The share of the ruble in Russian foreign trade increases dramatically

By Anna Koroleva

In June 2023, Russia received a record share of revenue in rubles from exports to the countries of America and Europe, RIA Novosti calculated based on data from the Central Bank of the Russian Federation. The same situation is observed in "friendly currencies" - for deliveries to Asia and Africa.

In general, most of Russian exports (40.2%) in June were paid in rubles, another 32.5% - in "toxic currencies", and 27.3% - in "friendly currencies".

Thus, according to the results of June, the share of ruble receipts for the export of goods and services to the countries of the Americas increased over the month by 8.8 percentage points - up to 26.2%, which was the maximum since the beginning of the data publication period (beginning of 2021. At the same time, the share of "toxic » currencies - among them the dollar and the euro - fell by 9.1 percentage points - up to 72.2%, while the rest - grew slightly, up to 1.5%.

The ruble also set a new record in trade with European countries: there, its weight in exports reached a maximum of 53.9%. At the same time, the share of "unfriendly" currencies in Russian exports to Europe fell to 40% for the first time. Other currencies accounted for only 6.1% of settlements with Europeans.

The largest shares of “friendly currencies” (among them, the yuan and the rupee) in Russia’s export settlements over the entire period of observation were recorded in Asia (34.5% in June) and Africa, where the figure soared to 43.6% from 14% a month earlier. The share of "toxic" currencies in exports to Asian countries in June rose to 29.6% from 28.6%, and to African countries, on the contrary, decreased to a minimum of 14.3% from 49.8% in May.

“Anti-Russian sanctions, on the contrary, made us bolder”
A new payment mechanism for the export of Russian products in rubles was introduced in addition to the previously taken measures to ensure the financial stability of Russia in response to the anti-Russian sanctions imposed, recalls Vladimir Koshelev, First Deputy Chairman of the State Duma Committee on Construction and Housing and Communal Services. And it has a number of advantages. First, the expert explains, we are talking about strengthening the position of the ruble as a settlement currency in the international arena. This strengthens the role of the ruble in the global economy.

Secondly, Vladimir Koshelev continues, this is, of course, the reduction of foreign exchange risks for Russian exporters. When making payments in rubles, they will be insured against possible blocking of funds due to restrictions. Well, and, thirdly, such a measure makes it possible to simplify calculations for buyers from countries where access to the dollar and euro is difficult due to sanctions. In addition, this contributes to an increase in demand for Russian exports from buyers who do not want to use the dollar or euro for political reasons.

For Russian banks, many of which are under sanctions and disabled from SWIFT, this makes it possible to normally process payments from foreign importers through national payment systems, without fear that transactions will be blocked. Making transactions in rubles also opens up access for investors from friendly countries to the Russian market, including if they have an interest in replacing departed Western brands.

It is important, adds Vladimir Koshelev, that an increase in the share of international payments in rubles provides additional serious support for financial stability in Russia itself, by reducing the dependence of the exchange rate and the real weight of the ruble on the currencies of unfriendly countries.

“The path to a stable and strong ruble inevitably goes through a decrease in its dependence on the currencies of unfriendly countries, including by increasing the share of ruble settlements under export contracts,” Alexander Tsybulsky, Governor of the Arkhangelsk Region, commented to Expert on the current situation. “For many years, we were essentially afraid to start this process on our own. There were always skeptics who dissuaded us and almost openly said that the dollar and the euro are supposedly the only “real” currencies, and the fate of the ruble is to exist forever in their wake. And this is exactly the case when anti-Russian sanctions, which were supposed to weaken us and crush us economically, on the contrary, made us bolder in defending our own interests, and ultimately stronger. It is already obvious

As the head of the region recalls, with some countries, such as India or China, for example, Russia has long been engaged in mutual trade in national currencies, and has well-established mechanisms for this. This pre-established foundation has been of great help in the current circumstances of unfriendly external pressure. Thus, only last year the volume of foreign trade turnover of the Arkhangelsk region with China increased by almost 48%. Pomorye traditionally exports products of timber and pulp and paper enterprises, as well as engineering products, to China.

“It is important to continue work on strengthening the international payment infrastructure with the possibility of direct payments in rubles and other “friendly currencies”. To scale up and improve the experience that we have already accumulated,” Alexander Tsybulsky concludes.

Shouldn't stop
The increase in the share of the ruble in Russian exports is directly related to administrative decisions in the first half of 2022, when the authorities ordered the sale of a number of goods for unfriendly countries for rubles, explains Andrey Kochetkov, a leading analyst at the Otkritie Investments global research department.

According to the analyst, a significant contribution to the current state of affairs is the restoration of delivery routes and payment methods by unfriendly countries that are not able to completely abandon Russian exports.

Meanwhile, Andrey Kochetkov says, further growth of the ruble's share does not seem obvious. In trade with Asia, the yuan begins to dominate, which, unlike other friendly currencies, has the greatest stability and liquidity.

The movement towards a wider use of the ruble in international settlements should be even more focused and confident, the expert believes, and as such can bring a lot of benefits.

Now exporters, taking advantage of legislative indulgences, are in no hurry to return external proceeds to Russian jurisdiction. Accordingly, these funds work more for the economies that are the target of export deliveries. If all external contracts are converted into rubles, they will be forced to transfer funds back to Russia and look for opportunities for their effective placement.

In this situation, the exporters themselves will be interested in reducing the volatility of the exchange rate and finding solutions to replace imports of equipment and technologies. With a significant, or 100%, sale of external proceeds, the ruble will become not only a means of temporary placement and payment, but also an object of long-term parking of enterprises' profits. That is, instead of freezing funds in unfriendly, or friendly, currencies, the object of accumulation will be rubles, which can be directed to investments in the economy to reduce dependence on external supplies.

“Russia can well afford it, as the country's trade balance regularly remains positive. Moreover, the transfer of exports to primary settlements in rubles will reduce sanctions risks, increase the liquidity of the domestic foreign exchange market and provide the economy with a relatively stable exchange rate, which is necessary in the context of economic restructuring,” says Andrey Kochetkov.

The only alternative is the Chinese yuan, but, in fact, this is just a replacement for toxic currencies with a derivative from them, but with a lower quality, the expert believes. Meanwhile, an alternative for any fiat currencies could be instruments based on gold, which has an undeniable advantage of anonymity and a positive mathematical expectation of value.

“Of course,” Andrey Kochetkov adds, “with this technique, it will be very difficult to use the instruments of inflation and the depreciation of the national currency to solve budgetary and corporate problems, but excessive enthusiasm for these instruments plays a negative role for the economy rather than ensures its long-term stability. The growth of the share of the ruble in foreign trade will help raise the status of the Russian currency and increase the interest of external state and commercial investors in the Russian economy.”
This article originally appeared in Russian at expert.ru