New Delhi: In a significant move to counter Western sanctions, Russia has officially designated the Chinese yuan (RMB) as its primary foreign exchange currency, sidelining the US dollar and euro. This decision comes as the US tightens its grip on Russias financial system through new sanctions targeting its war economy.Yuan-Ruble exchang rateThe Central Bank of Russia announced the switch, emphasizing the yuans growing prominence in Moscow Exchange (Moex) trading. The yuan-ruble exchange rate will now serve as the benchmark for other currency pairs, effectively replacing the dollar and euro in this role.The yuans share in Moex trading already surpassed 54 per cent in May, the Bank of Russia stated, highlighting the currencys established dominance. Transactions in US dollars and euros will continue through over-the-counter (OTC) markets, but their influence on the exchange is expected to diminish.US sanctions led to currency changeThis development comes on the heels of the US announcing fresh sanctions on June 12th, targeting over 300 entities and individuals allegedly supporting Russias war efforts. US Treasury Secretary Janet Yellen emphasized the aim to restrict Russias access to critical international materials and equipment.The rise of the YuanThe move reflects Russias ongoing de-dollarization efforts, accelerated by the Ukraine conflict. According to the Ukrainian news agency UNN, citing the Russian central bank, the dollar and euros share in Russian trade settlements has been steadily declining for the past two years. Before the war, these currencies accounted for roughly 90% of Russias trade settlements.Meanwhile, the yuan is experiencing a global rise. Data from the Society for Worldwide Interbank Financial Telecommunication (Swift) for March 2024 shows it has become the worlds fourth-most-used currency in international payments (4.69%), surpassing the Japanese yen (4.13%). However, it still trails behind the US dollar (47.37%), the euro (21.93%), and the British pound (6.57%).It still remains to be seen how is the Joe Biden administration is going to respond to the Kremlins step of changing the currency for foreign exchange. This will practically create an influx of foreign currency to the respective nations as their lockers grow heavy with the Chinese Yuan after ditching the US dollar.
