Will Russia abandon dollar due to sanctions?

Will Russia abandon dollar due to sanctions?

Russia will speed up work on reducing its dependence on U.S. payment systems and the dollar as a settling currency in response to U.S. sanctions, Russia's Deputy Foreign Minister Sergei Ryabkov said.

"We will of course intensify work related to import substitution, reduction of dependence on U.S. payment systems, on the dollar as a settling currency and so on," RIA Novosti cited Ryabkov as saying.

According to the minister, It is becoming a "vital need".

Advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to Vestnik Kavkaza, noted that Russia has partially prepared for a waiver of Western payment systems and dollar payments. "By itself, the use of dollars does not bear any risks. On the other hand, two analogues of the SWIFT system of interbank settlements have been created in Russia, the MIR card system has been widely implemented - that is, we already have everything we need for an autonomous functioning of the financial system," he pointed out.

At the same time, Russia will not be able to completely abandon dollars. "First of all, it's about large corporate payments related to energy supplies. In world practice, perhaps the only precedent when large contracts do not use dollars is Iran, which use euros in part of oil supply contracts. But there is a very big difference between Russia and Iran, and the likelihood that such sanctions will be imposed on us, in my opinion, is close to zero," Sergei Hestanov emphasized.

In addition, the share of foreign currencies in domestic settlements is insignificant. "Most of currency transactions are either imports or savings. Inside the country dollars have not been used as a form of currency for more than 10 years. So dollars are not a problem for Russia's economy now," the advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house concluded.

The Chairman of the Board of the National Currency Association (NCA), Dmitry Piskulov, in turn, noted that dependence on dollars in major contracts can be replaced only as a result of a purposeful policy of the state. "Russia's export-import is expressed in the dollar equivalent. Export-import companies do not want to abandon dollars, because their foreign exchange earnings are in dollars, as well as their obligations to pay off foreign debt. In this case, it will be possible to reduce dependence on U.S. payment systems if there is a targeted policy on the part of the state and state-owned companies, in order to start using euros and currencies of other countries," he explained.

"While 85% of our foreign exchange earnings are in US dollars. It is an objective reality, because trade in many other export goods are traditionally in dollars. If companies and their counterparties in Europe and the whole world are willing to pay in other freely convertible currencies, including rubles or Chinese yuan, then the dependence can be reduced," Dmitry Piskulov added.

U.S. President Donald Trump signed into law new sanctions against Russia, Iran and North Korea. It reduces from 30 days to 14 days the maximum allowed maturity for new debt and new extensions of credit to the state controlled financial institutions targeted under the sectoral sanctions.

It also reduces from 90 days to 60 days the maximum allowed maturity for new debt and new extensions of credit to sectoral sanctions targets in the energy sector, although this largely only brings US sanctions in line with existing EU sanctions, which already impose a 30-day maximum for most energy companies.

The bill also expands the existing Executive Order authorising sectoral sanctions to include additional sectors of the Russian economy: railways and metals and mining.

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