Published on: Oct 8, 2018 @ 16:01 – In a major development, Russian economy’s de-dollarization project that was announced in September by Russian VTB chairman Andrei Kostin, has been confirmed Monday and is moving forward now. This measure, Kostin said, could minimize the negative effect of US sanctions on the Russian economy.
Anton Siluanov, Russian Finance Minister, commented that the process of de-dollarization will not be similar to the Argentine scenario (the exchange of assets in dollars for assets in national currency), or that of Uzbekistan (the veto to the free movement of foreign currencies) . According to Siluanov, the Russian authorities are working to avoid using the dollar in foreign trade, and start to carry out transactions in euros, rubles and other currencies.
“We will introduce tax preferences, we will talk about the quick refund of value added tax on exports,” Siluánov explained.
“The list of countries that want to reduce their dependence on the US currency is large and includes all states that have already suffered or those who fear suffering from the dollar’s extremism,” the author said.
“Europeans would benefit if Russia were to use the euro because they now have to take into account all the risks linked to exchange rate volatility. BRICS countries, and others like Iran and Turkey, also want to avoid the dollar,” said Anatoly Aksakov, chair of the State Duma Committee (lower house of the Russian parliament) for the Financial Markets.
Mirzayan, for his part, stressed that the de-dollarization of Russian foreign trade is a very reasonable measure from the political point of view. However, economically it is difficult to perform.
“In order to be able to use national currencies in bilateral trade, it is necessary that this trade be done without imbalances,” he said.
Currently, Russian exports to Turkey exceed US $18 billion and imports reach only US $3 billion. In this case, according to Mirzayán, if both countries continue to use national currencies in trade, Russia may accumulate many reserves of lira, while Turkey will have no rubles.
Despite this risk and the fact that both the ruble and the national currencies of other countries are not currently sufficiently secure assets, the authors of dedollarization indicate that, for the time being, this is just an initiative that is in its infancy. According to Kostin, the implementation of this project in Russia will take at least five years.
“The more Washington abuses its control over the dollar, the more the Russian authorities, not just those in Russia, will be convinced that the de-dollarization is worth it,” concludes the analyst.