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Russia jumps to become third-largest market for yuan payments amid sanctions

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Russia has charged up to third place in a list of countries outside mainland China using the yuan for global payments, highlighting how it is being affected by Western sanctions.

Russia had not even been on the monthly list published by global financial messaging firm SWIFT before its invasion of Ukraine in February, but latest figures released on Thursday showed that only Hong Kong and financial powerhouse Britain are now ahead of it.

Russian firms and banks were involved in almost 4 per cent of international yuan payments by value in July, according to SWIFT. That was up from 1.42 per cent the previous month and from zero in February when the Kremlin’s action in Ukraine, which Moscow calls a “special military operation”, triggered sanctions.

Hong Kong unsurprisingly remains the top source of yuan transactions outside mainland China with 73.8 per cent of the total, followed by Britain which accounted for 6.4 per cent.

Russia’s sudden leap up the list will support the argument that sanctions are working and squeezing it out of the US dollar-based global banking system. But it will also back those who say it will bring Moscow and Beijing closer.

Alongside the impact on the financial sector, hundreds of big name Western firms have withdrawn or heavily cut their operations in Russia in reaction to the war.

Russia meanwhile has developed it own SWIFT-style financial messaging system, set up special accounts at some still-unsanctioned banks and continues to trade key exports like oil with countries from China and India to Turkey.

The latest SWIFT data also confirmed the rouble is no longer among the top 20 global currencies used in the international payments markets.

Back in December, it was in 16th place with a 0.3 per cent share in terms of value of transaction but it hasn’t been on the list since then.

The top four places on that list are held by the US dollar, euro, British pound and Japanese yen followed by the yuan in fifth spot.

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