Russian businesses prepare to be cut off from US dollar

Major Russian businesses have started preparing for new US sanctions which, in addition to prohibiting investments into Russian government debt, will also block certain Russian government banks from transacting in dollars.

According to the Russian news agency TASS, such companies as Alrosa and Nornickel have already tried out the first deals without the dollar system.

Alrosa, the world’s leading diamond miner by volume, which has earned $3 billion in the first 7 months of 2018, has tested a ruble-denominated payment method with clients from China and India.

The corresponding bank operations in China have been carried out by VTB Bank, whose head Andrey Kostin called for the “de-dollarization of the entire world economy” in June, and proposed a plan to abandon the dollar within Russia to President Vladimir Putin in July.

A Chinese company paid for a commodity acquired in a June auction in Hong Kong through the VTB Bank branch in Shanghai, and a buyer from India paid in the Russian currency for one of its scheduled shipments of diamonds, transferring rubles from its account at another Russian bank, Alrosa’s press service reports.

The company’s management was instructed by the supervisory board to try out payments without dollars, clarified Evgeny Agureev, head of Alrosa’s United Selling Organization.

The possibility of ruble-denominated settlements with foreign buyers is also being investigated by Nornickel, the world’s largest producer of nickel and palladium, belonging to billionaires Vladimir Potanin and Oleg Deripaska.

“We are trying this out with a few of our clients, since several buyers have expressed willingness to make payments in rubles,” Nornickel’s press service reported, without specifying exactly which clients were taking part in the experiment.

Organizing payments through offshore branches of Russian banks significantly speeds up and simplifies the payment process, assures Agureev from Alrosa. The need to use correspondent accounts at other banks also decreases.

Correspondent accounts in the US which make it possible to transact in dollars could be jeopardized by the sanction bill put forward in the US Senate in August. The bill proposes to ban American legal entities, including banks, from carrying out operations with any Russian counterparts on the potential blacklist, which would include Sberbank, VTB Bank, Vnesheconombank, Rosselkhozbank, Promsvyazbank and the Bank of Moscow.

 

  Russia, Russian banks, USA, US sanctions on Russia

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