Russia is using Chinese currency for at least a fifth of its imports, a new study has found, illustrating both Moscow’s increasing reliance on Beijing and its efforts to evade western sanctions.
Context: Sanctions imposed on Moscow by the EU, US and others as a result of its war against Ukraine have made it increasingly difficult for Russia to get hold of large amounts of western imports. It’s also made it more expensive for it to trade using the dollar, euro or other western currencies.
By the end of 2022, 20 per cent of Russia’s imports were invoiced in yuan — up from 3 per cent a year previously, according to a research paper published this morning by the European Bank for Reconstruction and Development.
Some of that increase is owing to increased imports from China itself, but the use of yuan to settle imports from third countries rose to 5 per cent, from just 1 per cent before the war was launched in February 2022.
“Yuan is being used as a vehicle currency,” said Beata Javorcik, the EBRD’s chief economist and one of the paper’s authors. “Russia is now the third-largest clearing centre for offshore yuan transactions.”
Asking trade partners to invoice them in yuan is just one way Moscow is evading sanctions, alongside tactics such as importing products through middleman countries or exporting its oil on tankers that sail without western insurance.
The EBRD paper makes stark just how much Moscow is avoiding western banks when trying to bypass sanctions: when it comes to sanctioned goods and dual-use equipment, which can be used by civilians but also to make weapons, “the increase in [yuan] invoicing was more pronounced,” the paper found.
But the research also strikes a warning for any western policymakers who might see the data as a sign that their measures are working.
“Rising geopolitical tensions in general, and the use of trade sanctions in particular, may reduce the attractiveness of the use of the US dollar as a vehicle currency in international trade,” they write. “This, in turn, might lead to a greater fragmentation of global payment systems.”