Russia and China pledged on Tuesday to settle more bilateral trade in rouble and yuan and to enhance cooperation between banks, Russia’s First Deputy Prime Minister Igor Shuvalov said, as Moscow seeks to cushion the effects of Western economic sanctions.
Shuvalov told reporters in Beijing that he had agreed an economic cooperation pact with China’s Vice Premier Zhang Gaoli that included boosting use of the rouble and yuan for trade transactions.
The pact also lets Russian banks set up accounts with Chinese banks, and makes provisions for Russian companies to seek loans from Chinese firms.
“We are not going to break old contracts, most of which were denominated in dollars,” Shuvalov said through an interpreter.
“But, we’re going to encourage companies from the two countries to settle more in local currencies, to avoid using a currency from a third country.”
Spurred on by their often fraught relations with the United States, Russia and China have long advocated reducing the role of the dollar in international trade.
The quest to limit the dollar’s dominance became more urgent for Moscow this year when U.S. and European governments slapped sanctions on Russia to penalize the country for supporting separatist rebels in Ukraine.
Washington and Brussels have excluded Russia’s state banks and top energy firms from capital markets, applying measures that mean even companies not blacklisted will struggle to raise large loans outside their domestic market.
For China, curtailing dollar’s influence fits well with its ambitions to increase the clout of the yuan and turn it into a global reserve currency one day. With 32 percent of its $4 trillion foreign exchange reserves invested in U.S. government debt, Beijing wants to curb investment risks in dollar.
Chinese firms’ proposals to invest in more than 30 projects in Russia were also discussed, Shuvalov said. The projects, some of which were valued at several hundred million dollars, included building roads and bridges, resource development, agricultural production and transportation facilities, he added.
Zhang will visit Moscow in October for further talks on bilateral cooperation, particularly in the traditional energy sector, Shuvalov said.
China and Russia signed a $400 billion gas supply deal in May, securing the world’s top energy user a major source of cleaner fuel and opening a new market for Moscow as it risks losing European clients over the Ukraine crisis.