Russian Exporters Turn to Soviet Era Barter System as Western Sanctions Bite

Russian exporters are increasingly embracing barter trade arrangements to circumvent payment delays stemming from Western sanctions imposed following Moscow’s invasion of Ukraine. The shift comes as foreign banks distance themselves from Russian counterparties after US President Joe Biden’s December warning of secondary sanctions on institutions supporting Russia’s war efforts.

The Russian government is actively promoting barter as a solution for international payment settlements, reminiscent of Soviet-era trading practices. During the 1980s, Soviet importers famously exchanged Stolichnaya vodka for Pepsi and even traded warships and submarines as scrap metal to secure Western goods.

Recent examples highlight this growing trend. Astarta Agrotrading, a Russian agricultural trader, has established barter agreements with Pakistani companies, exchanging chickpeas and lentils for tangerines and potatoes. The deal involves 15,000 tonnes of chickpeas and 10,000 tonnes of lentils being traded for equivalent amounts of fruit and vegetables. A separate arrangement will see 20,000 tonnes of chickpeas, valued at approximately £11 million, exchanged for rice.

The customs department in Ekaterinburg exemplifies this shift, having finalised a barter contract with a Chinese firm to exchange flax seeds for household appliances and building materials. These arrangements are gaining favour as they bypass issues related to payment delays and bank transaction refusals.

Whilst Russian agricultural exports remain unsanctioned, the broader restrictions have created a chilling effect, deterring many banks and potential buyers. Trade data reveals an 8% decline in Russian imports during the first half of 2024 compared to the previous year, with similar patterns observed in export statistics to Russia from countries providing regular trade data.

The Kremlin appears willing to overlook potential tax revenue losses from barter arrangements, prioritising the availability of consumer goods. However, experts remain sceptical about barter’s potential to fully address Russia’s trade challenges, citing coordination difficulties and trust issues between trading partners as significant obstacles to widespread adoption.

Post Disclaimer

The following content has been published by Stockmark.IT. All information utilised in the creation of this communication has been gathered from publicly available sources that we consider reliable. Nevertheless, we cannot guarantee the accuracy or completeness of this communication.

This communication is intended solely for informational purposes and should not be construed as an offer, recommendation, solicitation, inducement, or invitation by or on behalf of the Company or any affiliates to engage in any investment activities. The opinions and views expressed by the authors are their own and do not necessarily reflect those of the Company, its affiliates, or any other third party.

The services and products mentioned in this communication may not be suitable for all recipients, by continuing to read this website and its content you agree to the terms of this disclaimer.