Page 34 - TURKRptJun22

34 I Cover story bne June 2022
several attempts by the Kremlin to catch up, little progress was made.
Precision equipment and technology disappeared almost overnight in 2022, leading to the immediate collapse
of Russia’s domestic automotive industry. Within a month of the Russian tanks crossing the border
advanced technology, as it is made under licence from US companies that are forbidden to trade with Russia.
Techless
Online services have also fallen well behind since Russia was cut out of the global technology revolution. Sberbank never changed its name
as an exchange currency in the joint venture between RuPay, China’s Alipay and Turkey’s BKM, and the electronic currency started to gather momentum.
The flow of tourists between the
three countries and the exponential growth of e-wallet use globally fuelled this success, which governments in the emerging world also promoted
as a way to weaken the grip of the dollar on international payments.
Increasingly, corporates are experimenting with rubit payment systems for business purposes. Metals giant Norilsk Nickel has set up a commodity exchange that allows for rubit payments. The mining company placed 1mn tonnes of nickel in reserves on the exchange and 100,000kg of palladium to create liquidity and that has had the side-effect of opening up metal markets to retail traders, which in effect also backs the value of the rubit with commodities like gold and nickel.
The advantage the rubit has over
pure cryptocurrencies is that it is regulated by the CBR, which is seen as
a guarantee of its stability, and it has
not been prone to the wild swings in value of the now defunct bitcoin and Elysium, now long-forgotten precursors. Unlike traditional cryptocurrencies
that had to be mined, the rubit supply
is controlled by the central banks
of the participating countries and subjected to normal liquidity control management. That also means that there is no need to run energy-guzzling computer farms to “mine” the coins, which became unviable thanks to the Ukrainian war-induced energy crisis that sent power bills through the roof and killed off the first-generation coins.
“CBR Governor Elvira Nabiullina warned in March, a month after the war started, that Russian companies would have to go back two or more generations in technology to function”
five out of Russia’s six car plants were closed due to the lack of spare parts and car sales were down by 76%.
Since then industrial regression
has set in. CBR Governor Elvira Nabiullina warned in March, a month after the war started, that Russian companies would have to go back two or more generations in technology
to function. Companies, especially
in the food processing industry,
have had to buy old equipment and despite the best efforts of Russia’s entrepreneurs, they have not been able to reverse engineer much of the equipment that used to be largely imported from Germany and the US.
There have been a few exceptions in the less technologically sophisticated sectors. YedaPromMash, which makes food processing equipment, is the rising star of the sector after it entered into a joint venture with China, but
in aviation, automotive and telecoms Russia continues to lag well behind the rest of the world. Iranian experts have been advising automotive producers, thanks to that country's long experience of manufacturing Peugeot cars during decades of sanctions, and the improving quality of Indian and Chinese equipment has mitigated some of the problems. But Russia continues to fall further and further behind the rest of the world. Even China can’t export its more
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back from Sber, when it dropped
the word “bank” from its name as it tried to build a technological empire that catered to its customers' entire life. German Gref, its long-standing chairman, continues to try to roll out new online services over the so-called RuNet, but Sber’s offering has gone from cutting edge to almost-ran as even the Baltic states far outstrip the Russian offering. Estonia closed its last bank branch four years ago and now banks only have their headquarters as an actual office, while all their services are in the ee-cloud, as it is known.
Many of the online services that disappeared in March and April 2022 have been recreated by local startups such as RuTube, RusBox, RuCloud and in retail the now ubiquitous RosBurger has successfully replaced McDonalds.
However, the surprising success of RuPay continues to go from strength
to strength and is starting to
compete with ApplePay and PayPal internationally. Now widely accepted worldwide, RuPay’s exponential growth has been driven by the rubit, the digital ruble set up by the Central Bank of Russia (CBR) just before the war – a regulated version of a cryptocurrency. The regulator actively promoted the rubit as a way to make international payments outside the reach of the US Federal Reserve. The making of rubit happened after it was incorporated