The EAEU is preparing for a currency exchange

At a summit in the Kyrgyz city of Cholpon-Ata, the Prime Ministers of the countries of the Eurasian Economic Union (EAEU) agreed on recommendations for expanding settlements in national currencies. According to Kommersant, priority is given to the creation of an independent payment infrastructure of the EAEU – through the interaction of national payment card systems, the creation of a network of correspondent accounts in national currencies and the exchange of financial information without the use of the SWIFT system. To solve the latter problem, the Russian Federation has already proposed to its partners in the “five” to switch to the financial message transmission system (SPFS) created by the Bank of Russia.

The meeting of the EAEU Intergovernmental Council on Friday ended with two agreements – on the establishment of the Eurasian Reinsurance Company (see. “Kommersant” dated August 26) and on increasing settlements in national currencies in mutual trade. The prime ministers of the “five” approved recommendations for work in this direction, formalizing the proposals that have been made throughout the year. Now the share of such payments, recalled the Prime Minister of the Russian Federation Mikhail Mishustin, is estimated at 75% of the total turnover. The desire to expand their use was “spurred” by the impossibility of settlements in dollars with Russia and Belarus that arose due to sanctions. However, this process will not be easy.

As Prime Minister of Kazakhstan Alikhan Smailov noted, “serious distortions are observed” between the exchange rates of national currencies, which are determined through cross rates against the dollar, and therefore consultations are required at the level of the central banks of the Union countries.

The full content of the adopted recommendations on Friday was not disclosed. According to Kommersant, priority is given to the development of an independent payment infrastructure of the EAEU, in particular, through the interaction of national payment card systems, the functioning of a sufficient network of correspondent accounts in national currencies and the possibility of exchanging financial information without the SWIFT system. As Dmitry Volvach, Deputy Head of the Ministry of Economy, explained, the Russian Federation proposes to switch to the financial messaging system of the Bank of Russia (SPFS, the Russian analogue of SWIFT). Among other measures is the launch of organized trading in commodity assets. It should be noted that the formation of a common exchange market is still only being discussed – in particular, the countries of the “five” have not yet agreed on a mechanism for calculating indices in the common market.

A large block of calculations, for which the transition to national currencies is also planned, is the distribution of import duties to the budgets of the EAEU countries.

Let us explain that import customs duties are levied at the external borders of the union in national currencies, and then converted into dollars and proportionally distributed among the countries (85% – Russia, 6.95% – Kazakhstan, 4.86% – Belarus, 1.9% – Kyrgyzstan, 1.2% – Armenia). As part of the temporary order approved in May, Russia and Belarus carry out such settlements in rubles. The current splitting of duties may be the subject of new discussions – previously, at the initiative of countries that considered it unfair, the shares have already been revised (see. “Kommersant” dated April 18, 2019). Armenian Prime Minister Nikol Pashinyan said that it is necessary “to return to the consideration of the issue of approving a unified methodology for the distribution of shares in the very near future” due to the change in the structure of the EAEU foreign trade in recent months, due to which there are significant deviations in the distribution of duties. A similar issue was also discussed in Kazakhstan, but the country’s authorities eventually recognized the changes as premature, deciding that they would initiate the issue of revising the shares only in the event of a long-term reduction in budget revenues from Russia and Belarus.

As part of the integration agenda, the prime ministers also instructed to work out measures for financial support for industrial cooperation projects – as Russian Deputy Prime Minister Alexei Overchuk said, “specific proposals on sources of funding” may be ready for the October meeting of the intergovernmental council. In the meantime, priority sectors have been outlined – aircraft manufacturing, electronic engineering, and pharmaceuticals. Also, the issue of forming a single gas market has been postponed until October – as the official representative of the Eurasian Economic Commission, Iya Malkina, noted, there are still uncoordinated positions in the draft union agreement.

Evgenia Kryuchkova