EU-Russia trade has decreased since , as the conflict in Ukraine led to the introduction of EU sanctions on Russia, souring trade and the political relationship. The share has remained steady over the last decade. It is doubtful there would be any catch β Russian authorities are keen to narrow political gaps with the EU, a region they see as their most important strategic partner and neighbour.
Uncertainty and pressure emanating from the US makes Russian authorities keener to find common ground with the EU, and the euro would be an important symbolic common project. As long as there is common understanding and commitment by European partners on wider use of the euro, Russian authorities would be keen to engage.
Significant practical difficulties would need to be addressed, however. First, the vast majority of the trading in oil is still denominated in dollars, while price benchmarks are set on US-based exchanges.
Second, liquidity in the euro-rouble currency pair is low. A company or a bank most likely would want to hedge the risk that arises from euro or rouble exposure relative to the dollar-quoted oil benchmarks. The difficulties might be easier to overcome for gas contracts. Russian authorities are considering other options, but there are no quick fixes. Russia is negotiating with its key trade partners towards increasing the use of national currencies.
The Russian Ministry of Finance is ready to offer incentives for non-commodity exporters that switch to transactions in roubles.
