![]() ![]() There are two options on the table: bilateral agreements on integrating CBDC platforms, or connecting the country to a unified integrated platform. Right now, Russia is just testing cryptocurrency payments for foreign trade transactions, but the central bank plans to develop a model for transborder payments using the digital ruble (a central bank digital currency, or CBDC) this year. ![]() Russian-Chinese cooperation on cryptocurrencies will also intensify. This means that Beijing can’t really help Moscow in its crusade against the dollar. Accordingly, the yuan’s strength as a reserve currency doesn’t weaken the dollar rather, the two currencies complement each other. currency to support the yuan’s stability on offshore markets, primarily in Hong Kong. In fact, higher yuan internationalization means that the Chinese government needs more dollar reserves. Russian politicians often mistakenly claim that the yuan’s international expansion foreshadows the dollar’s collapse. Last October, Russia became the fourth largest offshore trading center for yuan, though back in April it wasn’t even in the top fifteen for offshore yuan users. But Russia’s growing dependence on the yuan is helping the Chinese authorities to make it into an international reserve currency. It constitutes just 3 percent of global currency reserves, overshadowed by the dollar (60 percent) and the euro (20 percent). It’s believed that the yuan can’t become a full-fledged reserve currency because of the current restrictions on capital transactions in China. Should relations between the two countries deteriorate, Russia may face reserve losses and payment disruptions. This is hardly a reliable substitution: now Russian reserves and payments will be influenced by the policies of the Chinese Communist Party and the People’s Bank of China. The de-dollarization of the economy, which the Russian authorities are so proud of, essentially translates into “yuanization.” Russia is drifting toward a yuan currency zone, swapping its dollar dependence for reliance on the yuan. Any surplus oil and gas revenues in 2023 will be accumulated in yuan. The Finance Ministry also revised the structure of the National Wealth Fund currency component at the end of 2022, doubling its yuan share to 60 percent. Nevertheless, it will mean reduced volatility for the ruble. It’s still an insignificant sum, which amounts to less than 3 percent in Russia’s yuan circulation in the last three months. The yuan’s share in stock market trading has also skyrocketed: from 3 percent to 33 percent.įrom January 13 to February 6, the Finance Ministry plans to sell foreign currency worth 54.5 billion rubles by tapping into its 3.1-trillion-ruble reserves of yuan liquid assets, which make up over 40 percent of distributable liquid assets in the National Wealth Fund. They have been replaced by ruble and yuan payments, which have seen respective increases of 12.3 percent to 32.4 percent and 0.4 percent to 14 percent. In nine months, the share of dollar and euro transactions on the Russian market declined from 52 percent to 34 percent and from 35 percent to 19 percent, respectively. The invasion and subsequent sanctions have forced Russian financial officials to accelerate those efforts: in the third quarter of 2022, the proportion of foreign currency in the Russian banking system fell to an all-time low of 15 percent. Efforts have now clearly shifted to cryptocurrencies and yuan payments, which means the Russian economy will grow increasingly dependent on the Chinese currency, with all the risks such a shift entails.Įven before the war, Russia’s central bank aimed to reduce the country’s dependence on Western currencies, particularly the U.S. The authorities and businesses have tried switching to national currency transactions, barter deals, cash payments, and other schemes, but were unable to find a comprehensive solution in 2022. The government is being forced to look for new ways to get paid for Russia’s exports and to pay for imports. The country’s main banks have been cut off from SWIFT the number of transborder transaction channels has decreased drastically and it has become much harder to conduct transactions in dollars and euros. One of the biggest problems Russia is currently facing is managing its foreign trade transactions.
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