The RBC published the opinion by Alexander Knobel, Head of the International Trade Department at the Gaidar Institute, on why it is so difficult to trade without the dollar and what the prospects are for building a new system of trade settlements between Russia and foreign countries.

In 2022, the surplus in trade with India was about $32 bn, which is 6.4 times more than in 2021, writes RBC, citing data from the Indian Ministry of Commerce. In H1 of this year deliveries amounted to $14.9 bn. However, the surplus in favor of Russia in January-March exceeded the indicator for H1 of the previous year more than 5 times. The EU, Turkey, China and India were leaders in trade surplus with Russia in 2022.

The figure is merely expressed in the dollar equivalent, however, the currency structure of settlements is unknown. “Russian-Indian trade last year showed a certain anomaly, the nature of which is quite clear: Russian oil exports were significantly redirected to this particular country,” Alexander Knobel said.

Experts warned that Russian exporters are not interested in accumulating Indian rupees because particular currency regulations make it almost impossible to convert the rupee and increasing supplies from India which could be paid for with the same rupees, is unpromising.

The RBC studied data on Russia's trade surpluses with other countries. In 2022, the share of settlements for exports from the Russian Federation in U.S. dollars and euros has almost halved from 87% in January last year to 48% in December according to the Central Bank. However, the ruble's share has increased from 12% to 34% and the yuan from 0.5% to 16%. Russia has the largest trade surpluses with the European Union ($137.8 bn), Turkey ($49.5 bn), China ($38 bn), India ($31.8 bn) and the United States ($13.3 bn), follows from the foreign trade data of these countries collected by RBC.

Although the structure of foreign exchange settlements is shifting on the whole towards the yuan and the ruble, a significant part of settlements with the EU countries is still carried out in euros and with the U.S. in dollars, said Alexander Knobel. As for Japan, Russia obviously pays in dollars. “Most likely, the bulk of settlements with Turkey is also paid in reserve currencies, but the share of the ruble is also quite large and growing,” the expert believes.

Even by the end of 2022, the total weight of the dollar and euro in Russian settlements for both exports and imports showed a little less than 50%, which may indicate that settlement risks and risks of asset blocking by unfriendly countries still persist, the Central Bank warned in an April review of the financial sector.

According to Alexander Knobel, this may indicate that it is still difficult to build up trade with third countries in yuan. “These countries are prepared to trade with us either in reserve currencies or in their national currencies,” the expert said.

The Central Bank pointed out in a review of the financial sector that trade settlements are increasingly being transferred into currencies of friendly countries, however, contracts often remain denominated in U.S. dollars and euros. This may increase currency risks for residents, the regulator said.

In global trade, the contract currency is overwhelmingly the dollar or euro, Knobel noted. “Foreign trade actors, wherever they are located, peg the value of their products to reserve currencies as the least risky in terms of long-term planning. Payments can be made in rubles, but at the rate on the day of settlement or some particular date,” he explained. This suggests that actors in foreign trade will adjust to trade changes as a result of the changes of the world prices in dollars and euros, rather than in national currencies, the expert concluded.