US sanctions make it difficult for Russians to access Chinese money

The United States (USA)’s tough economic sanctions against Russia make it very difficult to get Chinese yuan in Russia. As a result, Russians have to exchange currency at higher rates through yuan exchanges with the Russian Central Bank, which is very disadvantageous for companies.

In July, the number of yuan transferred through these yuan exchanges rose to 20 billion yuan, up from a total of 10 billion yuan in June. According to Bloomberg, this indicates that the new US sanctions are having an impact on Chinese banks: Banks fear being accused of indirectly contributing to the financing of the Russian war machine and thus became the target of new sanctions imposed in June. . According to Freedom Finance Global’s Vladimir Chernov, in a worst-case scenario, some Chinese lenders have decided to freeze transactions for a few months.

‘Friendship knows no bounds’

As a result of the war in Ukraine, the yuan became the most traded currency on the Russian stock market in 2023, and Russia was able to partially avoid Western sanctions through its relationship with China. In addition, almost $240 billion in imports and exports are now paid in yuan as part of the “unfettered friendship” between Moscow and Beijing. Payments issues were high on the agenda during the recent meeting between Russian President Vladimir Putin and Chinese President Xi Jinping.

However, Russian companies have not been able to get access to enough yuan, which is why payments outside of Russia are increasingly being made through former Soviet republics such as Kazakhstan. According to Sberbank, Russia’s largest bank, an improvement in yuan liquidity is unlikely. Despite the actions of the Russian central bank, the cost of borrowing yuan increased by 20 percent after the sanctions took effect.

The yuan’s stance is questionable

Alex Isakov, a Russia economist, thinks that the high costs of doing business in yuan will lead to a reduction in trade volume with China, where most of Russia’s imports come from. If China’s exports to Russia actually fell in the second half of the year, Washington could say the sanctions worked. Additionally, it also calls into question the yuan’s status as a substitute for the dollar.

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