Russian firms test non-dollar deals to sidestep any US sanctions
MOSCOW: Several major Russian companies are exploring ways to do deals abroad without using dollars, spurred on by a US threat to broaden sanctions that have impeded access of some Russian firms to the international banking system.
The Kremlin has been pushing companies to conduct more deals using other currencies to reduce reliance on the dollar.
Russian Alrosa, the world’s biggest producer of rough diamonds in carat terms, said it had completed a pilot deal with a Chinese client using yuan in the summer and another nondollar transaction with an Indian client.
Other companies working on similar transactions include energy firm Surgutneftegaz, agricultural company Rusagro and miner Norilsk Nickel.
Russia’s central bank said this week the amount of non-dollar dealings was growing, with the share of rouble settlements in the Russia-China and Russia-India goods trade now between 10 and 20 per cent.
The share was higher in the service industry, it added.
But there are limits to how much business can be shifted. Major companies still rely heavily on dollar deals and most of Russia’s foreign earnings come from oil sales priced in dollars.
In addition, foreign banks with major US activities may still be wary of business with any entity under US sanctions even if transactions are not in dollars, bankers say.
The United States and its allies imposed sanctions on Russia in 2014 over Moscow’s annexation of Crimea. Washington said in August more measures could follow, after accusing Moscow of using a nerve agent against a former Russian agent and his daughter in Britain.
The new steps, which could be announced in November, may target dollar dealings, US lawmakers have said.
One challenge facing companies dealing in the rouble is the Russian currency’s volatility.
Between April 6 and 11, after Washington imposed sanctions on Russian billionaire Oleg Deripaska and some of his companies, the rouble lost almost 13 per cent of its value against the dollar.
Alrosa said it avoided the fluctuation risk by completing the Chinese deal in a day.
US dollar deals tend to take longer due to associated compliance checks required.
“An increase in the speed of operations is an advantage in such an operation,” the company said in a emailed statement.
Alrosa did not give a value for its China and India deals but said the Chinese buyer had bought a lot at its auction of diamonds of 10.8 carats or larger in Hong Kong. Alrosa data indicates that its lots are on average worth about US$100,000.
Alrosa said the banker for its Chinese deal was Shanghai office of VTB, Russia’s second largest bank. An industry source, asking not to be named, said Russia’s biggest bank lender Sberbank worked on the Indian deal.
VTB and Sberbank declined to comment.
The Chinese client settled its purchase in yuan, which VTB converted into roubles and transferred to Alrosa.
“We carried out the transaction itself in one day, in several hours,” Alrosa said, adding that on this occasion the currency move was in the client’s favour.