(CNSNews.com) – During their talks at the Kremlin this week, President Vladimir Putin told his Chinese counterpart that Russia supports using China’s yuan as a settlement currency for transactions between Russia and third countries, the latest move in a decade-long campaign by Moscow and Beijing to reduce their shared dependence on the U.S. dollar.
Putin noted in his discussions with President Xi Jinping that two-thirds of payments in bilateral trade between their countries were now being made in Chinese yuan and Russian rubles, bypassing the greenback.
Putin said relying on the two national currencies “allows us to protect mutual trade from the influence of third countries and negative trends on global currency markets.”
But Russia also wants to use the yuan increasingly in its transactions with countries in the so-called “global south.”
“We support using Chinese yuan in transactions between the Russian Federation and its partners in Asia, Africa and Latin America,” the Kremlin quoted Putin as saying.
“I am sure that these types of payment will grow between Russian businesses and their counterparts in third countries – as I said, payments in yuan.”
In addition to a joint statement on strengthening “strategic cooperation for a new era,” Putin and Xi also signed a “Joint Statement on the Plan for the Development of Key Areas of Sino-Russian Economic Cooperation until 2030.”
Putin touted an already significant expansion in bilateral trade, noting that it reached a historic high of $185 billion in 2022, “despite the consequences of the pandemic and the sanctions pressure.”
He predicted that this year it would reach, and then exceed, $200 billion – a target which Putin and Xi set several years ago for 2024.
By contrast, bilateral trade turnover stood at $146.9 billion in 2021, itself a record at the time.
Commenting Wednesday on the pledges of enhanced economic cooperation between Russia and China, National Security Council Coordinator for Strategic Communications John Kirby said the U.S. does not support “any effort to decrease the sense of isolation that Putin has already experienced from the international community.”
“We don’t support any effort to bolster his economy or make it any more healthy,” he told a White House briefing. “We don’t support any effort by anybody to make it easier for him, financially or otherwise, to continue to slaughter Ukrainians.”
Over the past decade the yuan, also known as the renminbi, has moved up the ranks of currencies used for international payments, according to data from the international transaction coordinating organization SWIFT.
In 2013 it was in 13th place, with a share of 0.63 percent of global payments, but it began to advance swiftly the following year. Last summer, the yuan was in 5th place, with a share of 2.2 percent of international transactions.
While still far behind the big players – the U.S. dollar at around 42 percent and the euro at around 35.5 percent – the impact of Russia’s invasion of Ukraine and Western sanctions imposed in response are expected to further boost its progress.
Shortly before the invasion, former Russian president and close Putin ally Dimitry Medvedev said that if the West imposes additional sanctions, Russia could turn to the yuan, which he described as “a new, very promising reserve currency considering the economic scale of the People’s Republic of China.”
Russia had begun taking steps to move away from the U.S. dollar in 2014, after its annexation of Crimea and support for proxies in eastern Ukraine began to attract U.S. and European sanctions.
It has been supported in the process by other countries that face U.S. sanctions, such as Iran, whose supreme ruler discussed the matter with Putin during a 2017 visit.
“By ignoring the negative propaganda of the enemies, that seek to weaken relations between countries, we can nullify U.S. sanctions, using methods such as eliminating the dollar and replacing it with national currencies in transactions between two or more parties; thus, isolate the Americans,” Ayatollah Ali Khamenei told Putin in Tehran.
Visiting Iran four years later, Russian Foreign Minister Sergei Lavrov said in an interview with the state news agency that Moscow was “working actively” to move away from the U.S. dollar and encouraged others like Iran to do the same.
“Gradual steps should be taken to move towards de-dollarization of national economies and transition to payments in national or alternative currencies, as well as to stop using international payment systems controlled by the West,” he told IRNA.
“Russia has been working actively to that end. We see great prospects for cooperation in that field with all interested international partners.”
According to Carnegie Endowment analyst Alexandra Propopenko, overreliance on China’s currency could carry risks for Russia.
“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,” she wrote in an analysis last month.
“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,” Propopenko said. “Should relations between the two countries deteriorate, Russia may face reserve losses and payment disruptions.”
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