The New System to Pay for Russia’s Agricultural Exports
Introduction
Experts noted that the new system that Russia has decided to implement to pay for the cost of its agricultural exports will protect these exports from sanctions, increase demand for the ruble and expand trade with friendly countries.
New Procedures for Export Contracts
On Tuesday, Russian President Vladimir Putin signed a decree setting out special procedures related to contracts for the export of Russian agricultural products, which will allow the use of special type Z accounts denominated in rubles and foreign currency in transactions starting November 1.
Opening of Special Type Z Accounts
These accounts are opened by authorized Russian banks on the basis of applications from foreign buyers, and the Russian government must determine the list of agricultural products subject to the decree within 30 days.
Money Transfer Process
Under the new mechanism, foreign buyers transfer money to an account in foreign currency, and then this currency is sold to an accredited bank – either directly or by putting it up for sale on exchanges. The bank transfers the received amount in rubles to a special account of type Z and sends it to the appropriate authority.
Benefits of the New System
“This brings a number of benefits. Firstly, it allows avoiding sanctions and reducing dependence on the currencies of unfriendly countries. Secondly, a foreign buyer who has opened a special account will have direct access to Russian exporters of agricultural products, bypassing bureaucratic delays.
This mechanism is similar to that used by Moscow in gas deals with the European Union, where consumers are not required to pay exclusively in rubles, but this provides additional opportunities for companies, analyst Yevgeny Shatov said.
Protection from Sanctions
Notably, the Z foreign currency account cannot be frozen or seized, which would protect exporters of agricultural products, especially grains, and foreign buyers from friendly countries from sanctions, Severin noted, adding that the ruble amount, unlike foreign currency, would not be “suspended” in foreign banks.
Increase in Trade with Friendly Countries
The countries of the Persian Gulf and the countries of Africa are showing interest in settlements in national currencies with Russia, after this mechanism has already been agreed between Russia and the member states of the Eurasian Economic Union and China.
The new system is expected to increase trade between Russia and friendly countries.
Growth in Russian Exports
According to the Russian Ministry of Economic Development, in 2022 the share of “unfriendly” economies in Russian exports decreased from 58% to 35%, while the share of neutral and “friendly” economies increased from 42% to 65%. As a result, food exports from Russia, despite the sanctions, increased by 25 percent.
In May last year, settlements in rubles for exports to Europe amounted to 49.8%, and to Asia – 36.3%, and the percentage of these settlements with friendly countries reached 66% compared to 13% in February 2022, according to the Central Bank of the Russian Federation.
Potential Application to Other Strategic Goods
Experts believe that a similar settlement mechanism will be applied to the export of other strategic goods, in particular, ferrous and non-ferrous metals and products from them, chemical industry products, and timber.
Source
Source: “Nofosti”