Home » For the first time overtaking the US dollar and RMB to become Russia’s largest foreign exchange currency experts are worried | RMB and ruble transactions | RMB exchange rate | Financial sanctions

For the first time overtaking the US dollar and RMB to become Russia’s largest foreign exchange currency experts are worried | RMB and ruble transactions | RMB exchange rate | Financial sanctions

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For the first time overtaking the US dollar and RMB to become Russia’s largest foreign exchange currency experts are worried | RMB and ruble transactions | RMB exchange rate | Financial sanctions

[The Epoch Times, October 7, 2022](The Epoch Times reporter Wang Xiang comprehensive report) After being hit with Western financial sanctions for its invasion of Ukraine, Russia has been forced to settle more transactions in yuan. The yuan surpassed the dollar for the first time this week as the most traded foreign currency on the Moscow exchange.

Data from Moscow Exchange Group showed that 65,000 yuan-ruble trades were completed on the floor on Monday (Oct. 3), bringing the volume to 70.3 billion rubles ($1.17 billion). By comparison, spot trades for the USD-RUB pair totaled 68.2 billion rubles, with a volume of close to 30,000.

The trend continued into Tuesday, albeit at slightly lower levels.

Russia’s economy is gradually moving closer to Beijing due to tensions with the West, especially after global payment systems Visa and Mastercard have suspended operations in Russia since March, and some Russian banks have been expelled from the country. After the SWIFT financial information system for cross-border remittances.

Russia became the third-largest market for offshore yuan transactions in August, accounting for 4.27% of total yuan payments, after Hong Kong and the U.K., according to SWIFT. In May, Russia ranked 12th in this regard.

Temur Umarov, an expert at the Moscow Center of the Carnegie Endowment for International Peace, told the South China Morning Post: “This is an inevitable process as Russia is forced to ‘de-dollarize the economy’ under the pressure of sanctions. ‘.”

That doesn’t necessarily mean the yuan has become more popular in Russia, but it reflects the impasse in which Russia finds itself, Ma said.

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In September, Gazprom announced that its natural gas supply to China would be settled in rubles and renminbi in equal parts. Analysts say this is an attempt by Beijing and Moscow to insulate themselves from Western pressure and the dollar.

Ma Tiemu analyzed that with the increase of Sino-Russian bilateral trade, the increasing use of RMB will deepen Russia’s economic dependence on China.

“If Russia doesn’t want all this money to be frozen, it will have to go to China to buy more goods and services,” he said.

At the same time, Russia could also accelerate the expansion of a cross-border payment and settlement system developed by Beijing.

Beijing launched the Cross-border Bank Payment System (CIPS) in October 2015, aiming to provide an independent international RMB payment and clearing system to facilitate the international use of RMB. But the yuan still lags far behind other major currencies such as the dollar and the euro when it comes to global payments.

Russian experts are full of doubts and concerns about the yuan

The Jamestown Foundation, a U.S. think tank, said in an article on September 27 that many Russian experts and officials expressed serious doubts and concerns about increasing the renminbi in the financial business.

The report, citing Russian media reports, said Putin’s economic adviser Maxim Oreshkin suggested that the reserve currency should be in the ruble rather than other currencies, even those of “friendly countries” such as the renminbi.

“My point is very clear that the dollar and euro should be exchanged for rubles, not other currencies.” He also doubts whether the renminbi can be used as a suitable reserve currency for Russia. “China is a country with a budget deficit of 5% of GDP. 5.1% of GDP.”

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Sofia Donets, a Russian economic expert, also complained that now working with China, regulations are opaque and China can provide much less information than they want to know. In the past, Russian economists and financial experts could easily read regulations in plain English, while the Federal Reserve continued to provide all the negative and risky information on the dollar.

Russian experts worry that with 17% of Russia’s foreign exchange reserves in yuan, the Kremlin will not be able to withdraw funds in a timely manner when needed, and thus be trapped by the CCP.

The Jamestown Foundation report said that the banking systems of various countries are accustomed to using reserve currencies such as the dollar and the euro in foreign trade, and will not open accounts in other currencies unless absolutely necessary. Even if the buyer agrees to trade in a non-reserve currency under extraordinary circumstances, the other party’s goods are required to be discounted.

While it is technically feasible to substitute a non-reserve currency for a reserve currency, it is difficult to gain acceptance of a non-reserve currency in actual trade with other countries. For example, Chinese companies do not use Russian rubles to buy goods from Turkey, and Russian companies do not pay in Turkish lira when they trade with India.

Responsible editor: Li Yuan#

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