U.S. Dollar Hegemony "Ambushed"! China, Russia, and India Secretly Upgrade Silver to Reserve Asset

Since July 2024, silver prices have shown abnormal trends, no longer following the fluctuations of the US Dollar Index, but instead becoming highly correlated with the exchange rates of the rupee and the yuan. This signal reveals a hidden financial channel: due to sanctions, Russia’s $40 billion worth of rupees trapped in India are being converted into physical silver via UAE dirhams and Chinese yuan. India slashed its silver import tariff from 15% to 6%, and Russia, in September, for the first time designated silver as a strategic reserve asset.

The $40 Billion Rupee Dilemma Under Dollar Sanctions

(Source: Reuters)

After Western sanctions against Russia in 2022, Russian oil could no longer be settled in US dollars, and India became the largest buyer. In just one year, India purchased tens of billions of dollars’ worth of Russian oil, but paid in rupees. This created a huge problem: the rupee is almost useless outside India, cannot be converted into dollars (due to sanctions), nor repatriated to Moscow (international markets do not accept rupees).

By May 2023, Russia had accumulated over $40 billion worth of rupees. Russia’s foreign minister publicly complained: “This money is meaningless outside India.” This $40 billion became “hostage,” trapped within India and unable to circulate. With the collapse of the traditional dollar system, Russia had to find a new outlet for these funds, and this is where silver came into play.

The Ingenious Design of the Triangular Trade Channel

(Source: Trading View)

To solve this dilemma, a secret triangular trade channel involving four currencies and three countries was established. The logic behind this channel is extremely clever, bypassing the surveillance of the dollar system:

First, India no longer pays solely in rupees for oil, but starts using UAE dirhams for part of the payment. Why choose dirhams? Because China needs dirhams to buy Middle Eastern oil, making the dirham a key currency bridge in this channel. Second, Russia exchanges the obtained dirhams for Chinese yuan on the international market. Although the yuan is not as widely accepted as the dollar, it is at least a widely recognized reserve currency.

The most crucial step is the third: Russia uses yuan to purchase physical silver from China. Silver is not paper money, is not controlled by any single country, and has both industrial use and monetary value. This operation converts paper currency into physical assets, perfectly bypassing the US dollar regulatory system.

Three Major Advantages of Silver as a Dollar Alternative

No National Attribute: Silver does not belong to any country, is not controlled by any single government, and cannot be frozen or sanctioned.

Dual Use: It is both an industrial necessity (solar, electronics) and a traditional monetary metal, with stable demand.

Limited Supply: Global silver reserves are much lower than gold. Once demand shifts to reserves, shortages may arise.

Official Actions Confirm the Secret Plan

If the triangular trade is just a hypothesis, then the official actions of two countries in the second half of 2024 are a public admission. On July 23, 2024, in the same month that silver prices experienced abnormal volatility, the Indian government suddenly announced a drastic cut in silver import tariffs from 15% to 6%, a reduction of 60%. This timing is no coincidence; the government is paving the way for this secret channel, making massive inflows of silver into India cheaper and more convenient.

Even more direct evidence comes from Russia. In September 2024, Russia announced its national budget for the next three years, and in a seemingly inconspicuous clause, for the first time in history, officially allocated funds through the state agency Gokhran to list silver as a strategic reserve asset. This is equivalent to the Russian government publicly acknowledging that silver is no longer just an industrial metal, but is as important as gold as a national reserve.

These two official actions occurring within the same time window confirm one fact: China, Russia, and India are coordinating to elevate silver as a new reserve asset. This is not a spontaneous market behavior, but a national-level strategic layout.

The Market Logic Behind Silver’s Identity Shift

Traditionally, silver has been considered an industrial commodity, with prices determined by supply and demand balance. You buy what you need, and inventories are kept at reasonable levels. But once silver is given the status of “monetary reserve,” the logic completely changes. The characteristic of monetary reserves is “buy as much as possible”—not for use, but for holding and preserving value.

This identity shift will trigger a fundamental change in supply and demand structure. Global annual silver production is about 1 billion ounces, of which 50% is used industrially, 30% for investment and jewelry, and only 20% as inventory. If Russia, China, and India begin to purchase large quantities of silver as national reserves, even absorbing just 10-15% of annual production would be enough to cause market supply shortages.

More importantly, expectations will change. Once the market realizes that silver is no longer just a “disposable” industrial good, but a national-level reserve asset, investors’ valuation logic for silver will be completely reset. Gold’s market value is about $12 trillion, while silver is only about $1.5 trillion. If silver truly becomes a reserve currency, its price could multiply several times over.

The Hidden Cracks in Dollar Hegemony

The deepest meaning of this story is that dollar hegemony is being eroded in unexpected ways. Previous attempts at de-dollarization usually involved direct challenges, such as the euro or petroyuan, but all had little effect due to the dollar’s network effect. The China-Russia-India silver strategy is instead a roundabout tactic—not confronting the dollar head-on, but quietly building a parallel system in the commodity market.

When silver becomes a settlement medium and reserve asset among the three countries, it essentially plays the role of a “shadow currency.” This shadow currency does not require IMF recognition or SWIFT system support; all it needs is mutual understanding and physical delivery among the three countries. This is a more covert, harder-to-sanction de-dollarization path.