Russia’s “hidden” weapon against sanctions: parallel system of international payments based on cryptos

Russia is open to accepting bitcoin for its natural resource exports - Alliance with China and Turkey for an alternative system of international payments.

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In what way will Russia not be cut off from the international payment systems in the midst of the paranoid sanctions of the West aimed at isolating it in the field of international trade?

It seems that it has already formulated an alternative no matter how “tough” the sanctions turn out to be.

In late March, the chairman of the Duma’s energy committee in Russia, Pavel Zavalny, said at a press conference that Russia was open to accepting bitcoin for its natural resource exports.

With Turkey and China for starters

“When it comes to our ‘friendly’ countries, such as China or Turkey, which do not pressure us (with sanctions), then we offer them the possibility of making payments in national currencies, such as rubles and yuan. With Turkey, it can be pounds and rubles. So there can be a variety of currencies, and this is a standard practice. If they want bitcoin, we will exchange bitcoin.”

– Pavel Zavalny

At the same time the talk internationally has focused on President Putin’s “Ruble for Gas” rule and the fact that the ruble has soared to multi-year highs against its fiat counterparts (the official currencies of central banks).

On the table

However, the Interfax news agency on Saturday 29 May 2022 quoted a government official as saying on Friday that Russia was considering allowing the use of cryptocurrencies for international payments.

“The idea of using digital currencies in transactions for international settlements is being actively discussed,”

– Ivan Chebeskov, head of the Finance Ministry’s economic policy department.

According to reports, the discussions have been going on for months and although the government expects cryptocurrencies to be legalized as a means of payment sooner or later, no consensus has yet been reached.

The Finance Ministry is discussing adding the latest proposal on international payments to a revised version of a draft law, Vedomosti newspaper reported Friday, May 27, citing government officials.

READ ALSO: Russia: Conflict Between The Central Bank And The Ministry Of Finance Over Cryptocurrencies

The Russian government said in a statement on Friday that the Russian government was not prepared for the sanctions.

Allowing encryption as a means of settlement for international trade would help counter the impact of Western sanctions aimed at making Russia’s access to traditional cross-border payment mechanisms “limited,” Chebeskov said.

Climate change

Russia’s openness to accepting bitcoin is changing the mood internationally as Putin last year dismissed the possibility in an interview at the Russian Energy Week event in Moscow.

“I think it has merit – Putin said at the time referring to bitcoin, but I don’t believe it can be used in the trade of petroleum products.”

Pilot trades

The current size of the Bitcoin market and its liquidity raise questions about whether the cryptocurrency could be widely used by countries in international trade at this time.

However, as we noted earlier, by being open to the possibility and eventually conducting pilot transactions with interested parties, Russia could set the stage for an upcoming trend where states choose to transact in the global monetary system without the use of state bank currencies.

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