Russian macro: gradual de-Westernization is on the way
As the Western countries decided to cut trade with Russia and oust it from the USD/EUR/GBP/JPY segment of the global financial system, Russian businesses shrugged their shoulders in bewilderment and gradually started looking for alternatives. Despite the various inconveniences caused by the fact that major Russian banks were cut off from SWIFT, Russia continues to trade with the rest of the world. Politicians on both sides seem proud and happy—the West no longer trades with Russia as much as it did years ago, while the Russian side sees that the economy has absorbed the 2022 shock and is recovering gradually. Demand for the currencies of the “unfriendly” countries fell as many Russian businesses and individuals consider these currencies toxic. As business people looked for alternatives, the Chinese currency recently became the main one on the Russian FX markets, as volumes of CNY/RUB transactions exceeded those of USD/RUB.
Despite mounting pressure, the Russian economy is alive. Even though its future shape is not yet known, the country’s macroeconomic policy has been reasonable and is likely to remain so, which will help the economy reinvent itself on a different basis. What is clear is that Russia won’t rely on the “unfriendly” currencies as it did in the past 30 years (although these currencies didn’t look that unfriendly and toxic until recently). If so, trade with the Western countries won’t return to previous levels for generations—not only because of the geopolitical split and sanctions that will last indefinitely, but also because Russia won’t need it in the future (and neither will the West).
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