What is the currency agreement between Russia and Ethiopia
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The currency agreement between Russia and Ethiopia, established in early 2025, allows the two countries to conduct bilateral trade using their national currencies—the Ethiopian Birr and the Russian Ruble—instead of the US dollar. This arrangement is part of Russia’s broader strategy to circumvent Western financial sanctions and promote de-dollarization in global trade, while Ethiopia aims to address persistent foreign currency shortages and diversify its international trade mechanisms .
Key Features of the Agreement:
- Non-Dollar Trade Mechanism:
The agreement enables direct currency exchanges between the Birr and Ruble, bypassing the US dollar. This reduces dependency on the dollar-dominated financial system and mitigates risks associated with Western sanctions on Russia . Ethiopia joins 40 other countries, including Nigeria, Tunisia, and BRICS members, in Russia’s network of non-dollar trade partners . - Foreign Exchange Liquidity:
Ethiopian and Russian financial institutions are now authorized to participate in currency trading on Moscow’s foreign exchange and derivatives markets. This aims to enhance liquidity for direct conversions and streamline cross-border transactions . - Economic and Strategic Alignment:
The deal aligns with Ethiopia’s broader strategy to secure alternative foreign exchange sources, following a similar 2023 currency swap agreement with the UAE (46 billion Birr for 3 billion Dirhams) . For Russia, it strengthens economic ties with Africa and supports its geopolitical goal of creating a multipolar financial system . - Integration into BRICS Initiatives:
Ethiopia’s 2024 accession to BRICS—a group advocating de-dollarization—facilitated closer collaboration with Russia. Both countries have emphasized joint efforts to develop alternative currency frameworks within BRICS, such as exploring a common trade currency . - Geopolitical Risks:
The agreement exposes Ethiopia to potential US retaliation, including a threatened 100% tariff on exports from countries reducing dollar reliance. This risk underscores Ethiopia’s delicate balancing act between economic diversification and maintaining relations with Western economies .
Broader Context:
- The agreement builds on longstanding diplomatic ties, including high-level meetings between Prime Minister Abiy Ahmed and President Vladimir Putin in 2023–2024 .
- Russia’s inclusion of Ethiopia in its foreign exchange market follows a 2023 federal law aimed at simplifying payments in national currencies with “friendly and neutral states” .
- Ethiopia’s participation in the 2024 BRICS Summit further solidified its role in Russia’s economic strategy .
This currency agreement reflects a mutual effort to strengthen economic resilience while navigating a fragmented global financial landscape. However, Ethiopia’s reliance on non-dollar trade networks may test its diplomatic flexibility in the face of potential Western countermeasures.
