Downloading foreign exchange in Russia due to transformation of transactions to the ruble

Russia is a witness to a decline in foreign exchange flow with the growing shift in trade to the settlement of the ruble, which reflects the impact of the West efforts to reduce financial transactions with Moscow. Data published by the Russian Central Bank showed on Wednesday night that more than half of the country’s exports are currently established in Ruble. In terms of payments in the so -called ‘friendly currencies’, led by the Chinese Yuan, they dropped to about a third, after almost half a year ago, while ‘not -friendly’ currencies currently represent only 15% of payments. This shift coincides with the decline in Russian exports by about 6% during the first five months of the year, due to the decline in the prices of basic commodities. These developments carry together with the reduction of foreign exchange flow to the Russian economy, at a time when the country’s ability to reach world markets is still limited. The yuan is an alternative solution … it has not lasted long; Russia increased its dependence on the yuan, after frozen the Western sanctions that frozen its ability to export transactions in dollars and euros after the invasion of Ukraine in 2022. However, this alternative road has begun to lose its momentum, as the United States has intensified in mid -2024 secondary sanctions on banks dealing with Russian entities. The quick rise of the yuan stopped in the commercial and financial systems of Russia before reflecting and decreasing its course. The Russian central bank, which previously announced a sharp increase in the use of the Yuan within the Russian banking system, has since stopped publishing detailed data. As for the Moscow Stock Exchange- the Yuan has become the only most important currency in circulation- it no longer reveals the trading volume. The newspaper “Commercan” reported last month that the trading volumes dropped to their lowest levels in two years in May and remained low during June. With the increasing part of the ruble in the settlement of export payments, the amount of foreign exchange sales has dropped by exporters in the local market since at least 2023 to the lowest level, despite the transfer of up to 100% of revenue, according to a report issued by the central bank this month. The demand for foreign currencies has decreased; Foreign currency demands have dropped to half compared to the average last year. This is partly attributed to the increase in the use of the ruble to pay the value of imports, according to Stanislav Morachov, the economic analyst of the Raiffeisenbank. The Russian central bank -data shows that the percentage of imported foreign currency imports has dropped to about 45%, while the remaining percentage is paid in the ruble. The transfer of trade to avoid sanctions said: “The main objective of turning in the ruble is to freeze or delay payments,” note that “the case is related to reducing the risk of sanctions and to ensure the ongoing financial flow.” However, Morashov noted that there are side effects, including an unexpected increase in the value of the ruble, which forms a double blow for public budget income, especially if it is related to the decline in commodity prices. Even banks in friendly countries are reluctant to implement direct payments associated with Russia, with the increase of secondary sanctions, which forced businesses to adopt alternatives despite the high cost of transactions. Analysts at the Center for ‘Analysis and Strategies in Europe’ described the most steadfast mechanism in light of sanctions as those based on the use of accounts reflected directly with rubles and yuan – or the ‘mirror’ – where Chinese importers pay the rowers in the same way. The double restriction between the ruble and the yuan takes place through the “mirror” accounts of the Yuan in a Chinese bank, without direct transfers, which hides it for the eyes of the supervisory authorities. The report of the Center ‘Analysis and Strategic in Europe’ said that most commercial transactions with China depend on this mechanism, while intermediaries are used in areas where this method is not implemented. Specialized businesses, which have legal entities in different countries, facilitate these transactions by receiving the ruble of Russian buyers and paying its value to exporters – also in the ruble – while the part is related to the transfer of foreign currency outside the country. More diverse options are available for large businesses, but in all cases financial operations are done by separate systems, without direct transfers. The researchers from the center confirmed that the alternative infrastructure of the payments has shown that it “its great ability to adapt” to the Western organizational procedures, noting that it is increasing “day by day, but that it also becomes less transparent.”