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Russia groups set to use renminbi if sanctions block dollar market

Published:Wednesday | June 11, 2014 | 12:00 AM

By Jack Farchy and Kathrin Hille in Moscow

Russian companies are preparing to switch contracts to renminbi and other Asian currencies amid fears that western sanctions may freeze them out of the US dollar market, according to two top bankers.

"Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies and to set up accounts in Asian locations," said Pavel Teplukhin, head of Deutsche Bank in Russia.

Andrei Kostin, chief executive of state bank VTB, said expanding the use of non-dollar currencies was one of the bank's "main tasks". He has told Russian president Vladimir Putin that developing the use of settlements in roubles and renminbi was "a priority" they have been working on since May.

The move to open accounts to trade in renminbi, Hong Kong dollars or Singapore dollars highlights Russia's attempt to pivot towards Asia as its relations with Europe become strained. Sanctions are pushing Russian companies to reduce their dependence on western financial markets while US and European banks have dramatically slowed their lending activity in Russia since the annexation of Crimea in March.

Russia's central bank is also working to create a payments system to reduce the country's dependence on western groups such as Visa and MasterCard.

"There is nothing wrong with Russia trying to reduce its dependency on the dollar, actually it is an entirely reasonable thing to do," said the Russia head of another big European bank. He added that Russia's large exposure to the dollar subjected it to more market volatility in times of crisis. "There is no reason why you have to settle trade you do with Japan in dollars," he said.

The chief executive of a Russian manufacturer that derives 70 per cent of its revenues from export in US dollars said his company had done the groundwork to move its contract settlements in the event of further sanctions. "If something happens, we are ready to switch to other currencies," he said.

Alexander Dyukov, chief executive of Gazprom's oil unit, has said that it has discussed with its customers the possibility of shifting contracts out of dollars, while Norilsk Nickel told the FT that it was discussing denominating long-term contracts with Chinese consumers in renminbi.

(c) 2014 The Financial Times Limited