Russia's bid to replace the dollar with the yuan stalls as US secondary sanctions bite

In brief

• Russia's attempt to replace the dollar with the yuan in foreign trade has largely stalled.
• The yuan's share of Russian export payments fell to 22% this year, half its mid-2024 peak.
• US secondary sanctions led Chinese banks to freeze or return payments, pushing Russian firms toward rubles and intermediaries.

Yuan share falls sharply

The yuan's share of payments for Russian exports has dropped to 22% this year, according to data from the Central Bank of Russia cited by Bloomberg. That is half the level reached in mid-2024, when the currency peaked in Russian foreign trade (Попытка России заменить доллар китайским юанем провалилась из-за угрозы вторичных санкций США — Bloomberg – Novaya Gazeta Europe) (План Кремля заменить доллар в международных расчетах юанем провалился из-за санкций — Bloomberg – Agentstvo).

From boom to retreat

Russia's shift toward the yuan accelerated once its full-scale war in Ukraine began and Western sanctions followed. The Chinese currency came to account for close to half of foreign trade settlements, and it overtook the dollar in bank deposit volumes and trading on the Moscow Exchange (План России заменить доллар юанем провалился из-за вторичных санкций США – Meduza).

Secondary sanctions take hold

In June 2024, the United States widened the grounds for sanctioning banks and companies doing business with Russia. Chinese lenders responded by freezing payments, holding them for months or sending funds back to senders. Russian banks then ran short of yuan, and the central bank urged lenders to limit yuan-denominated lending.

Businesses turn to rubles and intermediaries

Russian companies increasingly receive export revenue in rubles. Of export earnings from trade with Asian countries, 69% now arrives in rubles, Bloomberg reports. Some payment channels still function, but none guarantees that a transaction will go through. Many deals now run through intermediaries rather than directly through banks.

Costs of paying China

Imports from China still have to be paid for, and the cost of doing so has risen. The Bell reports that intermediary costs now reach 15–20% of the value of a deal (Почему Россия не смогла перейти на юань, Америка не приняла российский дизель, ФНС взялась за бизнес-карты – The Bell).

Global share returns to pre-war level

The yuan's share in global payments has returned to its level before the war, according to the same reporting. The episode shows how Western secondary sanctions can limit a currency's use in trade even when a major partner is willing to accept it.