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Russian Foreign Minister Lavrov: China-Russia trade has almost been de-dollarized

Economic and financial data confirm Lavrov's words."China and Russia are a perfect symbiotic relationship. China imports huge amounts of Russian energy (in red) and exports tons of goods to Russia (in blue) that keep its war economy going. This surge in trade began only after Russia's invasion of Ukraine. China is Putin's biggest supporter...." said Roobin Brooks, Senior Fellow at the Brookings Institution

At a conference in Moscow on April 22, Russian Foreign Minister Sergey Lavrov said that in the face of the overall development of trade and economic cooperation between Russia and China, more than 90 percent of payments between the two countries are made in domestic currency and that trade between the two countries has been almost completely de-dollarized.

"Despite the West's attempts to hinder it, Russian-Chinese trade and economic cooperation is developing positively and bilateral economic relations are almost completely de-dollarized," Lavrov said.

Russian Foreign Minister Sergey Lavrov Photo credit: Visual China

"Today, more than 90 percent of mutual payments have been converted into domestic currencies. Cooperation in the energy sector is steadily progressing, the supply of Russian agricultural products to the Chinese market has increased, and joint projects are being carried out in the fields of investment and industry."

He said that both Russia and China perceive the mutual benefits of such cooperation and that bilateral relations between Russia and China are at an unprecedented level and in the best period of their history.

In addition, Lavrov said that Russia believes it can cooperate more closely with China within the framework of the BRICS and the Shanghai Cooperation Organization, "We start from the fact that the potential of interregional cooperation is far from exhausted and that the new international situation opens a wider space for its further development and practice."

In recent years, trade between China and Russia has been growing rapidly: in 2021, trade in goods between China and Russia reached $146.87 billion, an increase of 35.9 percent from the previous year. Further growth was recorded in 2022, reaching $190.2 billion. In 2023, bilateral trade between China and Russia exceeded $200 billion for the first time, reaching $240.1 billion. The goal of reaching $200 billion in trade volume was reached a year ahead of schedule.

Trade growth also boosted Russian yuan reserves, causing the yuan to continue to grow in importance in the Russian economy. According to the Foreign Trade Bank of Russia, the yuan will account for 25 percent of Russians' foreign currency savings by the end of 2023, making it the second most popular foreign currency in Russia, according to Rosatom.

Last month, the Central Bank of the Russian Federation (CBRF) released a financial risk assessment report stating that the yuan's share of the Russian foreign exchange market reached a new record high in March this year, with 53 percent of yuan turnover traded on exchanges and 39.6 percent in over-the-counter (OTC) transactions.

On April 8, Elvira Nabiullina, governor of the Russian Central Bank, said in a speech to parliament that Russia is creating conditions for settlement in the currencies of several countries. Over the past year, the share of settlements in currencies other than the US dollar or euro has increased from 39% to 67%. She revealed that the currencies used for payments are now basically rubles and renminbi, and “the share of US dollars and euros has been almost halved.”

Bloomberg pointed out that Russia is trying to reduce the role of the dollar and euro in its economy and shift trade from Europe to Asia after the outbreak of the Russian-Ukrainian conflict and the imposition of sanctions on Russia by the United States and its allies.

At the BRICS leaders' summit last August, Russian President Vladimir Putin said that the BRICS countries are trying to reduce their dependence on the dollar in mutual transactions, that the dollar is losing its global role in an "objective and irreversible" process, and that "the 'de-dollarization' of our (BRICS) economic relations is an important step forward." The process of 'de-dollarization' of our (BRICS) economic relations is gaining momentum, and we are working on developing effective mechanisms for mutual settlement and financial and monetary regulation."

Regarding economic and trade relations between China and Russia, Chinese Ministry of Commerce spokesman He Yadong said on Jan. 18 that economic and trade cooperation between the two countries has continued to develop steadily in recent years. "The Ministry of Commerce, together with the relevant departments, will make every effort to implement the important consensus reached by the heads of state of the two countries, consolidate the good momentum of trade and investment cooperation between China and Russia, expand new areas of cooperation such as green and digital trade, accelerate the cultivation of cross-border e-commerce and other new forms of business, improve the level of cross-border interconnectivity, and strengthen cooperation between the enterprises and localities of the two countries, so as to continuously enrich the content of economic and trade cooperation between China and Russia," He Yandong pointed out.

In a tweet yesterday, Roobin Brooks, Senior Fellow at the Brookings Institution, said, "China and Russia are a perfect symbiotic relationship. China imports huge amounts of Russian energy (in red) and exports tons of goods to Russia (in blue) that keep its war economy going. This surge in trade began only after Russia's invasion of Ukraine. China is Putin's biggest supporter...."

According to Extrema Ratio, the division of geostrategic tasks between Russia and China pre-existed the invasion of Ukraine, albeit in embryonic form. However, the Ukrainian military quagmire, exacerbated by Beijing's fake peace mediation, has turned into an extraordinary accelerator of asymmetric strategic interdependencies between anti-Western powers, including Korea of the North and especially Iran with parts of the South of the world.

Li Enlin, who visited China with Russian Prime Minister Mishustin in May last year and was the only Chinese businessman in the delegation, told the Observer that Russians are used to hoarding dollars or euros in cash in homeland for many years. "Whether traveling abroad, protecting yourself from currency fluctuations, or worries about local banks, storing cash in euros and dollars has become a habit for many Russian residents. But after this year's changes, many people slowly started wanting to accumulate RMB cash, which is amazing for Chinese people: Chinese people usually don't carry RMB cash with them when entering Russia. After some Russian friends found out we were Chinese, they asked me if I had any RMB cash on hand and if I could help them exchange some. They want to keep some RMB cash at home, which will make them feel more comfortable. This may also reflect the fact that the status of the RMB in the hearts of the Russian people is gradually increasing. The trading volume of RMB originally accounted for less than 10% of the market, gradually becoming equal to that of the US dollar and the euro, then exceeding the US dollar, the euro and even the combined trading volume of the US dollar and the EUR. EUR. It can be said that the current state of the RMB in Russia is of great importance."

On February 26, local time, RIA Novosti reported that Russian Finance Minister Siluanov said in an interview that they were discussing the possibility of borrowing RMB with their Chinese counterparts.

Siluanov stressed that the current provisions of the Finance Law allow Russia to borrow in yuan. He has been engaged in long negotiations with his Chinese partners on this issue and raised the issue in the dialogue between the two finance ministries at the end of 2023. However, both sides have yet to make a final decision on this matter.

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