Malignant Growth: The increase in the rouble’s share of foreign trade settlements indicates that the Russian financial system is reliably isolated from the global economy

The rouble has become the primary currency for settlements for both Russian exports and imports, according to data from the Central Bank. In March, the rouble’s share in export payments reached 49.9% for the first time, and in May it surpassed 52% (June data is not yet available). The share of so-called friendly currencies (primarily the yuan) fell to 33%. A year ago, at its peak, their share was almost 50%. The share of 'unfriendly' currencies in exports is less than 15%, compared to 85% in 2021. In imports, the rouble crossed the 50% threshold as early as December 2024; in April–May, the rouble accounted for 55.5%. At the same time, demand for foreign currency from importers is falling: the share of 'unfriendly' currencies in imports has also declined to 15%; in the first quarter of 2024 it was 27%, while the rouble accounted for 30%, and 'friendly' currencies made up 42%. In 2021, the ratio was 68 to 29. Thus, over the years of war and sanctions, the transformation of foreign trade has gone through two phases: first, the share of 'friendly' currencies in settlements increased at the expense of 'unfriendly' ones, and then the share of the rouble grew.

Among Russian officials, it is customary to speak of the rouble’s growing importance in foreign trade with an unwavering tone of pride. President Putin also speaks of it in the same way. To the general public, this gives the impression that the rouble is somehow on par with the dollar. In reality, the opposite is true. The growth of the rouble’s share is linked to the fact that, due to the threat of secondary US sanctions, first major and then regional Chinese banks began to refuse to work with Russian counterparties (→ Re:Russia: Battle for Imports). As a result, Russian participants in foreign trade have had to learn to settle accounts without using foreign currency. In July, Yuri Chikhanchin, head of Rosfinmonitoring, reported to Putin: 'And now netting has appeared… This is when the exporter does not bring the money [back into the country], the importer pre-imports goods using that money and settles within the country, a kind of clearing operation…'

Structure of payments for Russian exports, 2024–2025, %

Structure of payments for Russian imports, 2024–2025, %

According to a survey of 29 participants in foreign economic activity, which forms the basis of Dmitry Nekrasov’s report 'International Settlements under Sanctions,' the majority of transactions with China have been conducted without cross-border transfers since the summer of 2024. A similar approach is used for settlements with CIS countries, Turkey and Iran. Russian companies work exclusively with Russian banks, while Chinese companies, for example, work only with Chinese banks. Balances are settled between exporters and importers on each side, so there is no need to transfer money from Russia to China or vice versa, hence the name 'mirror' scheme. Western regulators have no visibility of transfers conducted within national banking systems. As a result, banks and their clients are only at risk of sanctions if their activities become the subject of a specific investigation. To make tracking even harder, payments are often routed through so-called 'mixers', that is banks where Russia-linked funds are blended with money from other countries.

When officials proudly highlight the growing share of the national currency in foreign trade, this is usually meant to imply that the currency is becoming more attractive to the country’s trading partners. In this case, however, we are witnessing the opposite: the further isolation of the national currency, which is needed only by domestic agents, while foreign partners seek to avoid dealings both with the rouble and with Russian payment systems. Claims that the growing share of the rouble and netting arrangements prove that sanctions are ineffective are economically misguided. In fact, they show that sanctions are working. After all, currencies are needed not just for trade, but for financial operations such as credit and investment, and here netting schemes cannot compensate for the loss of convertibility. Moreover, this system creates additional macroeconomic challenges, most notably, it leads to an artificially high rouble exchange rate. Importers have no use for currency purchased within Russia. In effect, it ceases to be traded.

Financial sanctions, therefore, deprive the national currency of several of its normal functions, but they cannot completely shut down foreign trade. The alternative settlement mechanisms that have emerged do, however, erode the monopoly of international payment systems, albeit not in any significant way, given the relatively modest scale of the Russian economy.

Nekrasov notes in his report that VTB has become the largest operator of 'mirror schemes' for settlements with China, having established its own 'mirror' branch in Shanghai. The system works efficiently, with payments arriving quickly: 'sometimes money is sent in the morning, and the Chinese counterparty receives it by lunchtime,' The Moscow Times quotes a Russian importer as saying. The main problem is that VTB’s Shanghai subsidiary is slow to open new accounts, struggling to cope with the influx of clients. However, this issue is likely to be resolved over time. In addition, other major Russian banks also appear to be building their own 'mirrors.' According to Reuters, several of the top-20 banks are jointly developing a system called 'China Track.' One source told the agency that the infrastructure now enables operations with companies across 11 Chinese provinces that produce most of the goods exported to Russia. Settlements are conducted at the official exchange rate, with commissions of around 1% for imports and 0.5% for exports, which is far cheaper than traditional cross-border transfers. By comparison, Reuters’ sources estimate that last year fees averaged 2–4%, rising to as much as 12% during periods of tighter sanctions.

In settlements with India, Southeast Asian countries and the UAE, the key role is played not by banks but by intermediaries, who formally act as exporters or importers from third countries, Nekrasov writes, citing his sources. In practice, these intermediaries work on behalf of Russian companies. Payments for goods shipped to Russia are made from their accounts, while receipts from Russian exports are credited there as well. In other words, export revenues remain in foreign accounts and are used to pay for imports. Some of these intermediaries are affiliated with Russian exporters.

Small and medium-sized companies also rely on netting arrangements, using the services of minor intermediaries. One such intermediary, in a promotional article on the website vc.ru, describes its operations as follows: it holds accounts in both Russia and China. Russian companies transfer roubles to its Russian account, while Chinese companies transfer yuan to its Chinese account. The larger the client base, the less need there is for cross-border transfers: opposing flows cover most obligations within each country. According to the company, transfers take two days (up to four in rare cases), with a commission starting from 2%.

At a meeting with President Putin, Yuri Chikhanchin also mentioned other ways of conducting settlements that bypass sanctions. In particular, he referred to 'alternatives to SWIFT,' which, he said, operate through CIS countries. The Bell uncovered details of one such scheme set up by Sberbank. It turns out that Sberbank’s clients can transfer money to European bank accounts using card numbers. The funds are first sent to an intermediary in Tajikistan, Uzbekistan or Kazakhstan. There, they are converted into cryptocurrency and passed to the next intermediary, who transfers them to Europe, often as a peer-to-peer payment from a 'drop' card (a cardholder who lends their account for various, sometimes illegal, transactions). The recipient receives the funds as a personal transfer or a service payment from an unknown sender. In The Bell’s test transactions, the funds arrived from Tajikistan.

Chikhanchin also mentioned the use of gold and cryptocurrencies for settlements. However, as we reported recently, the volume of such transactions remains minimal – they are used mainly as a backup option (→ Re:Russia: Backup Crypto Exit). However, Russian authorities are introducing legislative amendments allowing more banks to use precious metals in settlements; 'Banks with basic licences can act as a distributed financial network for cross-border settlements, as they are harder to track and sanction,' comments a Russian expert.

The alternative settlement network built by Russian businesses appears fairly resilient for now. Previously, attempts by Ukraine’s allies to restrict the supply of dual-use goods to Russia largely focused on pressuring banks in China and other countries, sometimes successfully (→ Re:Russia: Sanctions Compliance). Shutting down 'mirror' and intermediary schemes is far more challenging. Meanwhile, the fees for such transactions are now comparable to those for standard cross-border payments. Yet it is worth remembering that, in terms of overall trade efficiency, these payment mechanisms resemble a regression of 100 years or more and highlight the fact that Russia’s financial system is now effectively cut off from the global one, including, in many respects, from the financial systems of 'friendly' countries.