The global financial landscape has been undergoing a shift as Russia aggressively pursues trading in local currencies in response to Western sanctions imposed in light of the war in Ukraine.
At this juncture, the Central Bank of Russia incorporated the Ethiopian Birr in its list of foreign exchange rates—enabling the country to trade using it and other 11 currencies effective July 10, 2025.
By strategically incorporating 12 alternative currencies into its exchange rate framework, Russia is attempting to diversify its financial toolkit and reduce reliance on the US dollar (USD)—a move that could have ripple effects across emerging economies, including Ethiopia.
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While those in favor of ending the greenback’s dominance in international trade see the move as a positive and necessary step, financial experts like Abdulmenan Mohammed (PhD), a veteran analyst, argue Moscow’s unilateral decisions on foreign exchange rates are primarily driven by self-interest, aimed at insulating its economy from dollar-dependent financial systems vulnerable to sanctions.
“I highly doubt that de-dollarization can be implemented easily,” said Abdulmenan, emphasizing that a currency’s global strength depends on the size and power of its national economy and noting that Russia’s economy is not comparable to that of the United States.
For Ethiopia, the potential benefits of this shift remain uncertain.
While Abdulmenan acknowledges that local currency trade could be advantageous if bilateral commerce were robust, the current reality paints a different picture. Ethiopia’s trade with Russia remains modest, especially when compared to its more substantial economic ties with China, Europe, and Middle Eastern nations like the United Arab Emirates (UAE) and Saudi Arabia.
Bilateral trade between the two nations reached USD 106 million during the first nine months of 2023 following a 68 percent dip the year before, according to data from the Russian government.
The data suggests the trade relationship remains uneven: Ethiopia primarily exports coffee and vegetables to Russia, while importing wheat and grains.
“There’s a significant imbalance that needs addressing,” Abdulmenan noted, emphasizing that while currency diversification is a positive step, it is unlikely to yield substantial benefits for Ethiopia in the near term given the low trade volumes.
The Central Bank of Russia has set the exchange rate at around 0.57 birr for 1 ruble, prompting Abdulmenan to point out another flaw. He explains the rate is likely derived using the US dollar as an intermediary benchmark (pegging), given the Dollar’s stability compared to the ruble’s volatility.
This contradiction has not gone unnoticed by another Ethiopian financial expert, who spoke to The Reporter Magazine anonymously.
“Direct ruble-birr pegging would introduce too many uncertainties for businesses,” said the expert, highlighting the dollar’s enduring role in the global financial arena.
The greenback has dominated international trade since the end of the Second World War and the ensuing creation of the Bretton Woods system, which effectively pegged nearly all world currencies to the dollar.
The USD’s dominance is deeply entrenched, supported by America’s economic might, open markets, military supremacy, and investor-friendly legal framework.
Historical parallels abound—the Dutch florin dominated the 18th century, the British pound the 19th and the dollar the 20th—each reflecting the geopolitical and economic realities of their time.
Although both of these currencies eventually gave way to another, stronger alternative, Abdulmenan predicts current de-dollarization efforts will be difficult to achieve.
“Even China, with its colossal economy, struggles to position the Yuan as a viable alternative due to market restrictions and weaker property protections,” Abdulmenan said.
Russia’s efforts, he argued, are more about political maneuvering than genuine financial innovation—a way to “threaten the US” and mitigate sanction-related vulnerabilities rather than overhaul the global monetary system.
Recent developments, such as US President Donald Trump’s threats to impose 100 percent tariffs on BRICS members (including Ethiopia), underscore the high stakes in this financial tug-of-war.
Abdulmenan notes the US will fiercely defend the dollar’s supremacy—a job made easier by America’s economic and military hegemony and continued investor preference for dollar-denominated assets.
“Investors flock to the US, not Russia, and that reality won’t change overnight,” said Abdulmenan.
Against this backdrop, Ethiopia has explored alternative financial arrangements, including a three-billion-dirham (USD 816 million) currency swap agreement with the UAE. This deal allows for trade settlements in local currencies, bypassing the dollar—a mechanism experts believe could reduce exchange rate risks.
However, Abdulmenan cautions against over-optimism.
“Currency swaps are temporary fixes, not long-term solutions,” he stressed. “Eventually, partners will demand payment in hard currencies like the dollar or dirham.”
While such agreements can ease short-term liquidity crunches, they do little to address Ethiopia’s structural foreign exchange shortages, according to Abdulmenan.
The other financial expert who spoke to The Reporter Magazine begs to differ.
He noted that beyond formal trade, Ethiopia’s relationship with Russia includes significant but often underreported defense cooperation. The Ethiopian Air Force remains heavily reliant on Russian technology, with transactions—ranging from military jets to spare parts and technical expertise—frequently excluded from official trade statistics.
“If fully accounted for, the actual trade volume would be much higher,” said the expert. This defense partnership, rooted in Cold War-era ties, underscores the strategic dimensions of Ethio-Russian relations, which extend beyond mere economic exchange.
Russia’s recent ruble-based nuclear energy deal with Egypt—where tourism revenue from Russian visitors will fund reactor payments—offers a potential model for Ethiopia, argues the expert.
“Such arrangements could alleviate dollar dependency,” he noted, conceding that these measures are more about “strategic hedging” than true de-dollarization.
“Acquiring or buying USD is expensive, and if Ethiopia cannot export sufficient volumes of commodities like coffee or secure foreign aid and loans, where can it possibly obtain foreign currency?” asked the expert.
“The Russia-facilitated exchange rate with Ethiopia will expedite trade, facilitate the transfer of technologies such as agri-tech and work systems, and enable products that were previously exported to Europe to be redirected to Ethiopia. This can be implemented within the commercial framework of BRICS.”
The expert believes BRICS can achieve its de-dollarization target, and argues that Russia’s decision to accept currencies like the birr is nothing more than a justified economic decision, which he says Washington should respect.
“Would you prefer freedom or sticking to USD dominance? This is the basic question to be answered,” said the expert.
He does, however, caution the move could have spillover effects on Ethiopia.
“When you think like politicians, you think long-term, and threats—such as those posed by President Trump—do not simply disappear,” he said. The expert remains optimistic that Ethiopia will be able to address any negative consequences collectively alongside the other BRICS nations.
On the other hand, the National Bank of Ethiopia (NBE) has stated it sees Russia’s listing of the Birr as little more than a display of basic information, and stresses that nothing has been implemented on the ground so far.
The economist notes that the most important factor to consider is the Purchasing Power Parity (PPP) of the ruble.
He emphasized that the birr has significantly lower purchasing power due to the devaluation implemented a year ago as part of Ethiopia’s ongoing macroeconomic reforms.
“A single egg now sells for 25 Birr,” said the economist, illustrating his argument. “While I was in Russia during the Soviet Union era, a full bowl of eggs sold for either a few kopecks (Cents) or one ruble.”
The trade exchange between the two countries is largely limited to their own goods, which resembles a barter trade system. I don’t see much value in this initiative as it currently stands,” he added.
Echoing Abdulmenan’s view, he said the trade relationship between Ethiopia and Russia could be more valuable if it involved a more diversified exchange of goods in both directions.
He also noted that during the Soviet era, one USD exchanged for 2.05 Birr, while four rubles traded for one USD on the black market.
For Ethiopia, the path forward requires balancing engagement with BRICS nations against the realities of dollar dominance.
As Abdulmenan puts it, “Strategic flexibility, not ideological commitment to de-dollarization, should guide Ethiopia’s economic diplomacy.”
With Ethiopia-US trade waning partly as a result of the removal of trade privileges under the African Growth and Opportunity Act (AGOA) and geopolitical tensions rising, Ethiopia must navigate these complexities with pragmatism—leveraging new opportunities while mitigating risks in an increasingly multipolar world.
The coming years will test whether Addis Ababa can successfully chart this precarious course, ensuring economic resilience without overcommitting to any single financial paradigm.
