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Russia’s yuan reserves are nearly depleted due to Chinese banks’ fears of US sanctions.
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Creditors have urged the Russian central bank to tackle the yuan deficit, causing the ruble to fall.
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China’s hesitation stems from threats of secondary sanctions from the United States over Russian war funding in Ukraine.
Russian banks have virtually emptied their yuan reserves, largely because Chinese financial firms are reluctant to do business with the country.
Creditors have urged Russia’s central bank to address the country’s yuan liquidity shortage, with insiders saying access to the Chinese currency was drying up, Reuters reported.
The Russian ruble fell nearly 5% against the yuan earlier this week, Reuters reported. The drop came shortly after the Russian Finance Ministry suggested the Central Bank of Russia would cut its daily yuan sales, with central banks selling just $200 million a day, down from $7.3 billion last month.
Sberbank, a major Russian state-owned bank, told Reuters it could no longer lend in yuan because it had “nothing to cover” the transaction.
VTB, Russia’s second-largest lender, said it had urged the central bank to counter the yuan liquidity shortage with currency cuts, and added that exporters to the country should also sell yuan to Russia.
Chinese banks are more hesitant to exchange currency in Russia after the United States threatened to impose secondary sanctions on countries doing business with Russia as it continues its war against Ukraine.
Payment disputes between Russian companies and Chinese banks have intensified in recent weeks, with almost all Chinese banks halting transactions with Russia. Some banks have even canceled payments for goods already sent to Russia, fearing sanctions, Russian media reported.
Russian companies, meanwhile, have been deprived of billions of dollars in recent months, mainly due to payment problems at foreign banks, according to data from the Russian central bank.
Payment difficulties are a problem for the Russian economy, which has become further isolated from global markets and therefore more dependent on the Chinese yuan after being targeted by Western sanctions in 2022.
Russia’s central bank said the yuan has become its main currency this year, accounting for more than half of all foreign exchange transactions in the country.
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