Sanctions imposed after the invasion of Ukraine are pushing Russia into China's sphere of influence. Economic cooperation is growing, but Beijing is the dominant player in this arrangement. Dreams of the big rouble are falling apart. Russian business is already switching to settling in yuan, and the Chinese are buying Russian oil and coal in their currency.
While Vladimir Putin dreamed of a petrorouble and settlements with the West in Russian currency, economic reality is exposing this pipe dream. It is not the rouble but the yuan that has far greater influence in the region. With each passing day of sanctions, China's position grows stronger, pulling Russia into its sphere of dependence and influence.
Russian banks have already seen a sharp increase in the number of yuan accounts because of the sanctions switching to the yuan necessary for Russian business.
Since the beginning of the year, the volume of funds in accounts in Chinese currency has increased about eight times at Tinkoff Bank and four times at MTS Bank and Ural Bank for Reconstruction and Development (UBRD). The same is happening at Bank St. Petersburg, where these business accounts have increased almost 3.5 times, and the number of contracts in Chinese currency has doubled.
Russian entrepreneurs are forced to conduct transactions in yuan. The home currency is unstable, and Western sanctions, along with Putin's decrees, such as the one on March 5 banning the payment of obligations to entities on the list of "unfriendly countries" in Western currencies, make it difficult for entrepreneurs to do business with counterparties abroad.
More and more Russian enterprises are betting on the yuan. Among them are companies trading spare parts, textiles and foodstuffs. Also, the oil, metallurgical, and mining industries are beginning to conduct transactions in the Chinese currency. According to the daily, private Chinese companies buy oil and coal from Russia for delivery in May and June.
Russia is increasingly falling into the sphere of Chinese interests. China is Russia's largest trading partner, and although bilateral trade reached a new record of $147 billion last year, the relationship is nevertheless highly asymmetrical.
The strategic partnership between Russia and China brings more benefits to the Middle Kingdom than Russia. Russia is only the PRC's 15th export partner. Moreover, China has overtaken Russia in trade turnover with most Central Asian countries.
The situation is similar in the energy sector, especially gas. In 2014, after Russia's military intervention in Crimea, when Russia received further economic sanctions from the European Union and was isolated in the West, China suddenly decided to conclude a gas contract while forcing the Kremlin to accept a low supply price.
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