Additional Coverage:
Russia’s reliance on the Chinese yuan is threatened as the US expands sanctions. The sanctions will cut off access to dollars and euros, forcing Russian businesses to rely solely on the yuan.
However, the US sanctions could also affect Chinese banks that engage in yuan transactions with Russia. This could lead to a shortage of yuan in Russia, making it difficult for businesses to operate.
The Russian unit of Raiffeisen Bank has already stopped making payments to China, adding to the strain on yuan liquidity. Chinese banks have also been reluctant to transfer yuan to Russian counterparts, leaving transactions in limbo.
To compensate for the lack of yuan, Russian companies have tapped the central bank for currency swaps. However, the central bank has stated that these swaps are only for short-term stabilization and not a long-term solution.
Despite wartime spending and oil exports, Russia’s economy faces challenges due to inflation, labor shortages, and a population crisis. Researchers warn that military spending is crowding out productive investments, stifling long-term growth prospects.