No Barriers

31 October 2017

Ruble continues to squeeze dollar out of settlements

Eurasian Economic Union member states should delegate more powers up to the supranational level to avoid stagnation in Eurasian integration.

Explosive development of the EAEU accompanied by creation of common commodity and labor markets has been replaced with a relatively more sluggish process, with thousands of matters remaining unresolved, noted Dmitry Pankin, Head of the Eurasian Development Bank (EDB). The issue was raised at the 12th International Conference Eurasian Integration hosted by the EDB.

The Eurasian Economic Commission (EEC) expends half of its efforts to lift barriers which member states keep erecting, oblivious of their common interests, said Tigran Sarkisyan, EEC Chairman. When member states start to interpret supranational rules after their own fashion, and become involved in various conflicts, it turns out that the Commission is only authorized to monitor the situation and issue recommendations, he regrets. Expansion of the scope of authority of the EEC was singled out by Sarkisyan as the most urgent task that needs to be completed to advance integration.

Aleksey Kudrin, Head of the Center for Strategic Research, former Finance Minister, and one of the drafters of the EAEU Treaty, concurs. According to the CSR, if all exceptions were to be eliminated, the volume of trade within the Union could increase by one quarter.

New US sanctions - now threatening third-country counterparties of Russian companies - are becoming a factor of uncertainty which affects the EAEU economy, as nobody truly understands how they will be applied, noted Pankin. They will encourage the use of ruble in internal settlements within the EAEU, believes Kudrin, even though such settlements may prove to be more costly for companies than dollar settlements. Over the last four years, ruble revenues from foreign trade treaties with EAEU member states have already increased from 54% to 70%, while transfers have gone up from 60% to 78%, as per Central Bank data.

There is no need to artificially spur the squeeze-out of the dollar from intra-EAEU settlements, says Ksenia Yudayeva, First Deputy Chairman of the Central Bank of the Russian Federation. This will depend on the growth of trust in national currencies, and securing a steadily low inflation level is the key condition for that.

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