RIO DE JANEIRO, BRAZIL – The Russian government has proposed to Brazil that it change the trade structure between the two countries to circumvent economic sanctions imposed by the United States and the European Union, writes Brazilian magazine VEJA in its latest report.
Talks are ongoing but have not yet advanced to the stage of diplomatic negotiations.
One of the curious effects of the sanctions has been self-criticism by Brazilian and Russian officials about the loss of time in economic relations between the two countries.
For example, a decade and a half ago, Brazil supplied 2.5% of its total exports to the Russian market. Last year, it was less than 0.6%, writes VEJA.
During this period, total sales of Brazilian products abroad more than doubled – from US$137 billion in 2006 to US$280 billion last year.
Total trade with Russia last year amounted to US$7.4 billion, most of which (US$5.6 billion) was in fertilizer imports.
On the world map of Brazilian trade, the Russian market ranks only 36th. It is thirteen times smaller than China (US$90 billion last year).
However, there is a strong interdependence – Brazil on Russian fertilizers and Russia on Brazilian agricultural products.
Vladimir Putin’s war has highlighted food insecurity in both countries due to a shortage of inputs for Brazilian crops and a shortage of agro-industrial products in the Russian market.
Russia is urging Brazil to take alternative measures to economic sanctions. Russian Ambassador Alexey Kazimirovitch Labetskiy even mentioned the proposal yesterday at a hearing before the Senate Foreign Relations Committee, writes VEJA.
“We reaffirm our interest in continuing fertilizer shipments,” he said, adding, “In the current situation, with the unlawful sanctions against our country, we are open to working and creating the necessary new procedures for logistics, which is very important, and the new procedures for payment for Brazilian fertilizers and agricultural products shipped to Russia.”
RUSSIAN INTERNATIONAL RESERVES SEIZED AND BLOCKED
The United States and the European Union seized half (US$330 billion) of Russia’s international reserves and crippled the country in foreign trade by excluding Russian banks from the international financial messaging system (SWIFT). They lost the ability to broker deals on exports and imports.
In the Senate, Labetskiy has already presented Moscow’s request to Brazilian diplomacy: creating a bilateral system of financial transfers for exports and imports.
The Russians believe that Brazil has an ideal mechanism for instant payments: PIX, made by the Central Bank to allow electronic transfers of any value between individuals, companies, and government agencies.
“In 2014,” recalls Ambassador Labetskiy, “when the first sanctions were imposed on us, we began to think about creating a parallel system (to SWIFT) to guarantee transfers in the Russian banking system. This system was created, and there are no problems with transfers between Russian banks within the country. As for foreign banks, only a few adhere to this system.”
He added, “We are thinking about expanding the possibility of financial transfers with foreign countries using national currencies and national systems. Brazil has its national system pix that can be used for direct payments.
The Brazilian government is interested in this because food insecurity in the country is predictable and prices of agricultural and industrial commodities are rising in the second half of the year as a result of Putin’s war in Ukraine.
Since circumventing economic sanctions is a high risk, they think it is wiser to combine the game with the U.S. and the European Union.
Source: VEJA