Russian military industry cut off from US dollar Tuesday, December 25, 2018 4:00:12 PM

US sanctions have led to the Russian military-industrial complex being cut off from dollar transactions, reports finanz.ru.

Although the portfolio of orders of the Russian state-owned arms exporter Rosoboronexport is estimated at $50 billion, the sale of weapons abroad does not bring in hard currency – the deals are made in rupees, yuans and rubles, which are harder to use to pay for imports.

Major defense contracts to supply S-400 systems have to be maintained outside the global dollar zone, Russian Minister of Industry and Trade Denis Manturov told RBC news agency in an interview.

“These are both the national currency of the countries that settle accounts with us, and rubles, which are bought on the exchange. There are various formats,” the minister observed. Among the countries with whom contracts have been made in national currencies, he named India, Turkey and China.

Barter schemes such as “weapons for food” or “weapons for goods” have not yet been used when selling the S-400.

“We went through this at the start of the 1990s. I remember perfectly when leather items were imported, they could be sold, and then settled with our enterprises either using Chinese tinned stew or feather beds,” Manturov noted.

“We have not yet come to this, and there are other, more modern forms of settlement which have already recommended themselves for a long time,” he added.

However, Rosoboronexport has at least one barter deal in its portfolio – the sale of 11 Su-35 fighters to Indonesia, whose contract was concluded in February after four years of negotiations.

The latest fighters, the Russian aircraft that come the closest to 5th generation, will be exchanged for batches of palm oil, crumb rubber, and other Indonesian goods. These goods will cover roughly half the cost of the contract ($1.1 billion).

The barter agreement was reached in August last year and helped bring the negotiations out of an impasse: Indonesia did not want to pay in foreign currency, and suggested this method of payment, a Rosoboronexport representative told Vedomosti at the time.

The law on US sanctions against the Russian defense sector came into force at the end of November last year, and as of January 29, the White House has the right to place restrictions on any organizations that are involved in “significant deals” with Russian defense industry companies. This applies both to the buyers of the weapons and the banks that process the transactions.

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