This text is an automatic translation from Русский. It was generated by AI and may contain inaccuracies.
Read original →Russia and Indonesia: National Currency Settlements as Part of a New Trade Reality
Russia and Indonesia are planning to use national currencies in trade through a Local Currency Settlement mechanism. An analysis of prospects, limitations, and the role of de-dollarization in bilateral trade worth $4-5 billion.
AI summary
Russia and Indonesia are planning to expand the use of national currencies in bilateral trade through the Local Currency Settlement (LCS) mechanism. With trade turnover of approximately $4-5 billion per year, this corridor is being considered as a testing ground for reducing currency risks and dependence on the dollar. The success of the initiative will depend on the development of banking infrastructure and business readiness for new settlement models.
Political Signal and Economic Logic
Indonesia's Minister of Industry announced plans to expand the use of national currencies in trade with Russia. The two sides are discussing a transition to settlements under the Local Currency Settlement (LCS) mechanism, which involves using the ruble and the Indonesian rupiah.
According to World Bank and IMF data, Indonesia's GDP stands at approximately $1.4 trillion, while Russia's is around $2 trillion in nominal terms for 2025. Meanwhile, bilateral trade turnover is estimated at roughly $4-5 billion annually, representing less than 1% of each country's foreign trade.
According to the minister, switching to national currency settlements should reduce currency risks and diminish trade sensitivity to external financial pressure. This logic aligns with a global trend: BIS data shows the dollar remains the dominant reserve currency with a share of around 58%, though it is gradually losing ground amid the development of regional settlement systems.
Trade Scale and Structure of Economic Ties
Indonesia conducts foreign trade worth over $500 billion annually. Its main trading partners are China, the United States, ASEAN countries, and Japan. Russia's foreign trade turnover in recent years has been estimated at approximately $600-700 billion, according to international statistics and national sources.
The structure of mutual trade between both countries features a high share of commodities. Indonesia primarily exports palm oil, rubber, coal, and agricultural products, as well as select manufactured goods. Russia supplies oil and petroleum products, gas, fertilizers, grain, and metallurgical products. This structure makes trade relatively straightforward in composition and tied to global commodity prices.