“The work is being carried out persistently”: Deputy Head of the Ministry of Economic Development Volvach on de-dollarization and the consequences of Western restrictions

- Against the backdrop of Western sanctions, Russia began to actively refuse to use the currencies of unfriendly countries in trade.

For example, the gas industry has already switched to settlements in rubles.

How is this process developing now and will we be able to completely exclude the dollar from trading operations?

- The trend to reduce foreign trade settlements in dollars and euros did not start yesterday.

Russia has been moving in this direction since at least 2014, when the first packages of sanctions were introduced against us.

That is why the results of the de-dollarization of the economy are now so noticeable.

So, for example, over the past five years, the share of the dollar in our exports has decreased from 68 to 54%.

In imports, the indicator is stable at 35%, but we will see how the situation will change by the end of this year.

This is not an easy transition because the change in the settlement structure affects the economy, current and future contracts, as well as margins.

Therefore, on the one hand, work in this direction is being carried out quite persistently, but on the other hand, very carefully so as not to unbalance the processes and ties that exist today.

Nevertheless, the trend towards a further decline in the share of the dollar and the euro in the calculations is obvious.

• Dmitry Volvach on de-dollarization

— In settlements with which countries, de-dollarization is going on most actively?

— First of all, these are our closest trading partners — the countries of the Eurasian Economic Union (EAEU) and the Commonwealth of Independent States (CIS).

We are doing this work with them more persistently and a little more successfully than with far-abroad countries.

It is important to note that the share of settlements in rubles under foreign trade contracts with the countries of the EAEU and the CIS is growing very seriously.

The share of the dollar in settlements with the BRICS countries almost halved, from 78% to 37%.

The Shanghai Cooperation Organization (SCO) also has a certain dynamic.

First of all, it is due to the fact that we are making really good progress in de-dollarization of trade in settlements with China.

— If we talk about cooperation within the EAEU, what is the share of payments in national currencies between countries now?

How might the meaning change in the context of today's world situation?

— All EAEU countries have approved the formation of a single payment area as one of the priority areas of our partnership.

At the same time, the share of domestic settlements in national currencies has already reached 75%, and in the future we hope to bring this value up to about 80%.

Since the beginning of this year, interest in such calculations has grown very seriously.

This can be judged by the volume of trading on the main stock exchanges.

For example, the volume of trading on the stock exchange in the currency pair Russian ruble - Belarusian ruble increased 20 times, and in the pair Russian ruble - Kazakhstani tenge - 46 times.

This means that there is an objective demand for these foreign exchange transactions, and participants in foreign economic activity need this liquidity in order to pay under real contracts.

I note that in trade with Belarus, 80% of settlements are made in Russian rubles.

That is, the share of the ruble in trade with the EAEU is high and plays an important role, but we still do not insist on the creation of a ruble space within the union.

Everyone should be comfortable.

Therefore, if it is more convenient to use national currencies somewhere, for example, those of Armenia or Kyrgyzstan, we will only be happy.

— Is it possible to use cryptocurrencies in foreign trade in the foreseeable future?

—

The positions of the Ministry of Economic Development, the Ministry of Finance and the Central Bank agree on the following: we do not agree that some kind of alternative currency should be used in internal settlements.

However, if a partner country’s legislation provides for the use of cryptocurrencies in foreign trade operations, we are ready for this.

• Dmitry Volvach about calculations in cryptocurrencies

That is, we provide in the relevant bills and regulations the possibility of settlements in cryptocurrency under foreign trade contracts, if the necessary infrastructure exists for this, the necessary restrictions are observed, and the legislation of the foreign trade partner allows this.

— How have the volumes of Russia's trade with the EAEU and CIS countries changed under the sanctions?

— In general, over the past five years, Russia’s trade with the EAEU countries has grown by more than 60%, or by $26 billion. In absolute terms, the Republic of Belarus has become the leader in terms of volume growth over this period.

Moreover, since the beginning of this year, Belarus has overtaken Germany in terms of export volumes to Russia.

It is clear that various factors influenced this, but the fact itself speaks volumes.

That is, we see a turn and reorientation of foreign trade towards our closest partners.

The basis of trade between Russia and the EAEU is energy, food products, metallurgical products, machinery, and equipment.

And the main trends in the development of the structure of trade between Russia and the EAEU countries are the reduction in the share of mineral products, the growth in the importance of all other enlarged commodity groups, that is, groups of higher value added.

As for our forecasts, by the end of this year, Russian exports to the EAEU countries are expected to grow by more than 24%, and to the CIS countries by 8%.

Imports, in turn, will increase by 9% and 19%, respectively.

- Western countries continue to impose new trade restrictions on Russia.

How seriously can this affect the volume of trade in Russia this year?

- Russia, despite the unprecedented and completely illegal unilateral pressure, remains a responsible participant in the world, and energy, and food markets.

We understand how much the whole world depends on those logistics chains that exist today.

Any attempt to exclude a link from this chain will lead to very serious consequences, and for all parties.

The impact will be felt not only by Russia and Belarus, which fell under the sanctions, but also by other countries.

Markets are so interconnected and interdependent that it is impossible to take a country like Russia, localize it, isolate it and try to somehow reformat it by external pressure without consequences.

It won't happen, it's impossible.

And what is happening now in the economies of our European and overseas partners only confirms this fact.

• Dmitry Volvach on the consequences of sanctions for the West

People who a few months ago proudly positioned themselves as the authors of sanctions and even competed among themselves who came up with more restrictions against Russia have now calmed down a bit.

The reason is very simple.

The damage and the harm that these people inflicted on the economies and the standard of living of their countries, at least, was not calculated to the end, and may not even be fully realized.

How the situation will develop further, of course, largely depends on the direction in which the foreign sanctions policy will move, which, unfortunately, we cannot influence.

But we can adapt to it, and we do it quickly enough.

— One of the most discussed topics now is the threat of a global food crisis.

What does this mean for the Russian economy?

Will we feel the consequences of this crisis?

— What is happening now in the food markets is not the result of any events or any decisions made in recent months.

All this is the result of the problems and mistakes that have been formed over the past few years.

This is the growth of world inflation, and trade protectionism, and such a categorical violation of the mechanisms of market pricing.

Also during the pandemic, supply chains began to fail, and so far they have not recovered.

The sanctions of recent months have only exacerbated the situation.

We see an increase in the cost of energy, fertilizers and food.

A number of countries have banned or restricted trade in key products, and this has certainly added a twist to the spiral of rising world prices and deficits.

Since the beginning of the year on the global market, wheat has risen in price by 45%, sunflower oil - by 53%, pork meat - by 35%, oil - by 51%, and fertilizers by 7%, which is also very sensitive.

Russia, on the other hand, is very deeply integrated into global trade processes and food chains.

We rank first in the export of wheat, fifth in the export of grain, third in the production of wheat, fourth in the production of potatoes, milk and chicken meat.

We also provide 13% of the world's supply of grain crops.

We account for one third of world exports of sunflower oil and 16% of rapeseed oil.

Despite the general global decline in food supplies to international markets, Russia remained the largest grain exporter.

We shipped 40 million tons to 120 countries.

Most of all in Turkey, Egypt, the countries of South Asia.

We shipped fertilizers to 130 countries and agricultural machinery products to more than 30 countries.

At the same time, we still have the potential to increase exports.

By the end of this year, we will be able to offer more than 25 million tons of grain and more than 22 million tons of potash fertilizers to world markets.

And we offer these products to our core customers because, again, we were, are, and continue to be responsible players in the global food and energy markets.

— Against the backdrop of Western restrictions, the ruble fell sharply in early spring, but now it has managed not only to win back sanctions losses, but also to strengthen to record levels of recent years.

What is the reason for this, and what course is optimal for our exporters and budget?

— The Central Bank and the government responded with lightning speed to the challenges and blows faced by the Russian financial system after the first round of sanctions.

Restrictions on the movement of capital and controls on the sale of export proceeds were promptly introduced.

This made it possible first to reach a fairly comfortable ruble exchange rate, then to the pre-crisis exchange rate.

• Dmitry Volvach on the strengthening of the ruble

At the same time, there is now some inertia from the decisions made, and the ruble is even re-strengthening.

However, any extremes here are not very good.

That is, the weakening of the ruble leads to inflationary processes and a rise in the cost of goods, as a result of which the consumer suffers.

If the ruble is overstrengthened, then sooner or later our producers will start to suffer.

Therefore, we must maintain the equilibrium exchange rate of the ruble.

At the moment, this balance is being sought, and it will be found through the tools that the Central Bank and the government use quite subtly, precisely and professionally in such difficult conditions.