Russia Turning To Yuan To Dodge Western Sanctions

A number of Russian companies are issuing bonds in Chinese currency as yuan-denominated trade grows with China amid western sanctions on Moscow over its Ukraine invasion.

Russia's trade has witnessed a reduction in dollar and euro payments since Moscow invaded Ukraine in February due to US and European sanctions.

Meanwhile, Moscow's yuan-denominated settlements with China are growing, reports Nikkei Asia.

On Tuesday (13 September), Russian state-owned oil firm Rosneft made a public offering of 10 billion yuan in bonds.

In late August, Russia's largest gold miner Polyus made a 4.6 billion offering.

Rusal, a major aluminium producer in Russia, in July became the first Russian firm to issue yuan-denominated bonds in the country.

The issues, with two tranches of 2 billion yuan each and maturities of five years, was reportedly oversubscribed.

The trade between Russian and China has been expanding even before Moscow's invasion of Ukraine earlier this year.

In 2021, China accounted for 18 per cent of Russia's total trade, up from 10 per cent in 2012.

Russia has risen to third place in its share of yuan settlements among jurisdictions outside mainland China, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an international interbank messaging network.

The energy trade between the two countries is prominently being done in Yuan-denominated settlements.

Russian state-owned Gazprom this month decided to shift to settlements in yuan and rubles for natural gas exports to China. These transactions were earlier believed to have been conducted in dollars.

The contracts with China National Petroleum, to which Russian gas is exported via pipelines will also be covered under the yuan-denominated settlements.

Further, Russian President Vladimir Putin is expected to meet his Chinese counterpart at Shanghai Cooperation Organisation (SCO) summit this week.

The two leaders may discuss closer financial cooperation, including the possibility of Russia issuing yuan-denominated government bonds.