Russia still uses ‘toxic’ euro and dollar to sell nearly half of exports

Russia still conducted nearly half of all trade late last year in the currencies of its adversaries that imposed sanctions over the Kremlin’s invasion of Ukraine, even as the yuan and the ruble made deep inroads into the settlement of transactions.

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Payments for exports using what the Bank of Russia calls “toxic currencies,” primarily US dollars and euros, accounted for 48 percent of the total at the end of 2022, down from 87 percent at the start of the year.

The yuan’s share increased to 16 percent — from about 0.5 percent — and the ruble made up 34 percent, or almost triple its level earlier, a report by the central bank showed on Thursday.

The tally provided a detailed picture of what the central bank describes as a “broad structural transformation of the Russian economy.

While the extent of trade carried out using the currencies of unfriendly countries has declined sharply, the Bank of Russia said their share is still “significant.”

The sanctions deprived the central bank of access to about half of its international reserves, leaving it in possession of only gold and yuan. Before the war, the Bank of Russia had spent years reducing exposure to the dollar.

The measures have sought to isolate Russia from international financial markets and led to an exodus of foreign investors from the country. In response, the central bank has looked to discourage businesses from using “toxic dollars and euros.”

In the report on financial market risks on Thursday, the central bank said that with the exception of the yuan, the currencies of other “friendly countries” are still used only rarely and represented just two percent of export payments.

Still, the retreat of “toxic currencies” is picking up momentum in other parts of the economy. In trading on the Moscow Exchange, the volume in the dollar-ruble last month accounted for just 36 percent of total turnover, the lowest level in years, according to the central bank.

When it comes to imports, “toxic currencies accounted for 46 percent in December 2022, down from 65 percent in January that year. The yuan’s share rose from 4 percent to 23 percent.

The phasing out of the euro — which largely took place in the first half of 2022 — means the difference between exports and imports paid for in the European currency has become negative, according to the central bank.

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