Ruble on guard: Russia and Syria discuss transition to settlements in national currencies, by Elizaveta Borisenko for Izvestia. 08.04.2024.
What are the prospects and challenges of economic cooperation between Moscow and Damascus?
Russia and Syria are discussing the transition to settlements in national currencies as part of the economic and trade cooperation that has been growing in recent years, the Syrian Embassy in Russia told Izvestia. Experts believe that the interaction between the two countries will only grow stronger against the backdrop of sanctions pressure, but the parties may face a number of problems. Why Syria is interested in cooperation with Russia and whether this issue was raised at the meeting between Vladimir Putin and Bashar al-Assad — in Izvestia's material.
Prospects for the development of economic cooperation between Russia and Syria
Russia and Syria are discussing the transition to settlements in national currencies in bilateral trade, the Syrian embassy in the Russian Federation told Izvestia.
“There are ongoing meetings and consultations between representatives of the central banks of Syria and Russia on the issue of accepting national currencies (the Syrian lira and the Russian ruble) in all financial and commercial transactions,” the embassy said.
A Russian source in the banking sector confirmed the information about the negotiations to Izvestia.
Earlier, the media also reported that the parties were negotiating the introduction of Mir cards in the Syrian Arab Republic (SAR). However, the embassy denied this information.
“As for the Mir card, at the moment it has not yet been adopted in Syria and there are no plans to implement it in the future,” they clarified there.
Russia is switching to settlements in national currencies with many friendly countries in order to minimize the risks associated with settlements in dollars, Finance Minister Anton Siluanov said earlier.
"Using the national currency in settlements is our priority, because the president was right when he said that it was not us who abandoned the dollar, but the dollar abandoned us, because settlements in dollars became dangerous. Therefore, the transition to using the ruble, currencies of friendly countries, digital currencies is our current and our future for conducting financial settlements," he said.
States that have fallen under Western sanctions are trying to avoid dollar settlements and withdraw their funds from assets in the US and EU. In order to avoid intermediaries in financial transactions, they are switching to settlements in national currencies and creating alternative payment systems.
In particular, Russia is actively switching to such schemes in relations with the CIS states and Asian countries. For example, the volume of such settlements with Kazakhstan and Tajikistan is about 80%, Deputy Foreign Minister of the Russian Federation Mikhail Galuzin reported earlier. And the share of settlements in national currencies with Kyrgyzstan in 2024 exceeded 95%.
Russian President Vladimir Putin noted earlier that over 90% of transactions within the Eurasian Economic Union (EAEU) are conducted in national currencies. The same situation is with China: about 90% of all payments between Russia and China are conducted in rubles and yuan. In addition, Moscow has almost completely switched to a similar practice with Iran and has begun this process, for example, with Vietnam.
The transition to settlements in national currencies could be beneficial not only for Russia, but also for Syria, believes Ivan Bocharov, programme coordinator of the Russian International Affairs Council (RIAC).
In this case, new prospects for trade and investment cooperation open up for Russia and Syria. In particular, this will allow the republic to find a way out of the unsafe financial infrastructure, — he says.
However, during such a transition, the parties may face a number of difficulties, the expert believes.
"The ruble and the Syrian lira are non-convertible currencies, which imposes certain restrictions. The parties will be able to spend their national currencies only within the framework of bilateral trade," he explained.
The transition to settlements in national currencies is an important moment for Moscow and Damascus, which needs Russian investments for the large-scale restoration of the country, Igor Matveyev, associate professor of the international business department of the faculty of international economic relations at the Financial University under the Government of the Russian Federation, told Izvestia.
"This is also connected with the restrictions against Syria and the sanctions that have been applied to Russia since 2014. Their presence causes real difficulties in conducting transactions. In May last year, the US began discussing a law against normalizing relations with the Assad regime, which implies control over the implementation of the Caesar Act and tightening control over banking transactions," he said.
Russia's Role in Stabilizing the Economic Situation in Syria
Syria's economy has been severely damaged by the fighting. In 2011, the country fell into civil war, destroying infrastructure, reducing agricultural land, and creating fuel shortages. The country's economic situation worsened in 2019 with the adoption of the Caesar Act and the economic crisis in Lebanon. According to the World Bank, 15.3 million people in the country will need humanitarian aid in 2023, up 14% from 2021.
Moscow has repeatedly provided economic and humanitarian support to Damascus. And in recent years, the parties have been even more active in pursuing a course of strengthening political and economic cooperation, as evidenced by the recent visit of Syrian leader Bashar al-Assad to Moscow. On July 24, he met with Vladimir Putin in the Kremlin. The parties discussed a number of topics, including the situation in the Middle East and economic cooperation.
"As for our trade and economic ties, there are a lot of questions here too. There are promising areas," Vladimir Putin emphasized.
In addition, in 2023, Bashar al-Assad reported that Russia and Syria would soon sign an agreement on economic cooperation. According to the Syrian president, Moscow and Damascus are planning 40 joint investment projects in areas such as energy, oil, transport, industry and housing construction.
At present, the trade turnover between Russia and Syria does not exceed $650 million per year, but the parties are working to increase it, the Russian Trade Representative in the SAR Georgy Asatryan previously told Izvestia. At the same time, there is a trade imbalance between the parties: Syria imports much more from Russia than it exports.
The basis of Russian exports to the republic are cereals, pharmaceuticals and raw materials, imports are fruits and nuts, salt, sulfur, earth and stone, lime and cement.
Currently, Moscow and Damascus are most interested in strengthening cooperation in such areas as agriculture, energy, healthcare, pharmaceuticals, construction, education, and technology exchange, experts told Izvestia.
— Everything related to energy is interesting for both countries, and the pharmaceutical sector is especially interesting for Syria in the context of sporadic outbreaks of diseases in the republic. Russia has developments in the medical field that may be of interest to the republic, — says Ivan Bocharov.
Russia intends to complete the construction of a mill complex in the near future and implement a water supply project in the province of Latakia. Syria plans to purchase agricultural machinery from Russia.
Strengthening economic cooperation is beneficial not only for Syria, but also for Russia. This will strengthen Russia's position in the region and give our companies the opportunity to receive dividends, Igor Matveyev believes.
“Such cooperation will allow Russian businessmen to increase profits, which is important for both taxes and job creation,” he said.
At the same time, the countries are faced with a number of difficulties that affect the further development of economic cooperation: the unresolved conflict on the territory of the republic, the Kurdish problem, political fragmentation, and the imbalance of Russian-Syrian trade.
— The Syrians expect that Russia will continue to help restore the economy. However, Russia now has other priorities, in particular the protection of national interests, which requires large expenditures and limits investment potential, — says Igor Matveyev.
In order to build further economic dialogue, the parties need deep expert study so that all projects implemented are mutually beneficial, the expert believes.
At the same time, he noted that economic relations between Moscow and Damascus will continue to strengthen. In particular, this may be influenced by the prospect of normalizing relations between Syria and Turkey, which is happening with the mediation of Russia. If relations between Damascus and Ankara are normalized, this will open up the possibility for the implementation of multilateral projects, the expert emphasized.
https://iz.ru/1737593/elizaveta-borisenko/rubl-sterezhet-rf-i-siriia-obsuzhdaiut-perekhod-na-raschety-v-natcvaliutakh
Syria offers Russia priority in reconstruction contracts following civil war destruction
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