It’s no secret that the Russian and Chinese central banks are preparing to dump the dollar and escape from the dollar payments system and dollar-based sanctions. Russia and China have both more than tripled their gold reserves in the past 10 years and continue either to reduce holdings of Treasury securities or shorten the maturity structure of what they hold so the portfolio can run off quickly without actual sales. But central bank policy is only part of the picture. Potentially, a more important part is the major corporations, institutional investors and sovereign wealth funds that actually use dollars or invest in dollar assets side by side with the central bank. Now we are seeing evidence that such entities are taking their cue from their central banks and also preparing to dump the dollar. As this article reports, one of the largest Russian oil producers, Surgutneftegaz, is working to persuade its customers to pay euros, not dollars, for the oil and gas it supplies. Such efforts tend to have a snowball effect. The effort can start out on a small scale, but as more customers agree to pay euros, there’s a tipping point where the euro becomes as important as the dollar in international energy transactions. One company will not change the dollar payments system overnight, but it is a straw in the wind that may have important effects sooner than later.

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