[SNN] Russian companies prepare to pay for trade in renminbi

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http://gata.org/node/14074


Russian companies prepare to pay for trade in renminbi


By Jack Farchy and Kathrin Hille
Financial Times, London
Sunday, June 8, 2014

 <http://www.ft.com/intl/cms/s/0/9f686816-ed51-11e3-abf3-00144feabdc0.html> 
http://www.ft.com/intl/cms/s/0/9f686816-ed51-11e3-abf3-00144feabdc0.html

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," Pavel 
Teplukhin, head of Deutsche Bank in Russia, told the Financial Times.

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Andrei Kostin, chief executive of state bank VTB, said that expanding the use 
of non-dollar currencies was one of the bank's "main tasks." 

"Given the extent of our bilateral trade with China, developing the use of 
settlements in roubles and yuan [renminbi] is a priority on the agenda, and so 
we are working on it now," he told Russian President Vladimir Putin during a 
briefing. "Since May we have been carrying out this work."

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.

The central bank is working to create a national payment system to reduce the 
country's dependence on western companies 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 Russian 
head of another large European bank. He added that Russia's large exposure to 
the dollar subjects 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 to different currencies in the event of further 
sanctions. "If something happens, we are ready to switch to other currencies -- 
for example to the Chinese yuan or the Hong Kong dollar," he said.

Alexander Dyukov, chief executive of Gazprom's oil division, has said that the 
company 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.

"It looks like this is not just a blip -- this is a trend," said Mr Teplukhin 
of Deutsche Bank. He added that Russian companies were able to hedge the risk 
of further US sanctions by "changing the letter of their contracts to allow 
them to change currency if it is necessary."

Some politicians have suggested Moscow should respond to Western sanctions by 
entirely "de-dollarising" its economy.

But while in recent discussions with big business about how to make the economy 
less vulnerable the government has advocated listing back home and settling 
more trade in currencies other than the dollar, it has rejected more extreme 
measures.

"As long as Russia is not subject to systemic sanctions, which could bring an 
artificial limit to our economy's access to dollars  ...  then I don't think 
Russia will take any steps in order to bring about artificial 
de-dollarisation," said Andrei Belousov, economic adviser to Mr Putin.

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