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Vladimir Putin

Russian President Vladimir Putin (left) and his Kenyan counterpart William Ruto.

| File | Nation Media Group

Why Russia is interested in Kenya and how Ruto’s US anti-dollar message fits in

"The Nairobi visit by Russian Foreign Minister Sergei Lavrov can only be interpreted in the context of Moscow’s diplomatic offensive to rally Africa to stand aside on condemnations of Russian aggression in Ukraine. Moscow is also trying to water down the Kenya position on the issue, which is influential and important in the UN.”

That was how a top Kenyan envoy with first-hand knowledge of recent nuances of diplomatic activity between Nairobi and Moscow put it when asked about the significance of the Russian’s visit on May 29.

Lavrov was on his way to Cape Town for a June 1 meeting of foreign ministers of the Brics group of emerging economies – Brazil, Russia, India, China and South Africa – that are on a campaign of cutting down the dominance of the US dollar on global trade, now popularly known as de-dollarisation.

With de-dollarisation having recently emerged as a key foreign policy objective for Moscow, it did not surprise that Lavrov’s visit fuelled chatter that the de-dollarisation push was part of his agenda in Nairobi. President William Ruto himself had recently been making very strong statements on what he described as the perils of dominance of the US dollar in intra-Africa trade.

“Why are we bringing in the dollar in our trade? Why is it that Egypt must pay for our tea in dollars? Why must we pay Egypt for their cotton in dollars?” quipped President Ruto while addressing the opening of the African Continental Free Trade Area Council (ACTFA) of Ministers’ meeting in Nairobi. He lamented how recent movements on dollar interest rates had precipitated the “biggest interest rates spikes in Africa in recent years”.

There are other reasons fuelling the chatter that Ruto’s administration was slowly – perhaps unwittingly – being sucked into the Russia- and China-led campaign against dollar dominance. First came the news early this year that Kenya was planning to buy tractors from Belarus in a transaction that was bound to trip Western sanctions against a country viewed as Russia’s strongest ally. Secondly, Kenya has only recently signed oil for credit deals with Saudi Arabia and the United Emirates under payment arrangements that allow the use of local currencies.

De-dollarisation campaign

Yet, on a closer look at the situation, the trends suggest that the needle has not moved for Kenya in terms of both diplomatic positioning in the Ukraine war and the de-dollarisation campaign. As a matter of fact, President Ruto’s strong remarks against dollar dominance in intra-Africa trade were uttered in the context of urging African governments to join the proposed Pan-African Payments Platform sponsored by the Cairo-based Afrixembank, which is being established to support intra-Africa trade by providing net settlement for trading between and among AU member states. Indeed, the ultimate aim of this platform is to clip the wings of the global primacy of the US dollar in international trade.

What is clear is that Kenya will have to employ dexterity in its diplomatic footwork to navigate an increasingly complex international relations landscape. On the eve of Lavrov’s visit, Nairobi announced that it would sign a trade pact with Russia aimed at boosting cooperation between businesses.

Russia has launched a high-profile diplomatic offensive to boost commercial ties with Africa as it grapples to offset a big chill in relations with the West prompted by its invasion of Ukraine. Moscow plans to hold an Africa-Russia summit in St Petersburg in July.

The government has not said when the pact with Moscow might be sealed or spelt out how such a deal would sit with the incumbent Western sanctions on Russia and Belarus. Russia currently sells mostly grain and fertiliser to Kenya. Lavrov has visited Africa at least three times this year, while Ukraine’s Foreign Minister Dmytro Kuleba travelled to several countries, including Ethiopia, Rwanda and Mozambique last week.

How diplomatic relations with Moscow will pan out in the coming months remains to be seen. As its critics accuse Kenya of swapping Russian fertiliser for a free pass on the war in Ukraine, it did not pass observers that Lavrov’s visit was neatly timed to coincide with arrival in Mombasa of 30 tonnes of fertiliser that Moscow has contributed to Kenya under a memorandum signed with the United Nations.

Lavrov Ruto

Russian Foreign Minister Sergey Lavrov meets President William Ruto and other Kenyan leaders at State House Nairobi on May 29, 2023.

Photo credit: PSC

The deal allows Russia to give fertiliser and food to struggling countries. Malawi and Mozambique have also been beneficiaries. These donations from Moscow illustrate how Russia is employing exports of this commodity as a strategic lever of global influence.

Is the end of dollar dominance near? While such a prospect remains to be seen, recent development and statements by Bric suggest that the road to a clipping of the winds of the dollar will be rocky. Russia, a key Bric member, recently said that it would not accept Indian rupees for its bilateral US$48 billion trade surplus with India as it would have nothing to buy from India with the billions of rupees it would be holding.

Trade deficit

For India to settle its trade deficit with Russia in yuan, it would need to run a trade surplus with China. Yet, India currently runs a massive bilateral trade deficit with Beijing. Hence trading and settlement in an agreed Brics bloc currency would require it to borrow from China, thus caging it in a Chinese debt trap.

South Africa’s International Relations and Co-operation Minister, Naledi Pandor, recently warned that trading and settlement in local currencies, combined with settlement in an agreed common Brics currency (yuan, for example) would amount to exchanging dollar dominance with yuan dominance. South Africa is a prominent member of Brics.

With the Chinese yuan accounting for a paltry three per cent of global central bank reserves, leading Brics members – Russia, India and South Africa – are acknowledging the reality of the absence of a credible alternative to dollar dominance.

The dollar still controls and holds by far the biggest share of global trade, foreign exchange transactions, swift payments and debt issued outside the USA. India’s share of global exports of goods also is just about 2 per cent and these factors reduce the necessity for other countries to hold rupees.

With the Chinese yuan (above) accounting for a paltry three per cent of global central bank reserves, leading Brics members – Russia, India and South Africa – are acknowledging the reality of the absence of a credible alternative to dollar dominance.

Russia, a key Bric member, recently said that it would not accept Indian rupees for its bilateral US$48 billion trade surplus with India as it would have nothing to buy from India with the billions of rupees it would be holding.