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- Modern financiers do not know how the clearing payment process works, but the old-timers can teach them
- Štern believes that Croatia has enough arguments for clearing – a poor economic situation, a threat of GDP decline, a jeopardized season, high energy prices that we cannot amortize…
- FROM PPD, which imports most of the gas, they state: while the other contracting party does not change the terms, we pay according to the contract, that is, in euros
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Since the moment Putin announced payment for gas and oil in rubles, despite the fact that contracts with ‘hostile’ countries specify dollars and/or euros, the public has been wondering how this could even be possible in a time of sanctions and the expulsion of Russian banks from SWIFT. However, in Croatia, there are quite a few experts who know how. Former Minister of Economy and one of the former directors of INA, now an energy consultant, Davor Štern was the first to propose the idea – clearing!
Most younger bankers, even within the Croatian National Bank (HNB), are poorly acquainted with the practice of clearing, and even with the fact that clearing is the offsetting of receivables and debts between parties within the banking or financial system (usually up to the amount of overlap, while the difference is settled in cash or some other form of final settlement). This form of payment is applied when a country has difficulties maintaining orderly flows of international payments, cannot maintain the convertibility of its currency, or does not have sufficient reserves of foreign convertible funds. The offsetting of receivables and debts can, for example, be done through the exchange of checks, promissory notes, and other instruments, contracts, etc. Clearing was a completely natural method of payment not only to Russia but also to Eastern Bloc countries during the former state. At that time, the import of gas and oil, and the export of various other goods was carried out by an agreement between the then Yugoslavia and Russia on offsetting mutual receivables.
What trains are running to Russia and on what route?
Mladen Pejnović, former head of the now-defunct DUUDI, says that clearing functioned until the mid-90s through Astra (the Yugoslav equivalent was Genex), a foreign trade company that had a contract with Russian Gazprom Export. For the purposes of importing gas and exporting various Croatian goods, an account was opened in a Russian bank, with two lists of goods with precise prices to know exactly how much was being offset. – The Russians had their office in Celje, as the gas went through Rogatec, there was no Hungarian connection at that time. Each side made its list of goods that interested the other side. We offered, for example, medicines from Belupo and Pliva, footwear and textiles, products from Jugoturbina, most often blades for gas turbines, and TVIN furniture. Even now, it is not a question of goods; we certainly have what interests the Russians, but the question is who would finance the export of those goods, as most companies do not have enough working capital to finance it themselves.
Clearing through Astra functioned until about ’95, after which it was taken over by INA, but barter transactions with Russia (barter is a form of tied trade between two business partners according to a special contract, where classic barter occurs in countries that do not have convertible currencies, editor’s note) were too much of a hassle, so they switched to dollars, although all of Europe was at one time on some form of barter. Besides not knowing who would finance the export of goods, the other problem is physical – what trains are running to Russia and on what route? With the current sanctions, this is difficult to achieve, possibly via the Black Sea, then directly to Russia – says Pejnović, adding that the Russians would have no problem with clearing, as they still have experience, offsetting payments, for example, with India, China, and Vietnam. What could be a problem is that since the mid-90s we have not had state contracts on clearing, only commercial ones, and as the HNB points out – clearing cannot be done under the current conditions of sanctions other than by an agreement between the two states.
Need to get EU approval
Would this even be possible? Štern believes it certainly would, as Croatia has enough arguments for it – a poor economic situation, a threat of GDP decline, a jeopardized season, high energy prices that we cannot amortize…- Yes, we need to get permission from Europe, but we are still at the lower end of the development scale, among the poorer members, and this would certainly be taken into account. After all, countries with experience in clearing such as Hungary, Slovakia, and the Czech Republic would surely support us. For gas, we could offer products from AD Plastika, JGL furniture, and technology. It is clear that we do not have as many goods as we had during the time of the former state when entire factories like Jedinstvo, TPK, Elke, and Prvomajska were massively exporting to Russia through clearing, but at this moment, the bigger problem is that no one knows the technique of clearing.
It used to be done through Privredna and Zagrebačka banks, but their owners today have no idea what that is. Not even at the HNB do they know, which is why after the breakup of the former state, the assets were divided through the National Bank of Yugoslavia, the London and Paris Clubs. Modern financiers do not know how this payment process works, so Americans call it ‘mickey mouse money’, but there are old-timers among us who can quickly explain and train those who could do it. Only if we get permission and the two states conclude an agreement on clearing – says Štern.
The domestic PPD, which imports most of the gas, is most affected in this whole story. From that company, they briefly state – while the other contracting party does not change the terms, they pay according to the contract, that is, in euros. If it gets tight with the desperately needed gas, and given the firmness with which Putin insists on payment in rubles, he certainly will, the government is on the move.
