Chinese yuan accounts for 25% of Russia’s global trade, report says


Russia has been fueling the de-dollarization trend by conducting trade agreements with its partners in the Chinese yuan. The currency accounted for 25 percent of Russia’s international transactions during the first half of 2023.

In the same period, the renminbi was also the currency of choice for 75 percent of Russia’s trade activities with China, as reported by Moscow-based outlet RBC on Thursday. Reuters reported that the yuan’s share in Russian import settlements had increased from four percent to 23 percent in the past year.

Following Russia’s invasion of Ukraine in February 2022, Western nations froze over half of the country’s foreign reserves. It compelled the Kremlin to shift away from what it refers to as “toxic currencies.”

RBC reported that the dollar now makes up only 28 percent of Russia’s export revenue and 31 percent of its import revenue. Before the conflict in Ukraine, these currencies had been responsible for 87 percent of export payments and 67 percent of import settlements.

Previously, Russian foreign minister Sergey Lavrov referred to the West’s freezing of the nation’s currency reserves following its invasion of Ukraine as “theft.” He expressed surprise at the severity of the sanctions last year.

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De-dollarization efforts worldwide

Russia’s renminbi adoption aligns with the broader global trend of de-dollarization. Fellow BRICS countries — Brazil, China, India and South Africa — and many others are also working to reduce the dominance of the U.S. dollar.

The annual BRICS summit concluded last month without agreement on a common currency and with members offering conflicting views on the U.S. dollar. However, this issue does not end their de-dollarization efforts.

The BRICS bloc has invited Iran, the United Arab Emirates, Egypt, Argentina, Saudi Arabia and Ethiopia as new members. Iran pushes for non-dollar transactions, while the others hold differing views on alternatives to the dollar.

Due to its long-standing sanctions, Iran has been exploring using the yuan for trade settlements since 2010. By 2012, China began purchasing crude oil from Iran in the yuan.

In February, Tehran and Beijing discussed expanding the use of the yuan and the Iranian rial for their trade, as reported by the Financial Tribune. In addition, Iran established a connection with Russia’s payment system, the System for Transfer of Financial Messages, as reported by Al Jazeera.

Adding energy exporters like Saudi Arabia, Iran and the UAE to the BRICS is a significant development since energy commodities — usually priced in U.S. dollars — hold substantial importance in the global economy. If these energy-exporting countries start using currencies other than the dollar for trade, it could impact the broader economy.

“Together with fellow oil and gas exporters Iran and the UAE, the admission of Saudi Arabia to the BRICS grouping will inevitably focus the debate on the use of non-dollar currencies in trade,” wrote ING analysts in a note published on August 24.

China also requested Middle Eastern suppliers to consider the yuan instead of the dollar for oil transactions last December. Meanwhile, starting in March 2022, Russia prohibited “unfriendly” nations from using any currency other than the ruble for natural gas contracts.

Despite these efforts, as of the first quarter, the yuan represented only 2.6 percent of foreign reserves. The U.S. dollar maintained a wider share of 59 percent, as reported by the International Monetary Fund.