80% of yuan payments reportedly being sent back to Russia

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It has become difficult for Russian companies to make cross-border payments in Chinese currency.

Source: Kommersant, a Russian news outlet 

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Details: The outlet stressed that about 80% of payments in yuan are now being returned to Russia. 

“Direct transfers are becoming increasingly difficult, so customers have to resort to intermediaries and add additional fees to their transactions. 

Risks in cross-border transfers are now recognised by market participants as one of the most acute,” Kommersant reports. 

Background:

• Banks in countries that trade with Russia are increasingly delaying or disrupting payments, fearing secondary sanctions.
• Vladimir Putin’s visit to China last month helped to provide both countries with payment alternatives to circumvent the sanctions.
• After the US sanctions were imposed, the Moscow Exchange effectively became an “exchange office,” with the Chinese yuan as the only key currency.
• Chinese buyers of liquefied natural gas demand discounts on cargoes from Russia, even from companies not on the sanctions list.
• On 1 July, China tightened export controls on products that could be used in the Russian military industry and dual-use goods.
• On 24 June, the Russian subsidiary of the Bank of China suspended all transactions with Russian banks due to US sanctions.

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