An important US license that permits Russian yuan transactions is set to expire in mid-October, potentially leading to Chinese banks becoming more cautious in conducting business with Russia. This could exacerbate Moscow's existing shortage of yuan, as Russian banks have already nearly depleted their reserves of the Chinese currency, as reported by Reuters last month.
The impending expiration of the license from the US Treasury, scheduled for October 12, could result in Chinese banks refusing to process payments from Russia, according to a source familiar with the matter. The license currently allows certain transactions between the Moscow Exchange and the National Clearing Center to gradually wind down rather than abruptly ceasing.
Following the closure of dollar and euro trading on the Moscow Exchange due to recent Western sanctions, the expiration of the Treasury license would halt all conversion transactions involving Chinese banks and their subsidiaries, leading to the closure of their positions on the exchange, as per another source.
This development poses challenges for Moscow, which heavily relies on the Chinese yuan amid ongoing trade restrictions imposed by Western nations. In June, the yuan accounted for almost all foreign-exchange transactions on the Moscow Exchange, according to a Bank of Russia report. However, Russian banks have nearly exhausted their yuan reserves, partly due to Chinese banks being more hesitant to engage in transactions with Russia.
Furthermore, Chinese banks have reportedly withheld billions of dollars in yuan payments intended for Russia, contributing to the existing yuan shortage. The combination of these factors could potentially impact Russia's ability to access Chinese yuan for its financial transactions, potentially leading to further economic challenges for the nation.