More On Divisions In The Russian Leadership

It appears that the Kremlin is looking to defuse the appearance of divisions within the Russian leadership, following a week of pointed exchanges that featured foreign minister Sergey Lavrov—apparently speaking for NatSec officials—attacking the stance of Putin friend Kirill Dmitriev, who has conducted widely publicized talks with Trump friend Steve Witkoff. The controversy was begun by the publication in Bloomberg of a so-called “Kremlin Memo” setting out supposed terms of a settlement between the US and Russia. You can find a more detailed account at the most recent post, Civil War In The Russian Leadership? The pushback or clarification against the concerns expressed by Lavrov was made by Dmitry Peskov, Putin’s spokesman.

Basically, Lavrov’s concerns were with regard to the possibility that the Dmitriev - Witkoff talks represented an attempt to subordinate Russian national security interests to a resumption of commercial “deals” between the US and Russia. Peskov’s clarification was along the lines that a resumption of commercial ties between the US and Russia was dependent upon a lifting of all sanctions on Russia. At this point that seems unlikely to happen soon, given that Trump has been increasing sanctions and seizing Russian connected (not necessarily Russian flagged) ships on the high seas. Here are two brief accounts of Peskov’s clarifications.

First, Izvestia:

Russia, against the background of the desire of some American companies to return with their business to the Russian Federation, offers mutually beneficial cooperation in which both countries are interested. This was stated on February 13 by Kremlin spokesman Dmitry Peskov, commenting on a Bloomberg article about the “Russian dollar peace plan.”

“A fairly obvious thing is stated in this information from Bloomberg. Of course, we offer cooperation. And of course, companies from the two countries are potentially interested in this cooperation — so much for a joint venture,” the press secretary of the Russian president said at a briefing.

Second, Hindustan Times:

Dmitry Peskov says Russia is open to expanding economic co-operation with the United States, but meaningful progress depends on a settlement of the Russia-Ukraine conflict. He confirmed talks on trade, LNG joint ventures, Arctic projects, and the possible return of American firms, while noting dollar usage declined due to US restrictions, not Russian policy. Peskov added that the Union State maintains foreign-policy coordination with Belarus and highlighted Moscow’s $1 billion aid pledge to Palestine. He declined to comment on reported damage to the Druzhba pipeline affecting Hungary and Slovakia. Russia confirmed the next Ukraine negotiations will take place next week, with the venue—possibly Miami or Abu Dhabi—to be announced.

Note the reference by the Hindustan Times to dollar usage. Sean Foo sheds additional light on this whole issue today from about the 9:00 mark to the end of his video. In particular, he distinguishes between “dollar usage” and a return of Russia to the system of dollar hegemony that Bloomberg was suggesting:

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In our final story, we need to cover the big rumors of Russia heading back to the dollar system. By now you’ve probably seen the headlines. “The Kremlin has a dollar deal for Trump”--or something like that. Now, Russia, of course, has not confirmed anything. No word from Putin, no word from Peskov that this plan is legitimate. At least to me, this sounds like a fever dream from the White House. Washington really wants the Russians back to the dollar system.

This was my initial take, and remains so.

[Evaluating] the document, [it’s plausible enough] that Russia would [be interested in] joint energy ventures with the Americans for cooperation in developing raw materials like copper, nickel, and lithium, and for the US to modernize Russian aircraft and help Moscow with AI ventures. Basically, to integrate US industries with the greater Russian economy beyond just oil and gas. And, finally, a return to the dollar settlement system. This could include Russian energy transactions as well. But this is where we need to separate fact from fiction. What is speculation and what is most likely going to happen?

An important fact, not speculation, is that while the US is sanctioning the world for doing business with Russia, the US continues to do business with Russia in the key energy sector.

To start with, there’s nothing that the US can provide in this list that China can’t. [Except for the commercial aviation aspect.] Everything from AI and semiconductors to developing mines can be done with the Chinese. In fact, certain industries are best suited for partnership with Beijing. Secondly, a return to the dollar system is very different from making transactions in the reserve currency. When the war ends, as it eventually will, one can expect Russia to resume some trade with the US. It only makes sense. You get another customer, you drum up demand so you can sell your goods for higher prices to the rest of the world. Basic supply and demand. And if the US is your customer, they would likely pay for your exports using the dollar. And that shouldn’t be very surprising. Despite the US punishing everyone else, their exports [US imports] from Russia actually increased by 30% in 2025 versus the year before. Trade has reached nearly $5 billion with the Russians. They [the US] are buying fertilizers, key minerals, as well as nuclear energy inputs as some imports have grown by an astounding 100% in value.

Going forward, if this was to expand, the US would most definitely try to settle in dollars. Russia might also accept dollars, but those are [simply] transactions. Putin understands the enormous risk of recycling those dollars into US assets. Over $200 billion in Russian assets have been frozen and they’re on the verge of total confiscation with no return. And if Russia goes back and buys up Treasury bonds or even US stocks, they will be subjecting themselves to risk of new dollar sanctions. It doesn’t make logical sense. Fool me once, shame on you. Fool me twice, shame on me. And if Putin does go back to US assets, I personally will be thoroughly surprised.

Now, even before the Ukraine war, even before the sanctions, Russia was already dumping dollars. In 2021, they cut away dollar holdings from their wealth fund. The money was diverted into other alternatives, including the Chinese RMB, Euros, and gold. The de-dollarization was already happening 5 years ago. This was long before the dollar sanctions and the asset confiscation. And in hindsight, that was a fantastic decision. By holding Chinese bonds and gold, Russia’s net position has increased in value. Just in the last year alone, the RMB has gained 5% against the dollar. In contrast, the dollar has fallen by over 10% against other currencies. And let’s not even talk about Russia’s gold position. Gold hitting $5,000 was a gamechanger for the Russians. It was great for their balance sheet. The money lost from the sanctions and confiscations have almost been recouped. Russia’s central bank is sitting on a gain of $216 billion from the gold stockpile. Gold now accounts for 43% of Russia’s national reserve. That’s around $750 billion.

It’s quite clear what the Russian playbook is going to be going forward. Even if dollar transactions do come back, we can be sure that recycling into US bonds would be highly unlikely. Chances are Putin will put in a mechanism where the dollars earned would get sold. They will still transact in dollars, but not hold them for any period of time. The proceeds will be shifted to either Chinese assets like RMB bonds or will be used to simply buy gold. This whole panic is likely a fever dream conjured by the Trump administration.

The bottom line: The factional infighting within the Russia leadership is probably real, but the bottom line in negotiations is unlikely to have budged.