Intergovernmental Clearing Agreement

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Russian: Межправительственное клиринговое соглашение

Intergovernmental clearing agreements were popular before globalizing world payment systems when a free movement of hard currencies did not exist due to confrontation between capitalistic and communistic systems. Besides, a lack of hard currencies in banks of socialist countries was an additional stimulus to use such clearing agreements. They list the types of payments, the procedure for opening and operating accounts, and the currency in which payments are to be made. They also specify the method of liquidating indebtedness and name the banks to be entrusted with the opening and settling of accounts. Such agreements are concluded between governments and are signed by authorized representatives, such as ministers of foreign trade, ministers of economics, and ambassadors. Each agreement stipulates when it is to come into legal force and the period during which it will be in effect, usually three to six years in agreements concluded by the USSR with other countries. The agreement can be terminated upon written notification by one of the parties[1]. These agreements were widely in a course before the crash of the socialist system. However, there are no principal political/economic obstacles to use such agreements in contemporary time.

Generalized Flow Chart of Intergovernmental Clearing Agreement[2]

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  • Government Agency is usually represented by an Authorized Bank
  • A-Companies, B-Companies - authorized by a Governement Agency actors (members) of exchanges in the frame of International Clearing Arrangement


  • Bilateral clearing accounts have been established with all states of FSU (former Soviet republics). However, it was only one intergovernmental clearing agreement in 1994; the “Roscontract” agreement with Russia which specified the intergovernmental exchange of crude oil from Russia for strategic products from Belarus, on a balanced basis. A successor agreement has been signed for 1995 as has a new clearing agreement with Uzbekistan, calling for the exchange of cotton from Uzbekistan for strategic products from Belarus, on a balanced basis[3].
  • The transition of the NIS [4] towards independent foreign exchange, financial, monetary and credit policies has not yet “buried” the idea of preserving the leading role played by the rouble in payment and account relations. Efforts are being taken to implement the idea of a multilateral clearing through the Interstate Commonwealth Bank set up in 1993. However, only a few operations in the framework of the intergovernmental reciprocal deliveries of goods were carried out according to the pattern where the Russian rouble was used as a price, account and settlement unit. According to non-official data, the Interstate Bank carried out in 1996 only 11 settlement operations under multilateral clearing with four currencies in the trade volume beyond 20 billion roubles. Experts believe that constant delays of delivery dates and other contractual terms cause imbalances and forced credits to one of the sides. It is usually Russia that becomes a debtor country. The Interstate Bank turned out to be unprepared to service this type of operations even in small amounts[5].
  • During the Soviet era the economic activities between Finland and the Soviet Union were strictly controlled by the governments. Cross-border trade was handled by a clearing system, and unlike most Western countries Finland continued to maintain this kind of bilateral trade until the collapse of the Soviet Union. The trade between Finland and the Soviet Union was notable, especially for Finland (25 per cent of the foreign trade in 1982-1983), but individuals and entrepreneurs had very few direct cross-border contacts [6]. Trade was hierarchically handled from top to bottom which supposed that enterprises in Finland had to have a license for the export. This led to a high level of bureaucracy and trade dominated by large-scale firms. One of the peculiarities of this kind of trade was that there were no cross-border money transfers. The central banks, the Bank of Finland and Gosbank (later VTB and VEB) signed a clearing agreement and through their accounts these organizations kept the trade in balance. Excess exports could be balanced only by increasing imports [7]. However, the non-marketable attributes of the Soviet products made it difficult to find products for import. Consequently, Finland was mainly able to import raw materials, energy, and oil. When, for example, the oil prices went down the balance of Finnish-Soviet trade was difficult to achieve. Therefore, for example in the 1980s Finland exported several years consecutively more than imported, which meant that Russia inherited debts from this Finnish-Soviet clearing trade after the collapse of the Soviet Union.


  1. Payments Agreement, Intergovernmental -,+Intergovernmental
  2. Designed by the author using Laurila, J. Finnish-Soviet Clearing Trade and Payment System: History and Lessons - Bank of Finland (Helsinki). – Helsinki: Oy Trio-Offset Ab, 1995
  3. Belarus – Recent Economic Developments – IMF Staff Country Report # 95/99, October, 1995
  4. Newly Independent States - The countries that until 1991 were constituent republics of the USSR, including Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. The term can also include Russia and sometimes Estonia, Latvia, and Lithuania. -
  5. Designing New Trade Policies in The Transition Economies - OCDE/GD(97)199 -
  6. Rautio, V., Tykkyläinen, M. Economic co-operation across the Finnish-Russian border - factors of sluggish development and success of enterprises - International Institute for Applied Systems Analysis, Interim Report IR-00-071/December, 2000 -
  7. Laurila, Op. cit., p.75
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