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Russia Pays Sakhalin Dividends In Yuan

Russia has reportedly paid dividends from the Sakhalin 1 and 2 oil projects in Chinese yuan, a shift from its usual practice of paying in dollars, thanks to western sanctions on Russia. The decision to pay in Chinese currency instead of the traditional U.S. dollar comes after Russia was cut off from the US dollar-dominated global payments systems following sweeping sanctions off the Ukraine war. 

Last year, Russia announced it will no longer accept the American currency as payment for its energy commodities but will instead switch to Chinese and Emirati currencies. 

Yuan transactions have been on the rise across the globe, but particularly in Russia, owing to the sanctions where yuan's share of foreign exchange transactions rose to a record high of 39% in March, outpacing the dollar's share which fell to 34%.

Russia is also accepting payments for its energy commodities in the Chinese currency.

Pakistan’s petroleum minister Musadik Malik has revealed that the south Asian country paid for its first imports of discounted Russian crude in Chinese currency. According to Malik, the purchase, the first government-to-government (G2G) deal between Pakistan and Russia, consisted of 100,000 tonnes, of which 45,000 tonnes have already docked at Karachi port.

On its part, the new arrangement is convenient for Pakistan considering that the country is facing a severe shortage of foreign exchange reserves and risks defaulting on its debt obligations. Pakistan has long been a close Western ally and an arch-rival of neighboring India, which itself has massively ramped up imports of cheap Urals. 

Last month,  a report by the Center for Research on Energy and Clean Air (CREA) titled Laundromat: How the price cap coalition whitewashes Russian oil in third countries, revealed that Western countries bought $42 billion worth of laundered Russian crude in the form of various oil products from nations that are friendly towards Russia, with India leading the five other countries. For instance, India’s diesel exports tripled to ~1,600,000 barrels per day in March 2023, compared to a year ago, making diesel one of the largest components of India-EU trade.

Russia ditching the greenback is not without its own headaches. 


Business Insider has reported that Russia is accumulating $1B in Indian rupees per month and struggling to trade in the currency since India imports far more from Russia than the reverse. Overall, Bloomberg has estimated that Russia accumulated a staggering $147 billion in net foreign assets built up over 2022 alone due to sanctions and the new currency regime.

By Alex Kimani for Oilprice.com

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  • Mamdouh Salameh on June 15 2023 said:
    Russia is reported to have paid dividends from the Sakhalin 1 and 2 oil projects in Chinese yuan, a shift from its usual practice of paying in dollars. This was done not because of Western sanctions but because Russia no longer accepts the dollar as payment for its energy exports but is prepared to accept instead ruble, petro-yuan, UAE Dirham and Indian rupee.

    Three days ago, it was reported that Pakistan paid for Russian oil shipments in petro-yuan.

    President Putin started a full scale de-dollarization of the Russian economy in 2014 after the United States imposed sanctions on his country in the aftermath of the annexation of the Crimea. He followed it up in April 2022 by demanding payments for Russian oil and gas in ruble after Western sanctions were imposed on his country because of the Ukraine conflict.

    Since then the floodgates of de-dollarization have been opened widely with countries worldwide dropping the dollar.

    The global de-dollarization campaign is gaining momentum as countries around the world seek alternatives to the hegemony of the dollar. China, Russia, Brazil, India, ASEAN nations, Kenya, Saudi Arabia, and the UAE are now using local currencies in trade.

    China and Russia are trading in their own currencies while Beijing and Brazil have also dropped the dollar in bilateral trade. The UAE is selling gas to China in yuan. Southeast Asian nations in ASEAN are de-dollarizing their trade and promoting local payment systems.

    Even the Financial Times newspaper has acknowledged that a multipolar currency world is emerging.

    When Chinese President Xi Jinping visited Moscow in March this year, President Putin revealed that two-thirds of their bilateral trade estimated at $190 bn in 2022 is already conducted in the ruble and the yuan. He added that Russia supports using the yuan in transactions with its partners in Asia, Africa and Latin America.

    ASEAN is developing a cross-border digital payment system that would allow the use of local currencies in regional trade. ASEAN Briefing noted that Indonesia, Malaysia, Singapore, the Philippines, and Thailand agreed on this in November 2022.

    Another Southeast Asian nation, Malaysia, is publicly advocating de-dollarization.

    The unilateral sanctions the United States has imposed on countries all across the planet, in flagrant violation of international law, are backfiring. Many nations are now seeking financial alternatives, afraid that they could be the next target.

    Several countries on the African continent are also advocating de-dollarization. Kenya is already buying oil from the Gulf region with its own currency.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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