“It is absurd that Europe pays for 80% of its energy import bill – worth €300 billion a year – in US dollars when only roughly 2% of our energy imports come from the United States,” said President Juncker in his state of the union speech.* Europe’s largest supplier of energy – Russia, who accounts for a third of that bill – couldn’t agree more. Russia’s offer to switch to euros in trade with the EU will likely be costly to implement, but the US switch towards unilateralism is forcing its long-standing partners to question the dollar’s global dominance.
The EU and Russia have strong bilateral trade links: Russia is the EU’s fourth-largest trading partner and the EU is Russia’s biggest. EU-Russia trade has decreased since 2014, as the conflict in Ukraine led to the introduction of EU sanctions on Russia, souring trade and the political relationship.
However, total trade (exports and imports) still stands at an impressive €230 billion per year. Russia remains the largest supplier of natural gas and oil to the EU accounting for 29% of all imports – or roughly €100 billion. The share has remained steady over the last decade.
In recent months President Putin, the Russian government, its parliamentarians and the country’s business representatives have all called for “de-dollarisation”. Russia’s motivation towards de-dollarisation is mostly geopolitical. It comes in response to what Russian authorities see as “weaponisation” of the dollar, increasingly entrenched and open-ended US sanctions, and the threat to Russia’s commitments to Iran posed by the US’ unilateral withdrawal from the Iran nuclear deal.
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