Update on Dedollarization and Related Areas Provided by TASS Interview with Deputy Foreign Minister Alexander Pankin

Interview of Deputy Foreign Minister Alexander Pankin by TASS covers dedollarization, implementation of new international financial system, EAEU activities, and closes with review of energy situation. As usual, the respondent's name is incorrect, so that machine translation error needs to be ignored:

Question: Russia and its partners are increasingly moving to settlements in national currencies against the backdrop of the unreliability of the dollar. When will Russia stop focusing on the dollar? Is this possible in the near future?

Maria Zakharova: The existing model of the global financial system, created by Washington, turned out to be unsuitable for the conditions of a multipolar world order and, in fact, has become a tool for achieving the political goals of one group of countries. Against the backdrop of the growing geopolitical pressure of the "collective West", the only way to guarantee the stability of trade, economic and investment ties between Russia and its partners is to avoid using the currencies that have become "toxic", primarily the US dollar and the euro, and switch to settlements in acceptable alternative, primarily national currencies.

It is quite obvious that in the current conditions, the West intends to continue to abuse its privileged position. It is gratifying to note that many countries watching the unprecedented and illegitimate sanctions against Russia have thought about the need to de-dollarize foreign economic activity in the interests of ensuring their own sovereignty. As it turned out, the task is quite solvable if there is political will. Mechanisms for settlements in national and alternative Western currencies have been successfully created with a number of states on a bilateral basis (the possibility of ruble payment for certain categories of Russian export goods, including energy and food goods, has been worked out), and a multilateral dialogue on this issue has intensified within the framework of BRICS, the SCO and other international platforms. Thus, not only the tasks of ensuring Russia's foreign trade operations are being solved, but also the foundations of the financial system of a multipolar world are being laid. In a sense, this process is already irreversible.

Question: Is the issue of a complete rejection of the dollar in settlements within the framework of the EAEU being discussed? What are the obstacles? By what year will this be possible?

Answer: The issue of increasing the share of national currencies in mutual settlements has been on the agenda of the EAEU since the beginning of its functioning. During this time, payments in national currencies between the countries of the Union reached about 75% of the total volume of transactions, and the use of the dollar decreased to 21%.

The events of recent months have demonstrated that the US currency is extremely unreliable. We have witnessed that one country can not hesitate to limit the use of the dollar around the world. In fact, Washington seeks to monopolize the sphere of international payments. All this has prompted us to intensify work on the creation of alternative and reliable mechanisms.

In this regard, within the framework of the EAEU, the necessary financial infrastructure is being formed to expand the practice of using national currencies by business participants.

Now we use them not only in mutual trade (and with a number of third countries – also in foreign trade), but also in the distribution of collected customs duties between the budgets of the Member States.

Of course, it is premature to talk about a complete rejection of the dollar within the framework of unification. Unlike Russia, individual EEU countries are likely to use it in cases where it is appropriate and safe. At the same time, we see that in the current geopolitical situation, our partners in the "five" are aware of the risks of dependence on the dollar and are interested in promoting their currencies.

Question: Since the beginning of the special military operation in Ukraine, Western countries have frozen Russian gold and foreign exchange reserves worth about $300 billion. Is there any chance of returning these assets to Russia? What measures are being taken to ensure that this situation does not recur?

Maria Zakharova: As for the assets belonging to the Russian Federation that are currently blocked in foreign accounts, we have repeatedly stressed that we consider their "freezing" illegitimate, violating all the principles and norms of international law and the unbiased functioning of the global financial system. Any use of the funds of the Russian state and its citizens without the permission of the rightful owners is interpreted by us as an unlawful and demonstratively unfriendly step that gives us the right to adequate retaliatory actions. Of course, we will not accept the current state of affairs and will use all available legal mechanisms to reverse the relevant illegal decisions. At the same time, within the framework of the Western judicial system, as has been repeatedly confirmed, "impartiality" works only until the moment of the beginning of challenging the political decisions imposed by the authorities. Therefore, we are not sure that we can count on the fairness and impartiality of the judicial authorities of unfriendly countries when considering such issues.

Russia and other countries have learned an important lesson from this situation: States seeking to pursue independent domestic and foreign policies cannot rely solely on Western financial infrastructure. The ability to carry out cross-border settlements without hindrance is, in fact, a matter of national sovereignty.

However, the West's refusal to interact exclusively in the legal field means that the inviolability of private and even state property in their jurisdictions is now not guaranteed to anyone and can be revised at any time if the geopolitical conjuncture changes. This is another reason for the whole world to think about the reliability of the US dollar and the euro, as well as the British pound, the Japanese yen and the Swiss franc as reserve currencies and the main means of international payments. In our opinion, the countries that initiated or joined the freezing of Russian assets have caused disproportionately greater, almost irreparable damage to their own business reputation, showing the whole world the true essence of the "rules-based order" they promote.

Question: As part of unilateral sanctions, the West is disconnecting leading Russian banks from SWIFT. Can Russia as a state be completely disconnected from SWIFT? What consequences does this threaten the country in the current conditions?

Maria Zakharova: It has already become clear that the anti-Russian restrictions introduced did not have the effect that Western countries had hoped for. First, without taking into account the consequences for their own economies and citizens, new packages of sanctions are invented and hastily introduced, and when our economy successfully adapts to them, another round of collective hysteria begins. In such conditions, we can already expect any "brilliant" ideas from our inconsistent "partners", including depriving ourselves of the opportunity to pay for vital goods and services from Russia. However, speculating on this topic when it comes to the predominance of political motives over common sense is a thankless task.

In any case, we proceed from the need for a gradual transition from SWIFT to mechanisms for the transfer of financial information protected from external pressure, for which we are actively developing the Financial Message Transfer System (FSS) of the Bank of Russia. This is a forced, but completely natural solution in conditions when Russian banks and their clients regularly face problems when making routine international payments. At the same time, we are confident that not only Russia, but also other pragmatic states, which are by no means few, are interested in the emergence of an international payment infrastructure that does not depend on the changing mood of Western countries.

Question: Does Russia plan to seek the lifting of economic sanctions and restrictions on SWIFT from the West after the completion of the special operation in Ukraine?

Maria Zakharova: Not us, but Western states significantly increased confrontation and sanctions confrontation with Russia in 2014. Therefore, the initiative to weaken or abolish unilateral illegitimate restrictions should come from them.

However, the US and the EU are still literally obsessed with "suffocating" sanctions against our country, its economy and society. The collective West, without hesitation, declares its so-called "sanctions" as an instrument for changing our sovereign foreign policy through the rocking of the domestic political situation, economic collapse and political destabilization, damage to the quality of life and rights of our citizens, paralysis of business. This is how our former partners seek to impose their own world order – indisputable, uncontested, based on the dominance of Westerners and subordinate to the rules and standards developed by them.

The application of such restrictive measures can be considered an economic war without rules, which fundamentally undermines the universally recognized principles and norms of international law, including the principles of cooperation, sovereign equality and non-interference in the internal affairs of States. Violates treaty obligations on a scale that has yet to be assessed.

Under these circumstances, we are not going to achieve anything from those who adhere to a confrontational course towards our country. We react with restraint and accuracy to such actions, guided by the tasks of protecting our citizens, maintaining the stability of the national economy, its financial system, as well as the interests of domestic business. We focus our efforts on de-dollarization, import substitution, and strengthening technological independence. At the same time, we reserve the right to tighten our special measures in the event of an escalation of sanctions pressure. We are ready for any eventuality – although we are trying to avoid a confrontational path.

Question: With which countries is Russia negotiating the possibility of sharing the Mir map? In which countries can the Russian payment system start operating this year?

Answer: The unjustified blocking of all Russian clients by the largest international card payment systems has increased the priority of expanding the geography of mir cards. We are actively working in this direction. Currently, the Russian payment system can be used in countries such as Abkhazia, Armenia, Belarus, Vietnam, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Uzbekistan, South Korea and South Ossetia. Negotiations with Azerbaijan, Bahrain, Egypt, India, China, Cuba, Myanmar, Nigeria, Thailand and other countries are at different stages.

Question: Will the EAEU expand in the foreseeable future? With which countries can we expect the completion of negotiations on the creation of free trade zones?

Maria Zakharova: Expanding the membership of the EAEU has never been an end in itself. The priority of the Union, especially at the current stage, is to ensure the stable development of the economies of the Member States, primarily through the implementation of mutually beneficial cooperation in a number of areas of the economic agenda.

At the same time, it is impossible not to note the noticeable practical interest of the observer states under the Union - Uzbekistan and Cuba - in the work of the association. Tashkent and Havana regularly put forward new and interesting initiatives, some of which are already under consideration by the member countries.

Interest in joining the Eurasian processes in various formats is also shown by other countries, primarily from the CIS. Possessing colossal resources, a capacious market and a huge transit and logistics potential, the EAEU is very attractive for third states.

We proceed from the fact that the decision on full membership in the EAEU should be made by the interested state based on the results of an assessment of the potential benefits that it can receive from the implementation of this step.

As for the trading tracks, very active work is being carried out on them. At the moment, we see the greatest progress in the negotiation process on the conclusion of a full-fledged free trade agreement between the EAEU and Iran. The current interim agreement, despite the limited trade "basket", has already made it possible to double in value terms the mutual trade turnover, which by the end of 2021 reached $ 5 billion.

Negotiations on the creation of a free trade zone with Egypt, which were forced to be suspended due to the coronavirus pandemic, have been resumed. It is planned to launch negotiation tracks with Indonesia and India. In the near future, we plan to launch a joint study on the feasibility of trade liberalization with the United Arab Emirates.

Question: In accordance with the Memorandum between Russia and the UN signed in Istanbul on July 22 this year, the Organisation has pledged to seek the lifting of restrictions on Russia's exports of agricultural products and fertilisers. When can we expect the lifting of restrictions on domestic supplies? Are there any fears that this document will remain only on paper?

Maria Zakharova: Indeed, on July 22, First Deputy Prime Minister of the Russian Federation Alexander Belousov and UN Secretary-General Antonio Guterres signed a Memorandum of Understanding between the Russian Federation and the UN Secretariat to promote Russian food and fertilizers on world markets.

The document is aimed at ensuring transparent and unhindered supplies to world markets of Russian food and fertilizers, including raw materials for their production.

The Memorandum is an integral part of the so-called "package deal" proposed by UN Secretary-General Antonio Guterres. Its second part is the "Initiative for the Safe Transportation of Grain and Food from the Ports of Ukraine". Its essence is to promote safe navigation for the export of grain, food and fertilizers, including ammonia, from the ports of Odessa, Chornomorsk and Yuzhny.

We are actively cooperating with the UN, which conduct targeted work with Washington, Brussels and private foreign companies in order to normalize the supply of Russian food, fertilizers and raw materials for their production to world markets. This is an important issue not only for us. The whole world, primarily developing countries, is interested in stabilizing international food markets. Until the artificial illegitimate obstacles of the West that our economic operators face in carrying out foreign economic activity (including bans on port calls, discrimination in cargo insurance, restrictions on the posting of payments) are eliminated, it is hardly possible to restore the normal functioning of supply chains and solve other problems related to ensuring food security.

In Brussels, they say that the EU sanctions are not directed against the export of Russian agricultural products and fertilizers to third countries. Even if this were the case, the problem lies deeper: the volume and intensity of anti-Russian restrictions, which are absolutely unreasonably and arbitrarily introduced by the European Union, scare off many foreign economic operators from cooperating with us.

Russia is faithfully fulfilling its obligations under both components of the package. Our country is one of the key suppliers of agricultural products and fertilizers to world markets, and ensuring their uninterrupted export meets the urgent tasks of ensuring food security and achieving the Sustainable Development Goals - primarily in needy developing countries. We hope that the UN will show a similar approach and make all the necessary efforts to lift the remaining sanctions restrictions by those who imposed them.

We see some progress in this area. Full results have not yet been achieved. The work continues.

Question: The EU sanctions also affected Russian oil. Russia's energy sector is subject to unilateral restrictions from the West. Against this background, are there any plans to completely stop the supply of energy to unfriendly countries and reorient themselves to other markets?

Maria Zakharova: Indeed, in early June this year, the European Union imposed sanctions against Russian oil and petroleum products. It is planned to stop maritime imports of Russian oil after December 5 of this year, and petroleum products with very few exceptions - from February 5, 2023. At the same time, it is worth recalling that the Russian oil industry became the object of EU restrictions back in 2014: individual projects in Russia were affected for the exploration and production of oil at sea at depths of over 150 m, on the sea shelf beyond the Arctic Circle and for the extraction of shale oil by hydraulic fracturing.

In the context of external sanctions pressure and initiatives generated by Western countries to establish an arbitrary "ceiling" on oil prices, the reorientation of Russian hydrocarbon exports to Asia is our natural response. Moreover, there are prerequisites for this: the dynamics of world energy markets is such that energy consumption is growing most rapidly in developing countries, primarily the Asia-Pacific region and South Asia. It is to these regions that there is a gradual redirection of Russian export flows. These countries, realizing that Russian supplies are reliable and profitable, do not succumb to Western blackmail. In fact, there is a geographical redistribution between consumers of limited energy resources at the disposal of producers.

If the Group of Seven tries to implement its voluntaristic anti-market plans to set marginal prices for Russian oil, our country, of course, will not sell it at a loss. In this situation, the world oil market, which is now in a state of fragile equilibrium, will experience a shock with a sharp rise in quotations, which the initiators of the introduction of a "price ceiling" for Russian fuel are so afraid of.

Question: Speculation continues in the West that Russia may not resume gas supplies through the Nord Stream gas pipeline after technical work, or resume supplies not in full. What can the Russian side respond to such statements? Is there a timeline when the gas pipeline is planned to be returned to full capacity?

Maria Zakharova: Russia is currently supplying Europe with the volume of natural gas that makes it possible to pump the existing technical capabilities of Nord Stream 1. As the Russian side has repeatedly stated, the current restriction of supplies through the gas pipeline is due solely to the current anti-Russian sanctions of Canada, the EU and the UK. It is the various prohibitions imposed by them, which are confused and do not really want to understand in Berlin, that prevent the successful resolution of the situation with the transportation and repair by Siemens of the gas turbine engines of the Portovaya compressor station, which provides gas to European consumers through the Nord Stream-1 gas pipeline.

As for the operation of the Nord Stream gas pipeline in the future, much will depend on our partners both in terms of gas demand and preventing the impact on its functioning of the restrictive measures introduced by them. I would like to note that the reduction in Russian gas supplies was initiated not by us, but by the European Union, which developed a plan to abandon Russian energy carriers "in advance of 2030."

Regardless of the political situation, Russia values its reputation as a reliable supplier of this valuable resource. In 2021, the Russian side fulfilled all gas contracts. We strive to fulfill our contractual obligations even in these difficult times. We call on our Western partners to resolve the problems created by their own hands as soon as possible. We have no doubt that then the situation with gas supplies to the European market will quickly normalize.

Question: Does Moscow admit that the situation in the West may change and the Nord Stream 2 project will be unfrozen?

Maria Zakharova: If you recall, the European Union, primarily represented by the European Commission, has long been conducting "preparatory" work against this project. In 2019, the EU adopted amendments to the "gas directive" of the notorious "Third Energy Package", which extended EU legislation exclusively to the Nord Stream 2 project, putting it in an unequal position in relation to other gas pipelines and violating the legitimate interests of its investors. Now this gas pipeline could be a solution to the problems that Brussels itself created with its policy, primarily around the gas pumping turbines of Nord Stream 1. Let me remind you that Nord Stream 2, after numerous delays in Europe, was ready for launch in December last year. However, Berlin, spurred on by the United States, Poland and the Balts, decided to "freeze" it. As a result, he made it worse for his own citizens and businesses. Despite this, the current leadership of the European Union and Germany continue to show political perseverance in their rejection of this project. Whether and under what conditions they will be ready to change their position depends on them, their constituents, and, apparently, their overseas "senior comrades" aggressively occupying space in the European gas market with record high prices.

At the same time, in the current situation, it was decided to use the SP-2 infrastructure located on the territory of our country for the gasification of the North-West of Russia. Therefore, if the German side, purely hypothetically, decides to commission this gas pipeline, then only one of its lines can be included in the work at this stage.