Russia - China reached an important agreement: The position of the US dollar "wobbled" violently?

Experts say Beijing and Moscow have agreed to pay for Russian gas supplies to China in rubles and yuan.

Russia's state gas giant Gazprom confirmed it has signed new agreements with China National Petroleum Corporation (CNPC) regarding the eastern pipeline, also known as the Siberian Energy Pipeline. .

"Payments for Russian gas supplies to China will now be made in the national currencies of the two countries, i.e. rubles and yuan," Gazprom said.

Gazprom Chairman Alexey Miller said that after a meeting with Dai Houliang, his counterpart at CNPC, the new payment mechanism was "decisive for mutual benefit, timely, reliable and practical". .

"I believe it will make payments easier, serve as a great example for other companies, and give new impetus to our economy," Miller said.

No further details about the payment mechanism were provided in Gazprom's statement, but Russian President Vladimir Putin said on September 7 that China would pay Gazprom based on a 50-50 split between the ruble and yuan.

Presidents Xi Jinping and Putin have face-to-face meetings in Uzbekistan on September 15, Russia's state news agency Tass reported, citing Moscow's special envoy to Beijing Andrey Denisov.

CNPC issued a short notice saying the company had signed an additional agreement with Gazprom to supply gas via the eastern route, without mentioning the new payment mechanism. The deal comes as the monthly value of Chinese goods imported from Russia hit a record high in August - up 59.3% year-on-year to $11.2 billion, according to customs data. announced by the Chinese authorities.

Strengthen relationship

Zha Daojiong, an international studies professor at Peking University, said the switch to local currency payments was "predictable".

"The use of the yuan in the international market to settle contracts has been going on for a number of years, as has the ruble."

"As trade relations between China and Russia - linked by land as neighbors - grow, even in the absence of sanctions, so does the fact that the two sides trade in their own currencies. It's completely understandable."

Cross-border trade between Russia and China has traditionally been denominated in dollars and euros, and only a fraction of that is in rubles and yuan, according to Nick Marro, head of global trade. at The Economist Intelligence Unit.

"This agreement confirms the longer-term ambitions of Russia and China to diversify their cross-border payment systems. But in the short term, it will still be a difficult process," Marro said.

"This is partly because China's capital controls have long discouraged efforts to internationalize the renminbi, which is a challenge that won't go away overnight."

China and Russia have for years tried to increase energy trade with the goal of reducing their dependence on the dollar for global contracts.

This year, China's imports of Russian natural gas have increased, while imports from most other countries have decreased.

In the first seven months of 2022, China bought a total of 2.76 million tonnes of liquefied natural gas - worth $2.47 billion, according to Chinese customs.

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