Friendship Is Friendship, but Money Is Different?
Renowned Russian sinologist Andrei Onikienko tells about how Moscow and Beijing can shift to mutual settlements in their national currencies
The exclusion of many Russian banks from the international SWIFT payment system is certainly a blow, and a serious blow. Moscow is now looking for a solution to the difficult situation which has appeared. One possibility is immediately obvious: to shift as quickly as possible to trade and economic relations with friendly countries, with mutual settlements in our national currencies. Only in this way will it be possible in the end to stop dependence on the dollar.
This is easier said than done, however. Even with China, our largest business and strategic partner, we are still not able to switch to mutual settlements in our national currencies, ruble/yuan – although we have been trying to do this for the last twenty years. In light of the situation which has arisen, a crucial moment in Russian-Chinese relations has clearly arisen, and we must take advantage of this chance. Moscow and Beijing are now becoming closer than ever before. Life is forcing us to make decisions promptly on the full spectrum of trade, economic, and financial ties.
Some skeptics are sure that it will never be possible to shift completely to mutual settlements with China. Their argument goes like this: why does Russia need yuan, and China – rubles? Both currencies have yet to become world currencies, unlike the dollar, euro, British pound, or Japanese yen. So we will nonetheless have to exchange the yuan we receive into the same dollars or euros – and the Chinese in turn will exchange our rubles for the hard currencies which they need.
Nevertheless there is another point of view. In fact, switching to mutual settlements in our national currencies with China is not only possible, but necessary. For this to happen, both countries need most of all to show goodwill.
It is a curious fact that the yuan is already used in mutual settlements between Russia and India. In fact, some experts feel that the Chinese can be used even more broadly – for example, in the mutual settlements between Russia and the countries of Latin America. Experts consider the yuan to be the leading candidate here because China has a powerful banking system, comparable to the American one. In their opinion, Beijing will thus be able to take over partially the role now played by western banks. In any case, this channel of transactions via the yuan as the base currency is worth seriously working out. There is a significant demand on the part of Latin American, anyway, for the development of trade and economic relations with Russia.
Be that as it may, what do Moscow and Beijing need to do in order to shift quickly to mutual settlements in our national currencies? Well-known Russian sinologist Andrei Onikienko feels that it is it is essential to improve the infrastructure of interbank settlements between the two countries.
In his opinion, under the conditions of sanction pressure from the West, the problem of improving the infrastructure of cross-border payments in rubles and yuan arises in its full size – and this issue appears to be critically important for ensuring the development of trade and economic cooperation between Russia and China. And today we need more decisive steps in this direction.
Nonetheless, the expert noted that over the past few years, a great deal has already been done to increase the share of our national currencies in the international trade settlements between Moscow and Beijing. “While in 2014 the share of imports from China with settlements in rubles and yuan was only 7%, by the beginning of this year it had grown to 31%. So we have laid a good foundation. But now it is necessary to make efforts to maximize this share, thereby weakening the ability of external forces to influence the economic relations of the two largest sovereign states,” Onikienko stressed.
To do this, according to him, it is necessary to “intensify the mutual opening of correspondent accounts by Russian and Chinese banks, ensure the normal transmission of payments on export-import operations, and provide various trade financing products in rubles and yuan to Russian and Chinese participants in foreign economic activity – so that they can completely fulfill their obligations under contracts in a timely fashion.” At the same time, the analyst is sure that it is necessary to create a communication channel that “would create a reliable bridge to connect the existing national systems for transmitting financial messages between banks in Russia and China, eliminating dependence on SWIFT, which is known to be fully controlled by unfriendly countries. On our part this is the SPFS system of the Bank of Russia, which has been operating since 2015, and in China it is the CIPS system of cross-border interbank payments in yuan, also launched in 2015,” Onikienko recalled. “Now an additional nudge from regulators is urgently needed, so that Chinese banks will begin moving more quickly to become participants in our SPFS system, and Russian ones – to connect to the Chinese CIPS system. There are no technical barriers to this. Thus, we would eliminate the bottlenecks that hinder the further development of settlements in national currencies and ensure more dynamic development of trade and economic cooperation – which is very much in the interests of both of the countries,” he concluded.