Page 22 - RusRPTSept22

course to maintain the $100bn trade turnover of recent years, but aspires to double their mutual trade to $200bn in the coming years. In 2021, trade between the two countries totalled $174bn, up 36% on the year before and if trade
volumes maintain the same pace set in the first half of this year, the goal of reaching $200bn of mutual trade should be achieved.
The importance of the yuan is expected to only include due to a variety of factors including: the arrival of Chinese companies (especially state-owned) on the Russian market looking to buy cheap assets; the resumption of investment imports, the first signs of which are already seen by the Central Bank; overall growth in trade with China, which by the end of the year may reach $185-190bn, according to the CBR; adaptation to the yuan of the Russian exchange infrastructure (in the segment of swaps, the yuan is already on an equal footing with the dollar).
Given that funds held in dollars and euros can be frozen at any time, the yuan in Russia naturally becomes not only an alternative for settlements and risk hedging, but also an important part of the financial system.
Banks are already massively offering deposits in yuan (at 1-2% per annum), and Russian companies like the Hong Kong listed aluminium producer Rusal have started to borrow in the Chinese currency on the domestic market.
The “yuanization” of the Russian economy already began several years ago after the CBR started dumping dollars from its international reserves and replaced it with the yuan. Russia currently holds 13.1% of its $630bn reserves in yuan, more than any other country.
2.7 China and India buy Russian oil
In January, 54.5% of Russian oil exports (and thus 80% of the country’s oil-and-gas revenues) went to the European Union. By June, according to International Energy Agency figures, Russian oil exports to Europe were down a third amid Western sanctions and the announcement of a phased oil embargo. In such conditions, the only alternative destination for Russian oil is Asia — and that means China.
At the height of the uncertainty in March, it looked like Russia’s “pivot to the East” might not work. Major Chinese companies refused to take Russian oil and India made to buy from the Middle East if sanctions wiped out Russian deliveries. But even by April it was clear self-interest had won out: tempted by discounts of up to 30%, China and India were happy to increase orders of Russian oil. According to Norwegian industry consultants Rystad Energy, sales of Russian crude oil to Asia almost completely compensate for European losses.
Surprisingly, though, China’s role in this turnaround is minimal — and this is illustrated by a single graph from Bloomberg’s weekly review of Russian oil experts. This chart shows that almost all the growth in Russia’s maritime oil exports to Asia in 2022 (up 43% from late January to late June) is down to
22 RUSSIA Country Report September 2022 www.intellinews.com