Experts of the Gaidar Institute estimate the benefits of International settlements in digital rubles

In December 2023, the ruble’s share in export settlements with European countries dropped again and amounted to 49%. According to the Central Bank, the last time this situation was observed in July 2023, and afterwards the share of the ruble exceeded 51%. The Central Bank has resumed publishing such statistics in summer of 2023, and only now the data are split by geographical areas: Asia, America, Africa, Africa, Europe, the Caribbean and Oceania. The statistics reflects the share of the ruble, currencies of unfriendly countries (dollars and euros) and other currencies, including currencies of friendly countries such as yuan, rupiah, dirham and others. Overall, the share of the ruble in December 2023 in export settlements amounted to 36.1%, the share of dollars and euros was 26.7%, the share of currencies of friendly countries was 37.2%.

According to Dmitry Kuznetsov, when analyzing the Central Bank's data, it should be remembered that the Central Bank reflects the statistics of currency settlements: “For example, a Russian importing firm buys goods in the EU. The contract is denominated in euros. However, if the transaction is pre-set in such a way that the bank debits the amount fr om its ruble account, the Central Bank's statistics will show this transaction as a ruble transaction,” he explained. The choice of currency is also influenced by the structure of goods. Some goods are traditionally traded in certain currencies, i.e. oil in dollars. Therefore, when their share in the structure of foreign trade changes, the same change also concerns the share of the corresponding currencies in trade settlements, Kuznetsov continued. He believes that statistics is also influenced by the characteristics of specific companies involved in the calculations. “Research shows that large companies that actively purchase components and attract external financing are more inclined to use dollars and euros in their calculations,” the Gaidar Institute expert explained.

Alexander Firanchuk explained why Europe and other countries use rubles when paying for gas supplied to the EU countries. The expert reminded that in fact the contract prices for gas were denominated in euros and dollars, but since April 2022, according to the Russian Federation's requirements, European companies had to convert them into rubles when paying for gas.

He paid attention to the fact that when analyzing the basket of currencies in settlements with Europe, it should be remembered that this region includes Belarus, wh ere ruble dominates in trade. “The decline in trade turnover with the EU while relatively stable with Belarus also partly explains the growth of the ruble share,” the expert added.

Interest in the ruble share is largely due to transition to settlements in rubles that may help mitigate the effects of secondary sanctions. However, this method seems to be inefficient in terms of the speed of transition to such settlements and the associated costs, says Alexander Firanchuk.

“Expanding the use of rubles with third countries outside the CIS will take considerable time. Thus, for instance, the share of rubles in settlements for imports from Turkey (6.5% in 2023) is growing too slowly (+ 2.3 p.p. by 2022), while in settlements for exports it remains negligibly small (1%, plus 0.47 p.p. by 2022),” the expert believes.

Dmitry Kuznetsov added that in light of recent events after the US President, Joe Biden, has signed an Executive Order on secondary sanctions for banking structures in third countries, settlements in rubles and “friendly” currencies do not particularly save from sanctions risks.

“This shows the problems in settlements with Turkey and China. If using such currencies does not allow to avoid sanctions risks, the question arises as to why do it. The dollar and euro comfort may outweigh simply because you can spend them in more places. It is now impossible to say that “hard” currencies have lost hegemony,” summarized Dmitry Kuznetsov.