The governments of Russia and China are reportedly planning to initiate barter trading systems. This move is seen as an effort to avoid banking systems that are under the surveillance of the United States.
What Happened: Anonymous sources involved in bilateral trade informed Reuters that both nations are contemplating using barter trading systems. These systems could potentially be in place as early as this fall, with agriculture being a likely sector for the initial deals, Reuters reported on Thursday.
Barter trading allows Moscow and Beijing to bypass payment issues, reduce the oversight of Western regulators on their bilateral transactions, and mitigate currency risk. It is understood that both countries are currently formulating regulations for barter trading.
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China and Russia have previously engaged in barter deals, with the last one occurring around 30 years ago. A senior manager at a prominent Russian bank confirmed the development of a barter scheme but refrained from sharing additional details.
A Russian government source stated that barter trading could address significant payment issues related to both sanctioned and civilian goods. Another source from a Russian industrial firm revealed that discussions are underway regarding the export of metals from Russia in exchange for machinery from China.
Why It Matters: The proposed barter trading system comes in the wake of significant challenges in the China-Russia trade relationship. Nearly 80% of bank transfers made in Chinese yuan are being returned without explanation, causing delays of up to six months in payments. This issue started in December when the U.S. implemented secondary sanctions targeting financial institutions aiding Russia in evading sanctions.
Furthermore, the latest round of U.S. sanctions on Russia is expected to reinforce the Chinese yuan's position as the primary currency for Russian trade, as per a Germany-based think tank. This trend could pose a real threat to the dominance of the dollar.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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