Russia’s government is working on measures to stimulate use of alternatives to the US dollar, as the Kremlin steps up efforts to cut dependence on the US currency amid fears of new US sanctions.
The government is working on “reducing our economy’s dependence on the US currency, including through stimulating and the creation of mechanisms to shift foreign-trade settlements to national currencies,” according to a statement from the Russian Cabinet’s press service published on official news agencies yesterday.
The authorities have “no plans to give up dollar settlements, ban the circulation of the dollar or impose any other restrictions,” the statement said.
Russia has long struggled to limit its reliance on the US dollar, but the relative stability of the US currency renders it useful to price Russia’s main commodity exports. The greenback remains a popular asset for Russian savers, still wary of the ruble after several deep devaluations over the past two decades.
However, as the US Congress has pushed in the past few months for additional steps to punish Russia for alleged election meddling, fears have grown that major banks could be cut off from the US financial system and the government has stepped up its efforts to develop alternatives.
KOSTIN PLAN
Russian Minister for Economic Development Maxim Oreshkin told reporters that the government is working on additional steps to make using national currencies more attractive and less costly.
“First of all, these are stimulative measures to make these operations simple and convenient for companies and the population,” he said, adding that they require working with other countries to integrate financial infrastructure.
Andrey Kostin, head of state-owned VTB Bank, last month announced his own plan for “de-dollarization.”
It would take about five years and include increased usage of local currencies in international trade, re-registering major companies in Russia and using local financial infrastructure for Eurobond issues, he said.
The government said its efforts are not driven by any “personal initiatives,” but “reflect the strategic line of the government.”
Russian President Vladimir Putin supports the move to reduce reliance on the US dollar, Kremlin spokesman Dmitry Peskov said on Tuesday.
“This is a very complex process,” he said. “It can’t be quick, but will take time.”
Russia has for years called for shifting more transactions with China and the EU into yuan and euros, while operations with its former Soviet neighbors could be done in rubles, but progress has been slow.
‘EXTRA COSTS’
“The ruble doesn’t have the same liquidity on the global market that other reserve currencies do and not everyone will want to shift to rubles, because that means extra costs,” former Russian minister of finance Alexei Kudrin told reporters. “Countries with soft currencies such as the yuan might want to shift to payment in national currencies, but I doubt the EU will want to take payment from us in rubles.”
Dramatic progress on reducing reliance on the US dollar would require at least one to two years, Russian Deputy Finance Minister Alexey Moiseev said last month.
However, the government is trying to accelerate that, the state-run TASS news agency said.
“For some Russian companies it is natural — for example, metals companies who sell to Europe — but for most, it is very tricky — oil is generally traded in dollars,” said Liza Ermolenko, an economist at Barclays Capital in London. “This is definitely not a trend internationally, as most struggle to see it as something viable.”
After the latest wave of new sanctions in the spring, Russia cut holdings of US government debt by US$81 billion, US Treasury Department data showed.
Even before that, the Russian central bank had trimmed holdings of US dollars to 44 percent of its reserves at the end of the first quarter from 46 percent three months earlier, while holdings of Chinese yuan rose to 5 percent from 3 percent.
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