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China · Russia · Sanctions · Yuan
Chinese firms initiated purchases of Russian oil and coal in yuan during March, marking the first commodity transactions in China's currency since Western sanctions targeted Moscow following its invasion of Ukraine, effectively circumventing the US dollar-centric global financial system.
These deals, typically dollar-denominated, emerged as Western sanctions largely cut Russia off from global finance. While initial sanctions spared energy, the US and Europe are now more aggressively targeting that sector.
The US leverages the dollar's power to punish Russia economically, prompting other nations like India and Saudi Arabia to explore non-dollar trade arrangements, such as a rupee-ruble ledger and yuan-based oil deals, respectively. Economist Aleksandar Tomic states that the dollar's dominance exposes countries to US political leverage, and sanctions against Russia serve as a wake-up call for nations seeking to reduce dollar reliance.
Despite these shifts, the dollar maintained nearly 90% of foreign-exchange transactions in 2019, compared to the yuan's just over 4%, according to the Bank for International Settlements.
Economic pressure has largely failed to cow rogue regimes, as Iran, Russia and North Korea master the art of evading U.S. sanctions.
