China negotiated a $400 billion, 30-year deal with Russia to bring Russian natural gas to China beginning in 2018.(i)) The agreement is for 38 billion cubic meters (about 1.34 trillion cubic feet) of gas annually, which is about 20 percent of Russia’s European gas sales. The deal is expected to further the strategic goals of Moscow and Beijing to diminish the status of the U.S. dollar by conducting world trade in critical commodities such as oil and gas using other currencies. This gas deal is the first major commodities contract to be settled in Russian rubles and Chinese yuan rather than dollars, and as such, should be reviewed carefully by policymakers for its implications on the United States as the world’s reserve currency.
