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Russia’s yuan reserves are nearly depleted due to Chinese banks’ fear of US sanctions.
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Lenders have urged Russia’s central bank to address the yuan deficit, causing the ruble to drop.
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China’s hesitance stems from US threats of secondary sanctions over Russia’s Ukraine war financing.
Russia’s banks have practically emptied their stash of yuan, largely because Chinese financial firms are spooked from doing business with the nation.
Lenders have urged Russia’s central bank to address a yuan liquidity shortage in the nation, with insiders saying that access to the Chinese currency was running dry, Reuters reported.
Russia’s ruble dropped nearly 5% against the yuan earlier this week, Reuters noted. The drop came shortly after Russia’s finance ministry suggested the Central Bank of Russia would shrink its daily yuan sales, with central bankers selling just $200 million a day, down from the $7.3 billion sold daily in the last month.
Sberbank, a large state-owned lender in Russia, told Reuters it could no longer lend in yuan because it had “nothing to cover” the trade.
VTB, the second-largest lender in Russia, said it urged the central bank to counter the yuan liquidity shortage through currency drops, and added that exporters to the nation should sell yuan to Russia as well.
Chinese banks are more hesitant to trade currency in Russia after the US threatened to impose secondary sanctions on countries doing business with Russia while it continues its war against Ukraine.
Payment scuffles between Russian companies and Chinese banks have escalated in recent weeks, with nearly all Chinese banks stopping transactions with Russia. Some banks have even returned payments for goods that had already been sent to Russia, out of fear of being targeted by sanctions, a Russian media outlet reported.
Russian businesses, meanwhile, have been locked out of billions in recent months, mainly due to payment issues at foreign banks, according to data from Russia’s central bank.
The payment difficulties are a problem for Russia’s economy, which has grown more isolated from global markets and consequently more reliant on China’s yuan after being targeted by Western sanctions in 2022.
Russia’s central bank said the yuan had become its main exchange currency this year, accounting for more than half of all currency trades in the nation.
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