Bloomberg Economics reported on the 2nd (local time) that Russia is likely to resume buying the Chinese yuan for the first time since the invasion of Ukraine to replenish its foreign exchange reserves. According to reports, starting in May this year at the earliest, Russia is expected to buy about 200 million yuan (about 268.4 billion won) every month.
Russia stopped buying foreign currency at the end of January 2022, just before the invasion of Ukraine, citing market volatility. After the invasion of Ukraine, it was subject to full Western sanctions, and in June of last year, the US-backed Global Task Force (TF) blocked more than $300 billion of assets held by the Russian central bank.
Then, in January of this year, the Russian government resumed its foreign currency intervention program, starting with the purchase of yuan. Russia’s purchase of the yuan means that it has gone from selling the yuan to cover budget deficits to buying it back. “The volume of foreign currency purchases will be small at first, but it will be very symbolic because it shows that Russia is building foreign exchange reserves instead of spending them,” said Alexander Isakov, an economist at Bloomberg Economics.
Meanwhile, Bloomberg analyzed that the yuan purchase shows that Western sanctions and a cap on Russian crude oil prices led by the G7 are not enough to curb Russia’s energy imports.
Russia was able to respond to Western energy sanctions by levying more taxes on oil companies such as Gazprom and Lucoil and increasing sales to China and India.
The fact that energy prices have not fallen has also been beneficial for Russia. In April, the International Energy Agency (IEA) said Russia’s energy imports were down about 43% from a year ago. However, oil prices have been supported since then by production cuts by OPEC and Russia. On the demand side, it is expected that the price will be maintained as demand increases in China, which has ended the Corona 19 blockade that lasted for nearly three years.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.