UPDATE 2-Russia, wary of sanctions, wants exporters to be paid in roubles

Wed May 14, 2014 11:15am EDT

Related Topics

* West weighing more sanctions against Russia over Ukraine

* Proposal aimed at reducing Western influence on economy

* Ex-finance minister says plan will hurt competitiveness (Adds comments from Gazprom and Rosneft)

By Gleb Stolyarov

KALININGRAD, Russia, May 14 (Reuters) - Russia, keen to dodge threatened Western sanctions on its companies over the Ukraine crisis, said on Wednesday it was looking at ways for major state-owned exporters such as energy giants to be paid in roubles.

The idea of major exporters being paid in roubles rather than dollars has been gaining ground in recent weeks in response to sanctions imposed by the West on officials and companies over Russia's annexation of Crimea and an uprising in Ukraine's east.

"There are certain risks, but we are preparing a mechanism, we are working on it," Finance Minister Anton Siluanov told reporters during a visit to Russia's Baltic enclave of Kaliningrad.

"There are certain costs for exporters and for the buyers of our export products because they will have to buy roubles, and the rouble is now somewhat volatile, plus there is the payment of commission," he said.

In response to Russia's actions in neighbouring Ukraine, the United States has sanctioned 18 Russian companies, preventing U.S. banks from processing their dollar transactions.

Western governments have so far refrained from sanctioning major state companies, but they have threatened more sanctions that could target key sectors such as energy and banking if Russia further escalates the crisis in Ukraine.

Andrei Kostin, chairman of Russia's second largest bank VTB, backed the rouble payment idea last month as a step to reduce the West's influence over the Russian economy.

"NUCLEAR WEAPONRY"

Kostin referred to "calls by high-ranking Western leaders to isolate Russia, practically destroying the Russian banking sector, using modern 'nuclear weaponry' - dollar payments," he told a conference, in comments cited by the Vedomosti newspaper.

Kostin said just three state-owned companies, gas company Gazprom, oil producer Rosneft and arms exporter Rosoboronexport had around $230 billion in exports between them, accounting for 44 percent of all Russian exports.

Gazprom said on Wednesday it was talking to its clients about possibly moving to rouble payments, but that it would not make any change unilaterally.

"We are conducting certain consultations with our clients. This is a bilateral process, one cannot unilaterally present a bill in roubles, it needs to be agreed with clients," spokesman Sergei Kupriyanov said.

A spokesman for Rosneft said that "Rosneft is sticking to contract obligations and will conduct payments in the currency of the contract".

In an interview with Russia 24 television on Monday, Deputy Finance Minister Alexei Moiseev said the government was in discussion with major state-owned companies about the possible transfer of their export contracts into roubles.

"Where there are additional inconveniences that arise from using the national currency, these are not very significant. One definitely needs to put up with these inconveniences because the additional security that arises from this is very significant," Moiseev said, in comments cited on the finance ministry website.

KUDRIN CRITICISM

The proposal for making rouble payments compulsory would not apply to privately-owned exporters, Moiseev said.

Under the proposal, the buyers of major Russian exports would still be able to pay in any currency, Moiseev said, but a bank would need to convert the currency into roubles before it was received by the Russian exporter.

Moiseev described the additional banking transaction costs as "minimal".

"Large London banks, which are oriented towards the London currency market, practically all offer competitive contracts for converting roubles and for hedging rouble currency risk," he said.

However, the idea came under fire from Alexei Kudrin, Russia's influential former finance minister, who said the additional costs it would impose on importers of Russian goods would make Russian exports less competitive.

"The foreign importer will have to buy roubles in Russian banks, spend money on banking commissions and take on the exchange rate risk," Kudrin said in comments to the Kommersant newspaper, cited on his personal website.

He said importers were likely to pass some of these costs on to Russian exporters, leading to lower revenues and taxes.

"We are in tough competition and the requirement to buy with roubles inevitably worsens the position of our companies in tenders," Kudrin said. (Additional reporting by Denis Pinchuk and Katya Golubkova; writing by Jason Bush; editing by Elizabeth Piper and Tom Heneghan)

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