Russian banks are losing out to their European competitors in terms of financing the huge volume of the country's natural resource and commodity exports, according to a Switzerland-based international trade consultant.

Intertrade Dynamics' director, Ruslan Kharlamov, says Russian banks are too reliant on letters of credit (L/Cs) and tend not to provide the commodity trade finance options provided by banks in other large emerging economies such as Brazil and South Africa.

Massive market

Russian commodity exports account for around half a trillion US dollars a year, or 93 per cent of all export revenues.

Many Russian banks market trade finance as part of their corporate finance programmes but their service offerings are often limited to documentary operations according to Kharlamov.

Overdependence

He says that dependence on L/Cs hinders exporters' trading activities in several ways.

While conceding that the L/C remains the most popular trade finance instrument, and is sometimes indispensable, he argues that buyers in developed markets are now accustomed to buying on credit terms.

More options needed

Large corporate customers and banks in emerging markets are following suit, according to Kharlamov, who believes it will not be long before trade credit becomes a requirement of creditworthy buyers worldwide.

Kharlamov is calling for Russia's banks, with the support of the central bank, to provide more commodity trade finance options.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.