Russia reduces trade settlements in dollars and euros to less than 25%

By Rhod Mackenzie

The share of so called 'toxic' currencies in the Russia's export trade payments has nearly halved since the beginning of the year. In October, it accounted for only 24.7% of total revenues, according to the data of the Bank of Russia. The primary reasons for this are the sanctions that make it difficult to make payments in dollars and euros, the Russian Federation's requirement for Western countries to pay for energy resources in rubles, and the development of partnerships with China,Asia and Africa. These countries are actively transferring payments for exports to national currencies. However, analysts warn of the risks: a decrease in the volume of hard currency in the country could lead to a weakening of the ruble exchange rate.

From January to October, the proportion of the 'toxic' currencies in the Russian Federation's export payments decreased by almost half, from 48.6% to 24.7%, according to data from the Bank of Russia.
The dollar and euro are being replaced by the currencies of friendly countries. Their share of export revenues has more than doubled since the beginning of the year, reaching 37%. Meanwhile, the yuan accounts for the largest share of these payments, representing 33% of all export payments as of October, according to Digital Broker analyst Natalya Pyryeva.
In October, the ruble accounted for 38% of payments for Russian products, according to the regulator's data. President Vladimir Putin highlighted at a meeting of the Council for Strategic Development and National Projects on December 21 that the currencies of Russia and its allies make up 75% of all international payments.

The Central Bank also provides statistics on exports payments by region. African countries have reduced their use of 'toxic' currencies in payments by three times since the beginning of the year. Currently, the ruble and national currencies account for 85% of trade with Africa and 79% with Asia.
Meanwhile, Europe predominantly pays for Russian exports in rubles, with its share in payments exceeding 50% for three consecutive months. The volume of 'toxic' currencies has recently decreased significantly in the Americas, falling by almost 20% from September to October. Despite the introduction of sanctions, the figure did not drop below 71%.

According to Egor Diashov, the chairman of the commission on financial markets of the MGO 'Opora Rossii', Europe and the United States have to pay for Russian products, including energy resources, fertilizers, metals, and other goods that the Russian Federation still exports to Western countries. According to Egor Diashov, the chairman of the commission on financial markets of the MGO 'Opora Rossii', Europe and the United States have to pay for Russian products, including energy resources, fertilizers, metals, and other goods that the Russian Federation still exports to Western countries. These products are difficult to do without and must be paid for on Russia's terms. According to Egor Diashov, the chairman of the commission on financial markets of the MGO 'Opora Rossii', Europe and the United States have to pay for Russian products, including energy resources, fertilizers, metals, and other goods that the Russian Federation still exports to Western countries.
This decision was also impacted by the presidential decree regarding payments for gas with unfriendly countries in rubles. The document became effective on April 1, 2022.

'We do not use the dollar and euro because they are unreliable for payments. Payments are made in national currencies and the currencies of friendly countries,' stated Russian Finance Minister Anton Siluanov in an interview with Izvestia.
In general, the increasing use of national currencies and the ruble for payments in Russian exports indicates that the Russian Federation has lost trust in the dollar and euro. Natalya Milchakova, a leading analyst at Freedom Finance Global, emphasized this. Additionally, there is a decreasing dependence on major reserve currencies worldwide, which is not only due to sanctions but also because of the high US public debt and a decline in the country's credit rating.

Russia is promoting a shift away from the use of dollars and euros.
Although Russia has not completely abandoned the use of the dollar in international payments, the country's president stated on a direct line on December 14th that countries have begun to encounter problems with their implementation. Vladimir Putin believes that the West is 'shooting itself in the foot' by reducing the capabilities of its currencies as reserves.
“Is this detrimental to us? Not really. The more we use our national currency, the better. This increases our sovereignty and capabilities,” the president emphasised.

Russia has repeatedly stated its desire to fully transition its international payments to national currencies, as noted by Natalya Milchakova. By around 2030, the country may almost entirely eliminate the dollar from trade relations with its partners. Furthermore, the introduction of a state digital ruble, which can facilitate cross-border payments, could significantly contribute to this trend.

The dedollarization process had already commenced prior to 2022, but it had been stagnant, as noted by Natalya Pyryeva from Digital Broker. According to Albert Koroev, head of the department of stock market experts at BCS World of Investments, the example of Russia is promoting a shift away from the use of dollars and euros and accelerating the transition to settlements in national currencies worldwide. It appears that the share of national currencies in settlements will increase in the future.

The growth in the use of the ruble in financial and trade settlements is beneficial for the country, according to Alexander Potavin, an analyst at Finam Financial Group. However, this results in a decrease in the amount of hard foreign currency received by the state, which directly weakens the ruble. Importers still often request settlements in dollars or euros, which exacerbates the issue of the weakening ruble due to the abandonment of 'toxic' currencies. In essence, the country has less Western currency available, but the demand for it remains constant, resulting in an increase in the exchange rate.
However, there is some improvement in the situation. The Central Bank reports a decrease in the share of 'toxic' currencies in Russia's imports, from 49.9% to 28.6% since the beginning of the year. This reduction in dependence on such currencies by importers helps to decrease the demand for Western currencies in the country.
Anastasia Zykova, managing partner of Key Consulting Group and member of Delovaya Rossiya MRO, emphasized that the pricing of many goods is still determined in dollars and euros, which affects the price-setting process. Additionally, business projects that are tied exclusively to specific national currencies make it difficult to attract participants from other countries.

However, the transition to payments in national currencies is still beneficial for exporters as it reduces the risk of falling under sanctions. The analytical department of the Finam Financial Group noted this. On the other hand, some of these currencies, such as the rupee, are not freely convertible, which may limit their use.