Care of the dollar: Russia and Turkey signed an agreement on settlements in national currencies

Care of the dollar: Russia and Turkey signed an agreement on settlements in national valuutakomitee link
October 8, 2019, 18:42

Elena Zibrova,
Vladimir Agoev
Russia and Turkey signed an agreement on settlements and payments in national currencies. The document mentions the use of the Lira and the ruble in transactions between the two countries, and the connection of Turkish banks to the System of transmission of financial messages — Russian analogue of SWIFT. According to experts, therefore Moscow and Ankara intend to reduce dependence on the dollar and to protect themselves from the influence of third parties.

  • Reuters
  • © Murad Sezer

Moscow and Ankara signed an agreement on settlements and payments in national currencies. About it reports a press-service of the Ministry of Finance of Russia.

It is noted that the document is aimed at expansion and strengthening interbank cooperation, as well as the continuity of calculations between business entities of Russia and Turkey.

From the Russian side the agreement was signed by first Vice Prime Minister, Minister of Finance Anton Siluanov, the Turkish Minister of Treasury and Finance, Berat Albayrak.

«The main purpose of preparation of the document is increased and a gradual transition to national currencies (ruble and Lira) in the calculations between the two countries, the creation of appropriate infrastructure of the financial market and enhance the attractiveness of the national currency to economic entities», — stated in the message of the Ministry of Finance, published on the official website.

In addition, the agreement provides for a further extension of the infrastructure of cards acceptance WORLD in Turkey and the connection of the Turkish banks and companies to the System of transmission of financial messages (SPFS) — the Russian analogue of SWIFT.

«This agreement is an important step for further expansion and development of mutually beneficial and equitable trade and economic cooperation between Russia and Turkey», — stated in the information notice of the Ministry of Finance.

As experts underline, the decision of the Russian and the Turkish financial authorities are consistent with the long-declared policy of dollarisation of the economy, including through the transition to settlements in national currencies.

«I think the main goal of this agreement is to reduce dependence on the U.S. dollar and, in principle, from the American financial system in trade and investment relations between the two countries. Both Russia and Turkey are now subject to American restrictions, so the use of the US dollar in cross-border transactions are equally risky for both countries,» — said the head of the RT Department investiga «BCS» Narek Avakian.

The analyst stressed that in line with the de-dollarization of Russia is also negotiating with India, China and even in relations with the EU, the country tries more and more to move to settlements in euros.

«This measure will not increase the trade turnover between the countries, but it will protect it from the influence of third parties, since the U.S. will not be able to block transactions if payments in national currencies», — said Avakian.

In conversation with RT chief strategist «UNIVER Capital» Dmitry Alexandrov also noted the impact of the transition to settlements in national currencies on trade. «As part of the transition to payments in national currencies of Turkey guaranteed relief for entrepreneurs from Russia, that is the reason for the expansion of turnover and an increase in supplies to Turkey that would be beneficial for the Russian economy», — the expert believes.

  • © Sputnik/Alexei Nikolsky/Kremlin via REUTERS

The Russian authorities declared active transition to settlements in national currencies with trading partners in 2018. In particular, the inclusion of this issue on the financial agenda, said Anton Siluanov. The Finance Minister spoke about the preparation of the document with proposals for tax incentives for companies conducting operations in the Russian currency. The Minister of Finance added that dollarization did not affect the currency of accounts of Russians.

In addition, the head of the Ministry of industry and trade Denis Manturov said that the government is considering joint actions for the gradual abandonment of the U.S. dollar with the countries of Southeast Asia, the Middle East, Latin America and Africa. It is curious that the Minister a year ago, just touched the topic of Russian-Turkish trade and did not rule out that a specific example of such a monetary transfer can be the supply of components for the needs of the Russian automotive industry of Turkey.

Also

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Russia is actively working on the transition to payments in national currencies with their trading partners. This was stated by the head…

In turn, Minister of energy Alexander Novak in July 2019 said that about a third of the settlements in Turkish-Russian mutual trade is carried out in national currencies.

Russia also intends to actively practice payments in national currencies with China. So, the President Vladimir Putin after talks with Chinese President XI Jinping declared that has signed an intergovernmental agreement aimed at further expanding the use of rubles and yuan in bilateral trade, as well as to ensuring continuity of banking transactions in the conditions of instability in global markets.

Curiously, earlier in conversation with RT economic policy Director, HSE Yuri Simachev recalled that the discussion on the topic of diversification was started in the early 2000-ies, when it became clear that it is irrational to carry out the bulk of the calculations in the currency of one country.

Then began the gradual diversification of Central Bank reserves, and by the end of 2018, the Central Bank halved the share of US dollar in their international reserves from 45.8% to 22.7%. At the same time the share of Euro in foreign exchange reserves of the country increased by almost half, from 21.7% to 31.7%, while the Chinese yuan five times from 2.8% to 14.2%.

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