though Shukla stressed that the objective was not to displace existing platforms. About 330 banks and 25 apps -- including Alphabet Inc.’s Google Pay and Meta Platform Inc.’s WhatsApp -- share NCPI’s unified payment interface, which has helped make instantaneous digital transactions a $3 trillion market in India.

NPCI is in the process of connecting the UPI platform to systems in other countries to replicate its domestic success. It is negotiating collaborations with governments, fintech companies and service providers around the world, aiming to reduce transaction costs and enable more small-ticket transactions, Shukla said.

Cutting Costs

“This is going to take the payments world by storm," said Mayank Goyal, CEO of moneyHop, a cross-border banking app that lets users make international remittances through the SWIFT network. The company will seek to integrate UPI rails into the app as it makes cross-border payments easier, Goyal said.

UPI’s linkage with overseas nations will further anchor trade, travel and remittance flows between the countries and lower the cost of cross-border remittances, the Reserve Bank of India said in a report.

Comment by Riaz Haq on July 19, 2022 at 4:27pm

The dollar sits atop a global monetary order shaken by sanctions
Countries tend to hold certain currencies as reserve assets mostly for economic, not geopolitical, reasons
ISABELLE MATEOS Y LAGO

https://www.ft.com/content/e2a69a2b-8eb1-4164-97ab-7a532cf743a2



"But ultimately, international reserves are held for specific economic reasons, not geopolitical ones: pegging or managing the exchange rate to another currency; paying for imports and international debt service; providing foreign exchange liquidity of last resort to domestic banks. So what will determine the extent of any shift in global reserve allocations is not the portfolio preferences of central bankers or the intrinsic properties of US dollar alternatives. It is whether new currencies come to play an important role in international trade and financial relations. The recent news of China negotiating with Saudi Arabia to pay for oil in renminbi is not, in itself, game-changing. If it finally happens and more of China’s inbound and outbound trade partners follow, it might well be"



-----

Days after Russian troops invaded Ukraine, the G7 and a host of allies in Europe and Asia declared a freeze on the assets of the Central Bank of Russia. The move, unprecedented in its swiftness and scale, instantly incapacitated roughly half of its $630bn in international reserves. Up to this point, central bank reserves had only been frozen multilaterally after abrupt regime change — think of the Bolshevik and Chinese revolutions, or more recently Hugo Chávez’s Venezuela.

Immediately, warnings were uttered about unintended consequences, in particular the stability of the US dollar in the international monetary system. As many have convincingly argued, the Russian reserves freeze alone is unlikely to end the dominant role of the US dollar. But it might, over time, induce major shifts in global monetary relations alongside a broader rewiring of globalisation, making the last 30 years look like a lost golden age.

Prudence and deliberation are in central banks’ DNA. They do not make rash decisions. So while many central bankers privately felt shock or dismay at the reserves freeze, they do not appear to have significantly reallocated assets away from the dollar or euro.

Yet there is consensus among central bank reserve managers that something fundamental has changed: geopolitical considerations now need to be taken into account when assessing the safety and liquidity of a reserve asset. For most, this is an argument in favour of currency diversification, a trend under way already over the past 20 years at the expense of the US dollar and to the benefit of smaller advanced economy currencies such as the Canadian dollar or the Korean won. This might now accelerate, and possibly extend to additional currencies.

Might the renminbi be one of the beneficiaries, as suggested by a recent survey? In fact, when it comes to the attractiveness of Chinese bonds in reserve portfolios after the sanctions on Russia, geopolitics is a clear dividing line. By and large, central bankers I talk to in countries in or close to the sanctioning coalition are reviewing — but not yet retreating from — whatever exposure or planned exposure they had to the renminbi. Others seem more inclined to stick to their holdings and plans to ramp them up further over time.

In the near term there is little practical scope to overhaul trade and financing patterns, even if some countries want to. But other forms of rewiring may develop. Countries that see themselves as politically aligned may try to create a mutual aid system, separate from the sanctioning coalition. China’s recent creation of a renminbi liquidity facility at the Bank for International Settlements can be seen in this light. Discussions could also resurface between large reserve holders from the global south about swap arrangements, like those between the Fed, European Central Bank, Bank of England and a few others in the 2008 financial crisis. Cross-border payment systems to rival Swift will probably continue to grow. 

Comment by Riaz Haq on August 8, 2022 at 6:00pm

U.S. Lawmakers Look to Digital Dollar to Compete With China
The Federal Reserve is considering the idea, but in no rush to join a digital-assets space race

https://www.wsj.com/articles/u-s-lawmakers-look-to-digital-dollar-t...

Lawmakers are pushing the Federal Reserve to move swiftly toward issuing a digital dollar, to combat steps from China and others they say could one day threaten the U.S. status as the global reserve currency.

The bipartisan group of lawmakers, including Reps. Maxine Waters (D., Calif.) and French Hill (R., Ark.), has sought for the U.S. to counter global competitors launching digital versions of their currencies. The House Financial Services Committee, which both serve on, might vote on related legislation as soon as next month.

Ms. Waters has framed competition over new forms of central-bank money as “a new digital assets space race.” The Biden administration and the Fed don’t share a sense of urgency.

-----------

Fed Chairman Jerome Powell has indicated the central bank isn’t in a rush, as it confronts inflation and a slowing economy. Mr. Powell has said it is more important to get the digital dollar right than to be first to market, in part because of the dollar’s critical global role. He has also said the Fed won’t issue a digital dollar without support from elected officials. The White House has largely remained neutral on a digital dollar, with President Biden ordering a study to determine its implications for issues such as economic growth and stability.

---------------

Some in Congress say the U.S. is already behind the curve. Among the Group of 20 major economies, 16 are in the development or pilot phase of a digital currency, according to the Atlantic Council, a Washington think tank. The European Central Bank, on behalf of countries including Germany and France, is exploring designs for a digital euro and preparing to launch a test pilot.

Mr. Hill, the Arkansas Republican, said his concerns were animated in part by China, which began real-world testing of its own central-bank–issued digital currency in 2020. In an interview, he said China’s lending practices in the developing world could make it easier for the country to promote international uses of its digital currency—a potential threat to the dollar-based global economy.

--------

“We should be concerned about China’s predatory practices,” he said.

Chinese authorities haven’t ruled out international use of the e-CNY, the official name for the country’s digital currency, but say it is designed for small-scale domestic use by consumers.

Analysts are looking for signs that the People’s Bank of China will take concrete steps to join with central banks elsewhere to make it possible to use digital currencies between countries. The bottom line is that Beijing is uncomfortable with the outsize role the U.S. dollar plays in global commerce and in particular fears being frozen out of the dollar-based financial system, such as in response to a conflict over Taiwan.

International transactions in a digitized currency created by China, the thinking goes, could be a defensive weapon in such circumstances because they would happen beyond the reach of the U.S.

Comment by Riaz Haq on December 6, 2022 at 10:41am

Pakistan launches new laws to expedite CBDC launch by 2025
The State Bank of Pakistan signed in new laws for Electronic Money Institutions — non-bank entities offering digital payment instruments — to ensure the timely issuance of a CBDC in the next three years.

https://cointelegraph.com/news/pakistan-launches-new-laws-to-expedi...

Regulators worldwide see central bank digital currencies (CBDCs) as a way to enhance fiat capabilities by inheriting the financial prowess of technologies that power cryptocurrencies. Pakistan joined this list by announcing new regulations to ensure the launch of an in-house CBDC by 2025.

The State Bank of Pakistan (SBP) signed in new laws for Electronic Money Institutions (EMIs) — non-bank entities offering digital payment instruments — to ensure the timely issuance of a CBDC in the next three years. The World Bank helped Pakistan design the new regulations, according to local media Arab News.

In addition to timeline adherence for the CBDC launch, the regulations warrant preventive measures against money laundering and terror financing while considering consumer protection and reporting requirements.

The state bank, SBP, will issue licenses to EMIs for CBDC issuance. During the announcement, Finance Minister Asad Umar stated that using EMIs in promoting the digital economy will safeguard financial institutions from cybersecurity threats. Deputy Governor of SBP Jameel Ahmad envisions curbing fiat-induced corruption and inefficiency through CBDCs. He said:

The commencement of a speedy regulatory environment places Pakistan among the nearly 100 countries that are actively involved in researching and launching CBDC initiatives.

Neighboring country India also recently joined the race to launch a home-grown CBDC. On Nov. 22, The Reserve Bank of India (RBI) announced an ambitious plan to launch a retail CBDC pilot by the end of 2022.

Indian central bank, RBI, is reportedly in the final stage of preparing the retail digital rupee pilot rollout, which will be initially tested among 10,000 to 50,000 users of participating banks.

Comment by Riaz Haq on January 13, 2023 at 4:26pm

#Pakistan seeks change to #US world finance control as #Cuba leads #UN bloc. Pak Ambassador Munir Akram: "many other countries, including its allies and friends, are not happy with that (having US$ dominate world #trade and #finance)" #Dollar https://www.newsweek.com/pakistan-seeks-change-us-world-finance-con...

Pakistan's envoy to the United Nations has expressed the need to establish alternatives to the current U.S.-dominated global financial system as he handed over the chair of a massive bloc of developing nations to Cuba.

Speaking to a small group of journalists ahead of the Group of 77, or G77, handover ceremony on Thursday, Pakistani ambassador to the U.N. Munir Akram asserted that, "as far as global governance is concerned, the greatest structural issue is the control of the international financial system by the United States."

He said "many other countries, including its allies and friends, are not happy with that," though Washington's position reflected the reality that "the United States is the dominant financial power in the world, and this will not change in the near future."

"But efforts to democratize the international financial architecture will be made," Akram said. "They should be made."

Asked by Newsweek to expand on the direction of these initiatives, the senior Pakistani diplomat pointed to the quota system instituted by the International Monetary Fund (IMF), which is based on economic status, prioritizing wealthier, mostly Western countries, while leaving poorer nations with the least say in how money is distributed.

He also called for reform in how sovereign debt is handled and for the U.S.-led World Bank to overhaul the borrowing system, using its preeminent credit rating to borrow on behalf of developing nations that would then be loaned the money.

"These are just a few issues that need to be addressed in order to change the international financial architecture," Akram said. "Whether we get there? It's a difficult issue. Obviously there are countries whose interests do not want that."

But as he prepared to conclude Pakistan's tenure as G77 chair along with leadership of an array of projects on issues such as fighting poverty, combating climate change and closing the technology gap for developing nations, he placed his confidence in Cuba to lead the way.

"I'm sure that they will have a plan of action. I think the objectives are clear and common," Akram said. "As such, it may be expected that they will push hard for a realization of some of the objectives."

Cuban Foreign Minister Bruno Rodríguez Parrilla outlined this plan of action hours later, addressing the U.N. group that has expanded to some 134 nations since its initial founding by non-aligned states amid the Cold War nearly six decades ago. Those present included representatives of the majority of nations spanning Asia, Africa and Latin America, with China holding a unique position as the world's second largest economy, leading the group to often be referred to as "the G77 and China."

"The great challenges imposed by the current economic order on the developing world have hit their highest point during these times of systematic crises," Rodríguez Parrilla said, "namely health, climate, energy, food and economic crises; escalation of geo-political tensions and renewed forms of domination and hegemony."

Among the issues that he argued still needed to be addressed by the international community were "unequal access to vaccines, the digital gap, the burden of the foreign debt, the structural reform of the international financial architecture, development financing flows, food insecurity, restrictive trade measures, climate financing and capacity building."

Comment by Riaz Haq on January 13, 2023 at 4:27pm

#Pakistan seeks change to #US world finance control as #Cuba leads #UN bloc. Pak Ambassador Munir Akram: "many other countries, including its allies and friends, are not happy with that (having US$ dominate world #trade and #finance)" #Dollar https://www.newsweek.com/pakistan-seeks-change-us-world-finance-con...

On the issue of restrictive trade measures, he argued that "more than 30 measures and systems of unilateral coercive measures against developing countries continue to be fully implemented," a trend he argued is "far from reversing" and "has exacerbated during the last few years."

Cuba has been subject to one of the world's longest-running sanction campaigns mounted by the U.S. While Washington has regularly been condemned by a near-unanimous consensus of the international community over these measures, America's leading role in the global financial network has generated caution among those potentially seeking to do business with the Communist-led island.

Western sanctions have had a similar effect on a number of other nations represented in the G77 and present at Thursday's gathering, including Iran, Myanmar, North Korea, Syria, Venezuela and Zimbabwe. The vast majority of these measures have come in response to allegations of human rights abuses and authoritarian policies.

Cuba's top diplomat vowed to pursue the G77 and China agenda "in a flexible and always constructive way, based on the broadest possible consensus, in order to implement the transformative vision defended by our Group." He asserted that "it will be our priority to foster international solidarity and cooperation in support of the post-pandemic recovery of our nations."

And Rodríguez Parrilla promised to establish a range of cooperative projects among nations in the Global South for health, biotechnology and education, three fields in which Cuba has ranked among the highest in the developing world, among other areas.

He also promised to challenge the most influential and wealthiest nations on the matter of global responsibilities.

"We will face any attempt to put on our shoulders the burden of unfulfilled promises by the most powerful nations, which allocate millions to the weapons manufacturing, not to development," he said. "We will promote tangible commitments in terms of financing under favorable conditions and capacity building for the countries of the South."

While U.S. President Joe Biden has yet to show any signs of easing sanctions on Cuba, a move partially pursued by the U.S. when he served as vice president to President Barack Obama only to be reversed by President Donald Trump, the current administration has acknowledged calls for reform.

Addressing Pakistan's push for changes to the International Monetary Fund quota regime, State Department spokesperson Ned Price deferred reporters to the Washington, D.C.-based global financial institution during a press briefing Thursday. He did state, however, that "we, of course, want to see Pakistan continue down the path of reform."

"We want to be a partner," Price said. "We will continue to be a partner to Pakistan when it comes to all of their priorities, whether it's security, whether it's economic in this case, or humanitarian in the case of the provision of the additional funding for the flood relief today."

U.S. Secretary of State Antony Blinken also weighed in last week on calls for debt reform for African nations on the heels of the U.S.-Africa Leaders' Summit.

"This is a subject, a theme that we've heard loudly and clearly here," Blinken said. "It's not new in the sense that this has been part of the conversation for some time. And there is no doubt that the rise of unsustainable debt burdens, especially in Africa, is a tremendous challenge, and it's one that we're committed to addressing."

Comment by Riaz Haq on January 13, 2023 at 4:28pm

#Pakistan seeks change to #US world finance control as #Cuba leads #UN bloc. Pak Ambassador Munir Akram: "many other countries, including its allies and friends, are not happy with that (having US$ dominate world #trade and #finance)" #Dollar https://www.newsweek.com/pakistan-seeks-change-us-world-finance-con...

"When you look at the debt crises that we've seen, they're devastating from a humanitarian standpoint, and they can be debilitating when it comes to effective economic development and inclusive growth," he added. "So, there are a number of things that we talked about and that we clearly need to move forward."

Among these steps Blinken highlighted was mobilizing both national and private sector creditors from other countries, as "it can't just be the United States." He said the U.S. was already supporting this through multinational platforms such as the Group of 20, or G20, a body comprising the world's top 20 economies and the European Union, and the Paris Club, which consists of 22 major creditor countries.

But another "concern" expressed by Blinken was "the growth of untransparent debt, including off-balance-sheet debt and debt that's hidden by non-disclosure agreements" drafted by other companies and countries. Though Blinken did not reference China by name, he and other U.S. officials have often accused Beijing of pursuing such practices in Africa and other parts of the developing world to China's own benefit.

Chinese Foreign Minister Qin Gang disputed the so-called "debt trap diplomacy" argument during a conference held Wednesday alongside African Union Commission Chair Moussa Faki Mahamat.

"The so-called China's 'debt trap' in Africa is a narrative trap imposed on China and Africa," Qin was cited by the Chinese Foreign Ministry as saying. "Projects and cooperation carried out by China in Africa contributed to Africa's development and the improvement of people's lives. The African people have the biggest say in this."

"China will continue to respect the will of the African people, and bring tangible benefits to the African people through China-Africa cooperation based on the realities in Africa," he added, "so as to achieve better common development."


Qin, who served as China's ambassador to the U.S. before his promotion was announced late last month, also argued that "Africa's debt problem is essentially an issue of development."

"The solution to the problem requires addressing not only the symptoms but also the root causes by means of debt treatment, among others, so as to enhance Africa's independent and sustainable development capacity," he added. "China's financing cooperation with Africa is mainly in fields such as infrastructure development and production capacity, with a view to enhancing Africa's capacity for independent and sustainable development."

Comment by Riaz Haq on February 27, 2023 at 12:23pm

Money and Empire: Charles P. Kindleberger and the Dollar System

By Perry Mehrling

https://www.bu.edu/gdp/2022/11/08/money-and-empire-charles-p-kindle...

Charles P. Kindleberger ranks as one of the 20th century’s best known and most influential international economists. A professor of International Economics at the Massachusetts Institute of Technology (MIT) from 1948-1976, he taught cosmopolitanism to a world riven with nationalist instinct. He worked to relieve the fears of his fellow citizens through education, thinking that if people understood how the dollar system worked, they would stop trying to destroy it. His research at the New York Federal Reserve and Bank for International Settlements during the Great Depression, his wartime intelligence work and his role in administering the Marshall Plan gave him deep insight into how the international financial system really operated.

In the new book, “Money and Empire: Charles P. Kindleberger and the Dollar System,” Perry Mehrling traces the evolution of Kindleberger’s thinking in the context of a “key-currency” approach to the rise of the dollar system, which he argues is an indispensable framework for global economic development in the post-World War II era. The overall arc of the book follows the transformation of the dollar system, as seen through the eyes of Kindleberger.

The book charts Kindleberger’s intellectual formation and his evolution as an international economist and historical economist. As a biography of both the dollar and Kindleberger, this book is also the story of the development of ideas about how money works. In telling this story, Mehrling ultimately sheds light on the underlying economic forces and political obstacles shaping a globalized world.

Comment by Riaz Haq on March 8, 2023 at 5:04pm

India's oil deals with Russia dent decades-old dollar dominance | Reuters


https://www.reuters.com/markets/currencies/indias-oil-deals-with-ru...

India in the last year displaced Europe as Russia's top customer for seaborne oil, snapping up cheap barrels and increasing imports of Russian crude 16-fold compared to before the war, according to the Paris-based International Energy Agency. Russian crude accounted for about a third of its total imports.
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NEW DELHI/LONDON, March 8 (Reuters) - U.S.-led international sanctions on Russia have begun to erode the dollar's decades-old dominance of international oil trade as most deals with India - Russia's top outlet for seaborne crude - have been settled in other currencies.

The dollar's pre-eminence has periodically been called into question and yet it has continued because of the overwhelming advantages of using the most widely-accepted currency for business.

India's oil trade, in response to the turmoil of sanctions and the Ukraine war, provides the strongest evidence so far of a shift into other currencies that could prove lasting.

The country is the world's number three importer of oil and Russia became its leading supplier after Europe shunned Moscow's supplies following its invasion of Ukraine begun in February last year.


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Some Dubai-based traders, and Russian energy companies Gazprom and Rosneft are seeking non-dollar payments for certain niche grades of Russian oil that have in recent weeks been sold above the $60 a barrel price cap, three sources with direct knowledge said.

The sources asked not to be named because of the sensitivity of the issue.

Those sales represent a small share of Russia's total sales to India and do not appear to violate the sanctions, which U.S. officials and analysts predicted could be skirted by non-Western services, such as Russian shipping and insurance.

Three Indian banks backed some of the transactions, as Moscow seeks to de-dollarise its economy and traders to avoid sanctions, the trade sources, as well as former Russian and U.S. economic officials, told Reuters.

But continued payment in dirhams for Russian oil could become harder after the United States and Britain last month added Moscow and Abu Dhabi-based Russian bank MTS to the Russian financial institutions on the sanctions list.

MTS had facilitated some Indian oil non-dollar payments, the trade sources said. Neither MTS nor the U.S. Treasury immediately responded to a Reuters request for comment.

An Indian refining source said most Russian banks have faced sanctions since the war but Indian customers and Russian suppliers are determined to keep trading Russian oil.

"Russian suppliers will find some other banks for receiving payments," the source told Reuters.

"As it is, the government is not asking us to stop buying Russian oil, so we are hopeful that an alternative payment mechanism will be found in case the current system is blocked."

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