The world's largest energy exporter and the world's second largest economy are hitting back at a common enemy: the US dollar. And they're gaining followers, including some big ones like Brazil, Saudi Arabia, India and the ASEAN countries.

Russia's first alternative to the dollar was the euro, at a time when it was closer to the European Union. The sanctions imposed for the invasion of Ukraine and the growing economic difficulties have made Russia turn to a new alternative: the Chinese currency.

Since the breakdown of relations with the European Union a year ago, Russia has taken the Chinese market as its preferred market for its energy exports, which have been paid for in Chinese yuan, with repercussions on its sovereign reserve. Russian companies have also been borrowing in yuan and households have started saving in the same currency.

According to RTP, during the Chinese president's recent visit to Moscow, Xi Jinping and his Russian counterpart, Vladimir Putin, signed agreements for an in-depth partnership between the two countries.

The impact is still barely felt, but Beijing has welcomed Russia's monetary drift with open arms. It goes hand in hand with its gradual, but so far unsuccessful, offensive to establish its renminbi (the official name of the Chinese currency, which has the yuan as its unit) as an international currency, stealing space from its US rival.

Currently, 66 percent of commercial transactions around the world are carried out in dollars, compared to a mere four percent in yuan, despite China's weight in the world's production and circulation of goods and merchandise.

The foreign currency reserves of 60 percent of the world's banks are preferably in dollars, compared to 20 percent in euros and six percent in Japanese yen. Even though it is the world's second largest economy, Beijing has virtually no clout in this sphere.

Winds against the dollar

It's not the first time that China has tried to undermine the dollar's global hegemony. This time, however, it seems to be having more success and gaining supporters.

At the end of March, a catadupa of key decisions and debates took place.

On the sidelines of Xi's visit to Putin on the 21st and 22nd, in addition to the trade rapprochement with China, Russia has pledged to use the yuan and ruble in its transactions with various countries in Asia, Africa and Latin America where the dollar is scarce.

A week later, on the 28th, France's Total Energies and China's Cnooc, both in the energy sector, signed contracts to sell liquefied gas also in Chinese currency, on the sidelines of the dollar. Even on a small scale, this was a victory for the renminbi.

On the same day, on the other side of the globe, the finance ministers of ASEAN (Association of South East Asian Nations) put the debate on Local Currency Trading on the agenda, a program that proposes using local currencies in financial transactions between its members to the detriment not only of the US dollar, but also of the euro, the yen and the pound sterling.

At the time, Indonesia also proposed abandoning Visa and Mastercard payments in the nations of the area, to avoid repercussions from the sanctions on Russia.

On the 29th, Brazil, South America's largest economy, announced that all its bilateral transactions with China would be carried out in reais and yuan, emancipating trade worth 150 billion dollars from US influence.

At the same time, Saudi Arabia has been in talks with China to be paid in yuan for its oil, and has admitted substantial progress in recent weeks.

For its part, India has decided to adopt the strategy that, in a multipolar world, the good choice is also to diversify its currency of exchange. New Delhi has already established an agreement with Moscow to trade in rubles and rupees, and has refused to follow the imposition of Western sanctions over the invasion of Ukraine.

The big news has been the trend towards de-dollarization, as it is already called, of the markets.

Both Beijing and Moscow have been pioneers, having already begun in 2018 to reduce the weight of the dollar in their foreign exchange reserves, transferring most of their transactions to the euro, a scenario now also in decline.

The Kremlin is now also looking at the possibility of using Turkish rubles and lira in trade with Turkey.

The Chinese Global Times, the official mouthpiece of the Beijing government, in marking the agreement between Brazil and China on the 29th, welcomed "the end of the dollar's dominance", arguing that "every hegemonic monetary system eventually collapses".

In the case of the dollar, said the same editorial, this scenario will be really urgent.

"With the Bretton Woods system and the petrodollar, the dollar has evolved from a dominant payment and investment vehicle into a tool of blackmail and political coercion," he charged. "With the hegemony of the dollar, the US can not only arbitrarily impose unilateral sanctions on other countries, but also collect global wealth and export its own risks to the rest of the world through irresponsible monetary policies," he added.

As a blatant example of the dollar being used as a "tool for political gain", the same newspaper cited the disconnection of Russian banks from the SWIFT system, "a warning to the rest of the world".

Bells in the USA

None of this is going unnoticed in Uncle Sam's land. Expert Fareed Zakaria recently wrote in the Washington Post that the dollar, "our superpower", is under threat from a "perfect storm" created by Moscow and Beijing.

"The dollar is our superpower. It gives Washington incomparable economic and political strength," he said. "When Washington spends freely, it can be sure that its debt, usually in the form of Treasury bonds, will be bought up by the rest of the world," he stressed.

The current trend will only worsen the dollar's loss of influence, he added, pointing out that the dollar's current share of less than 60 percent of central banks' global reserves is lower than the 70 percent recorded "20 years ago". "And it's still falling," he said.

"Europeans and Chinese are trying to develop international payment systems outside the dollar-dominated SWIFT system" and cryptocurrencies themselves are a threat, he said.

For her part, Gillian Tett, editor of the Financial Times, admitted that "some signs" seem to indicate that the dollar's dominance of the debt market "is coming to an end", not least in order to reduce exposure to "toxic US assets".

The recent "banking turmoil in the US", "inflation" and the "impending debt ceiling battle" are factors Tett points to as to why dollar-based assets are becoming "less attractive", even in the light of the ASEAN ministers' meeting.

Advantages of the dollar will "remain"

Despite the warnings, not everyone is worried. One of them is Nobel Prize-winning economist Paul Krugman, who sees the dollar as a "fortress".

In the New York Times, Krugman listed the advantages that have maintained the dominance of the US currency. On the one hand, the "ease" of transacting in dollars, as they are as common globally as the English language.

The strength of the currency is also based on the huge American economy, with a vast and sophisticated "capital market", "without the kind of capital controls that could prevent people from accessing their funds".

These are "fundamentals" that immediately rule out "the yuan as an alternative to the dollar, because China has control of capital and seems unlikely to give it up," the Nobel Prize winner said.

One of the criticisms leveled at Beijing is precisely the way it intervenes in the yuan, keeping it weaker than the dollar to favor its exports.

A changing world

The trend to remove the dollar from global transactions seems to be confined mainly to the energy market for the time being, despite the example of Brazil and, to a certain extent, Russia.

But while President Lula da Silva's government sees only mornings that sing in the new relations with China, Russia remains cautious about its dependence on Beijing and its rapprochement with the yuan is the result of negative Western pressure rather than a strategic choice.

"Right now it's the only rational option for Russia and for Putin," said Alexander Gabuev, senior partner at the Carnegie Endowment for International Peace, inferring that other circumstances may dictate different options. "If relying on the rhinminbi is the lifeline that helps you be less exposed and less dependent on hostile currencies, then that's the way to go," he said.

The Russian example and the recent fragility revealed by the Swiss financial sector invite governments and elites, especially in China and Asia, to admit the risks of having their accounts frozen or even sucked dry by a financial crisis, in a serious reflection that could soon change the world as we know it, even in finance.

This doesn't necessarily mean that Beijing will win this currency war. Its authoritarian attitudes do not instill confidence in investors, which makes the yuan a poor alternative as a reserve currency and deprives the Chinese Central Bank of the credentials to take on a decisive role beyond its national borders.

A possible departure from the dollar's hegemony could turn out to be a Pyrrhic victory for China.