Putin looks to RMB to replace greenback
Updated: 2014-09-25 06:56
Russia has developed a strong appetite for the Chinese currency, reports Bloomberg in Moscow.
Vladimir Putin has a secret agent in his campaign to curb the impact of sanctions on Russia's economy: Mr Yuan.
That is what skeptical bankers started calling Igor Marich after he introduced yuan trading in Moscow in 2010, when Russia became the first country outside China to offer regulated renminbi purchases. Now, as sanctions from the West over the conflict in Ukraine are prompting more Russian companies to look east for growth, Mr Yuan has become something of an honorific.
The yuan-ruble trade on the Moscow Exchange, where Marich runs money markets, has jumped tenfold this year to $749 million in August, though still a sliver of the $367 billion in dollar-for-ruble sales. Yuan buying hit a then-peak of 666 million yuan ($109 million) on July 31, when the European Union penalized Russia's largest banks, OAO Sberbank, VTB Group and OAO Gazprombank, over Putin's support for Ukraine's insurgency. With European Union and United States sanctions in place, and ties with China deepening, daily trading will soon reach 1 billion yuan, Marich said.
"I believe we can see this result within a year," the 40-year-old sports enthusiast said in an interview at the exchange in central Moscow, where he started working in 2000, the same year Putin became president.
Marich's goal may come sooner than he thinks. Russia is considering accepting yuan for gas under the $400 billion, 30-year supply deal that China signed during Putin's visit to Beijing in May, according to four senior Russian officials and executives who asked not to be identified because a final decision has not been made.
China agreed to prepay for supplies, which are scheduled to start in 2018, to help state-run OAO Gazprom finance the construction of the pipeline that will carry the fuel to the border. Introducing yuan payments into the gas business would lead to an exponential rise in trading in the Chinese currency in Moscow, the people said. China is already Russia's largest trading partner, with turnover of $89 billion last year, according to Russian customs data, and Putin has set a goal of reaching $100 billion next year.
Gazprom and its Chinese partner, China National Petroleum Corp, the country's biggest oil and gas producer, have so far declined to comment on the financial details of the accord.
Under Putin, Russia has moved to end what he's called the "dollar monopoly" that allows the US to act like a global economic "parasite". The US debt binge that triggered the worst financial crisis since the Great Depression six years ago exposed the need, according to Putin, for a counterweight to the US-led International Monetary Fund and World Bank. The issue became more acute after Crimea joined Russia in March, which sparked the first round of sanctions.
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