Russia And Türkiye Agree To Trade In Rubles And Dump US Dollar
Plans to increase bilateral trade to US$100 billion by 2030
Turkish President Recep Tayyip Erdogan has said that at his meeting with Russian counterpart Vladimir Putin in Sochi on Friday (August 5) they reached an agreement to start using the Ruble in bilateral trade.
Erdogan stated “At the meeting in Sochi with Mr. Putin, we agreed on the Ruble as a monetary unit in trade. As we are going to trade in Rubles, it will definitely be a substantial source of income for both Türkiye and Russia. And there is the Mir card. Five of our banks are currently taking it. There are significant moves in this issue, which will eventually improve conditions for the stay of Russian tourists. They will be able to make purchases and pay for hotels. During the visit, the governors of our countries’ central banks held talks.”
Russian Deputy Prime Minister Alexander Novak told reporters after the talks between the Russian and Turkish Presidents that they had touched upon gas exports to Türkiye and agreed to partially pay for them in Rubles, and that Russia and Türkiye are announcing a gradual transition to paying in national currencies only.
Russia is one of Türkiye’s main energy suppliers. In 2021, Moscow provided Ankara with a quarter of its oil imports and about half of its gas purchases. “Turkish Stream [the gas pipeline connecting the two countries across the Black Sea], unlike all other routes of our hydrocarbon supplies, works properly, dynamically, and flawlessly, it has become one of the main arteries of Russian gas supplies to Europe.” Putin stressed at the meeting. Türkiye, for its part, is a key transshipment point for Russia-bound goods in the face of the exit from Russia of Western companies and is one of the main destinations for Russian tourists.
Novak added that the Russian and Turkish presidents had also focused on monetary and financial relations.
“We talked about the financial banking sector – on which several agreements were also reached – so that our commercial companies, our citizens can make transactions during their tourist trips and exchange money as part of trade turnover,” Novak said.
Russian – Türkiye bilateral trade is currently running at about US$23.5 billion with both sides committing to increasing this to US$100 billion by 2030.
Although there are frictions between them, Moscow and Ankara also have many good reasons to cooperate. There are important economic ties between them, and the two countries are natural allies, increasingly assertive regional powers whose geopolitical ambitions have created strains with the West. Their overall relationship is therefore one of cooperation, in which individual areas of contention can be accommodated. Economic ties have made Russia and Türkiye closely interdependent.
In 2019, with bilateral trade totaling €23 billion, Russia was Türkiye’s second biggest trading partner after the EU, while for Russia, Türkiye came in fifth place. Russia exports hydrocarbons and metals to Türkiye, while for Türkiye, Russia is an important export market for textiles, leather goods and agrifood products. Turkish exports of the latter were boosted in 2014, after Russia decided to restrict agrifood imports from the EU in response to the latter’s sanctions concerning Crimea. Since then, trade has climbed and reached €27.31 billion in 2021, or average annual increases of around 15%.
This can be expected to continue and is Turkish-Russian state policy. In 2019, Rushkar Pekcan, Türkiye’s Foreign Trade Minister, speaking at the Russia- Türkiye Joint Economic Commission, said that “Bilateral trade between Russia and Türkiye is under-exploited and should be US$100 billion per annum.”
Türkiye has an estimated US$10 billion of investment in Russia, and Russia has a similar amount in the opposite direction. More Russian tourists visit Türkiye than from any other country (in 2019, pre-Covid, there were 7 million, 16 % of all tourist arrivals). Türkiye’s mandarin orange harvest had a boost in 2021 with exports to Russia up 49% in the face of increased demand. Russia is Türkiye’s primary energy supplier however this is not limited to fossil fuels: Russian state nuclear company Rosatom is building Türkiye’s first ever nuclear plant at Akkuyu, at an estimated cost of US$20 billion. The US$100 billion trade marker still has some way to go to be realized, however discussions are in place: Ankara has been holding discussions to establish a Free Trade Agreement with the Eurasian Economic Union.
Türkiye is the only member of NATO to actively seek to increase trade with Russia, while Istanbul has become the gateway to access Russia from the EU as all EU borders with Russia are effectively closed. It is a situation Ankara is fully expecting to exploit.
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