Now that the ruble is a freely floating currency, Russia will be forced to convince both its own citizens and global currency traders that the fundamentals of the Russian economy remain strong and that new trade partnerships with China will pay off later.

Pedestrians walk under a board listing foreign currency rates against the Russian ruble outside an exchange office in central Moscow on November 10, 2014. Photo: AFP / East-News

On Nov. 7, the dollar and euro hit historical highs against ruble, with the Russian currency showing signs of further weakness ahead as long as the turmoil in Ukraine persists. By the end of the week, the ruble-dollar exchange rate was approximately 48, while the euro was trading as high as 60.  On Nov. 10, at the APEC Summit in Beijing, Russian president Vladimir Putin signalled that Russia’s Central Bank would stop its currency interventions to prop up the ruble as well as abolish an official trading corridor for the ruble. This essentially makes the ruble a freely floating currency.

So what comes next if the ruble is allowed to find its true market value in global markets?

Amidst the ruble’s decline, one of the deputies of Russia’s State Duma proposed a very controversial bill intended to prohibit the dollar in Russia. In the event that this law passes, Russian citizens would be obliged within a year to close their dollar accounts in Russian banks and exchange all existing dollars into other currencies.

There is absolutely no need to pass such a law. In reality, this is a very emotional but economically weak project which is far away from reality. Plus, the existing Currency Law and Central Bank instructions already limit how individuals may use dollars inside Russia.

It just so happens that the U.S. dollar has a special place in Russia's peculiar post-Soviet mindset. Russians are now the devoted fans of any currency except the ruble. Most Russians remember the early 1990s when practically everybody started to convert rubles into dollars fanatically, sometimes without any reason. They had only a single motivation: They were scared of the “wooden” ruble.

The first to dump the ruble were the currency traders, who even sold directly on the streets. They brought this mentality to the new market for Western consumer goods, when the average person became infected with this malady. And this, too, is easily understood. The first group of traders needed foreign currencies to secure their “business” from the ups and downs of interest rates, while the second group – the proverbial man on the street  did it unconsciously, pushing Russia towards a supranational currency system.

The result was absolutely shocking. The money that is the lifeblood of the economy and national financial system was transfused, or at least diluted, with all the sicknesses and bad genetic heritage of the immediate post-Soviet period. The organism of the newly-born Russia, which planned to grow and to build up a tolerance, could not survive.

Several decades ago, the dollar was dominant not only in Russia but also in most emerging market nations. It was the major instrument of international trade, which saw demand increase year-after-year for dollars. Being the world's reserve currency, the dollar kept its value and promoted the need for dollar-denominated U.S. debt. The countries of the world formed their reserves mostly in dollars. And this allowed the U.S. government to borrow and to spend dollars easily and without any limits.

But now the situation is likely to be changed. The new economies of the developing world are increasing their role in global trade. A large number of countries are thinking of new possibilities of reducing the role of the dollar in their economies. Some of the oil trading countries already stopped selling oil for dollars. The UN and the World Bank have issued reports hinting at possible reasons for creating a new reserve currency not linked to the dollar.

Last year China, as well as Russia, started signing agreements that limit the use of the dollar in some trade sectors. In reality, Moscow and Beijing were the first that initiated these changes. During the period 2011-2014, both countries agreed to step away from dollar contracts and to use the ruble and yuan in international trade. Then Japan started to sign contracts in which the yen became the major element of trade.

That makes possible a system of currency exchange without using the dollar as the intermediary between them. In addition, there is a new agreement between Russia, China, Brazil, India and South Africa, in which these states will promote their national currencies in international relations. In 2009, China became the largest trading partner of most African countries. As a result, by 2015, trade between Africa and China will surpass 100 billion yuan.

Moreover, the idea of stepping away from the dollar is supported by a number of commercial entities. They heavily convert their deposits from dollars to euros, pounds, Swiss francs or Hong Kong dollars, keeping them not in the U.S., but in China.

Going forward, all this has implications not just for Russia's economic policymakers at the highest level, but also for the average Russian suddenly concerned about the future of his or her ruble deposits. Would it really be safer to diversify their savings or deposits into other currencies, or even into precious metals like gold?

From that perspective, Vladimir Putin's recent reassurances in Beijing at the APEC Summit should make everyone feel better. And, indeed, the ruble immediately strengthened against the dollar. The question, though, is whether the downward trajectory of the ruble in recent months is the result of poor economic fundamentals within the Russian economy, or just the result of dangerous speculation infecting the normally rational financial markets.

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.

Read another opinion: The ruble's headlong drop: No conspiracy, just economics