Russia has announced that it will allow bankers and brokers from certain “friendly and neutral” countries to participate in currency trading on the country’s exchange market. This move is significant as the Russian currency exchange market was previously closed to foreigners. The list of approved states was published on the Cabinet website and includes countries that have not signed up to Western sanctions on Russia related to the conflict in Ukraine.
Under the new regulations, banks and brokers from 32 countries, including China, Cuba, the United Arab Emirates, Saudi Arabia, and Turkey, will now be able to participate in foreign exchange trading on Russia’s forex and derivatives markets. This decision comes as part of the federal law “On Organized Auctions,” which was adopted in July 2023. The aim of this law is to promote the direct conversion of the ruble and the national currencies of Russia’s partners.
Previously, only Russian residents were allowed to participate in domestic foreign exchange trading. However, this restriction limited the amount of transactions as most of them did not have the opportunity to supply liquidity in national currencies in the required volumes. As a result, the exchange rate of the ruble with other national currencies was distorted due to the high demand for transactions in those currencies. This trend started after Western sanctions were imposed on Russia in response to the Ukraine conflict, forcing the country to shift away from euros and dollars in cross-border trade.
Russian authorities believe that this amendment will help increase the volume of settlements in national currencies and further reduce the share of Western currencies in Russia’s imports and exports. The share of national and friendly currencies in the country’s trade with the Eurasian Economic Union has already increased to nearly 80% in 2022 and is expected to reach 90% by the end of this year. Additionally, there have been reports that the BRICS group of emerging economies is considering switching all cross-border trade to national currencies.
The volume of trading in national currencies on Russia’s forex exchanges has been on the rise. For example, the volume of trading in the ruble-yuan pair on the Moscow Exchange (MOEX) exceeded the volume in the dollar-ruble pair back in February. This shift towards trading in national currencies demonstrates Russia’s efforts to reduce its reliance on Western currencies and promote the use of national and friendly currencies in international trade.
In conclusion, Russia’s decision to allow bankers and brokers from selected countries to participate in currency trading on its exchange market is part of its broader efforts to promote the use of national currencies and reduce reliance on Western currencies. By expanding the pool of participants in foreign exchange trading, Russia aims to increase the volume of settlements in national currencies and decrease the share of Western currencies in its imports and exports. This move aligns with the country’s strategy to strengthen its economic relationships with countries that are not subject to Western sanctions and further diversify its currency reserves.