The situation changed dramatically in 2022, when the sanctions were focused on SDN sanctions covering around two thirds of the banking sector, expanded to the central bank and the government and started covering Russia’s key exports. This resulted in a new wave of de-dollarisation, which this time involved the FX market and led to the replacement of USD, EUR and currencies of other sanction-imposing countries with ruble and yuan.
Starting in 2022, official Russian data on the FX breakdown has become scarce, but some bits of information are still available. Looking at the trade statistics, it appears that Russian foreign trade is becoming more China- and CNY-focused (Figure 34), and the usage of CNY is more active on the imports side (Figure 35) leading to a trade deficit in CNY. The higher share of China in Russia’s foreign trade is by no means a new trend, but the more active usage of CNY instead of USD and EUR is new. By now, almost 40% of Russia’s foreign trade turnover is with China, and around 80% of the bilateral trade is in CNY.
On the foreign asset side, very little is known, as the Central Bank of Russia (CBR) stopped disclosing the structure of its international reserves, and the international investment position of the Russian economy. The Finance Ministry is still disclosing the structure of the National Welfare Fund (the sovereign fund), which contributes to the funding of the central bank’s international reserves.
The available data suggests that the government had de-dollarised already in 2020, with USD and EUR replaced by CNY and gold, which have become the only two liquid assets available to the Russian government since 2022 (Figure 36). Since 2023, the Russian government has been selling CNY in 1H23 as per the fiscal rule (due to the under collection of budgeted fuel revenues versus its plan).
The dramatic change in the FX structure of trade and quite possibly the capital flows finally led to a material de-dollarisation of the FX market (Figure 37), something that was not possible during the first wave. According to the Bank of Russia, the CNY-leg of the FX trading on the Russian FX market reached 15-40%, pushing down the USD share to 30- 50% depending on the segment.
