SINGAPORE: China has dramatically increased use of the yuan to buy Russian commodities over the past year, with nearly all of its purchases of oil, coal and some metals from its neighbour now settled in the Chinese currency instead of dollars, multiple trading executives with direct knowledge of the matter told Reut
The switch to yuan to pay for much of a roughly US$88 billion commodities trade in the wake of the Ukraine war accelerates China's efforts to internationalise its currency, at the expense of the dollar, although strict capital controls are expected to limit its global role in the near term.
"This is a very long term development stretching into the coming one or two, even three decades," he said. That began changing last year as western buyers shunned purchases of Russian goods in the face of mounting sanctions following Moscow's invasion of Ukraine. Chinese buyers stepped in to snap up discounted crude oil, coal and aluminium, boosting 2022 commodities imports from Moscow by 52 per cent in value terms.
Nearly all of China's oil imports from Russia, mostly crude but also smaller volumes of fuel oil, are now settled in yuan, five trading executives with direct knowledge of the matter told Reuters. China imported a combined $60.3 billion worth of crude oil and fuel oil from Russia last year, according to Chinese customs.The People's Bank of China did not immediately respond to a request for comment.
Yuan settlement surged after the US-imposed import ban and as Europe stepped up restrictions on Russian exporters before eventually slapping a trade embargo, with a Western price cap imposed on Dec. 5 on Russian crude exports. China opposes unilateral sanctions but is also wary of itself being exposed to so-called secondary sanctions.
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