Alexandra Prokopenko
Beijing’s decision to keep doing business with Moscow after the full-scale invasion of Ukraine in February 2022, along with the nature of Western sanctions, has saved the Kremlin from economic and political disaster. China has not only opened up its market for Russian energy exports, but also become a crucial source of imports for Russia. As a result, economic integration between the two countries has accelerated dramatically: in 2023, the yuan became the most popular currency on the Moscow Exchange, beating even the U.S. dollar.
China tells Western countries it respects their sanctions on Russia, but it operates on the principle of “everything that is not banned is allowed.” The real beneficiaries of Moscow’s “pivot to the East” have been second- and third-tier Chinese companies, particularly banks. At the level of cross-border transactions, payment systems for Russian rubles and Chinese yuan have replaced the SWIFT global bank messaging network and other traditional financial structures.
These payment systems are now capable of processing sizable transactions that include third parties. The nature of Western sanctions on Russia is pushing Beijing toward further increasing the number of yuan payments that go via this route. This system is here to stay now, even if the war in Ukraine were to end tomorrow and Russia were to rebuild ties with the West.
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