Russia will stop accepting dollars for hydrocarbons: experts advise not to rush

Moscow switches to paying for oil and gas in national currencies

Moscow is improving the mechanism for switching to settlements in national currencies for the export of energy resources. According to Deputy Prime Minister Alexander Novak, the refusal to use the euro or the dollar when paying for oil and gas supplies with “friendly” countries has become a trend: Turkey is increasing settlements with Russia in lira, China in yuan, and India in rupees. Officials are confident that in a few years, American and European banknotes will lose their status as the world’s reserve currency altogether. Experts advise not to rush to conclusions, believing that the transition from the dollar to the unstable currencies of the third world will lead to the loss of foreign revenues of domestic producers.

Russia will continue to transfer payments for energy resources to national currencies, Alexander Novak said. According to the Deputy Prime Minister, given the problems with dollars and euros, “the trend has changed a lot in terms of their less use.” “The yuan is in demand, the ruble is in demand. This vector will continue,” the Deputy Prime Minister believes.

As much as possible, the Russian authorities decided to decouple foreign trade contracts from the value of the dollar about a year ago. From April 2022, on behalf of Vladimir Putin, our country began to accept payment for energy supplies to unfriendly countries exclusively in ruble terms, which was the result of a large-scale blocking of reserves of domestic foreign currency accounts in the West.

At first, the measure proved effective: As Reuters reported last May, German and Italian authorities allowed their utility companies to open ruble accounts with local banks to continue paying for Russian gas. But over the course of a year, the Europeans reduced their purchases of “blue fuel” from our country by more than half – some EU members, for example, the Czech Republic, which was previously completely dependent on Gazprom’s supplies, now supplies itself with Norwegian hydrocarbons. Therefore, experts believe that there are still many gaps in the announcement of a complete transition of energy exports to national currencies.

On the one hand, Western currencies are indeed becoming toxic to the Russian financial system, as there is a constant fear that such sanctioned assets may be seized and operations in euros and dollars for domestic exporters frozen. On the other hand, over the past year, Russian gas supplies to China alone increased by almost 60%. In addition, the Celestial Empire, as well as India, came out on top in terms of the total consumption of “black gold” from our country. Turkey is gradually joining them, whose transit capacities make it possible not only to provide its own market with hydrocarbons, but also to resell raw materials to European buyers. To one degree or another, Russia has agreements with all these importers on concluding energy deals in national currencies: A year ago, Ankara agreed with Moscow either to pay in rubles or give its own lira for supplies; Beijing is ready to pay in yuan, which is in demand all over the world, and Delhi – in rupees.

Only, as experts warn, Russia should be prudent and choosy in choosing the most profitable settlement money. The yuan of China, which is now at the stage of transition to the class of developed countries, is likely to acquire more and more characteristics of a hard and stable currency. “Of course, the money of the Celestial Empire is seen as the most real alternative to the dollar and the euro,” says TeleTrade analyst Alexei Fedorov. – For some time, the yuan may act as a “gateway” for transferring a currency with limited volatility and minimal risks of devaluation into finances subject to more serious concerns. India is far from a developed economy, therefore, if the local government and the Central Bank do not make the exchange rate of the rupee less floating within 3-5 years (as in China), then it will remain a weak currency instrument, not much different from the ruble in terms of characteristics.

However, there is another rather subtle maneuver of currency coordination between Russian exporters and foreign partners. In March 2022, after another sanctions strike against our country, a number of domestic experts proposed to take as a criterion an independent payment unit – UAE dirhams, which are distinguished by exchange rate stability against world reserve currencies. “The dirham exchange rate has not changed for the past 25 years,” said Sergey Suverov, investment strategist at Arikapital Management Company. – As Reuters reported, in order to reduce the risk of violating Western sanctions, Indian refineries have already begun to pay for part of the supply of Russian raw materials in the currency of the UAE. If a direct move away from the dollar is unavoidable, then converting both currencies is likely to make them more attractive for international trade.”