Russia asks China to give it loans, agrees to take money in yuan - Reuters

Russia wants to take loans from China, but in fact on the latter's terms. It is assumed that the loan will be received in the Chinese currency, the yuan.

This was stated by Russian Finance Minister Anton Siluanov, Reuters reports. He noted that Russia and China have been negotiating a loan for a long time, but there is no decision yet.

"Negotiations with Chinese partners have been going on for a long time. There is no decision yet. We discussed this topic at the end of last year at an interministerial dialogue," the Russian minister said.

He emphasized that Russia is ready to start testing payments in digital currencies with China. And also with the countries of the Eurasian Economic Union.

At the same time, let us recall that at the beginning of the full-scale invasion of Ukraine, Russia intended to demonstrate its strength and dominance to Europe and force it to pay for gas in rubles. However, the plan did not work, and both individual EU member states and the union as a whole refused to comply with the Kremlin's demands.

Later, Russian President Vladimir Putin said that Russia was ready to switch to foreign trade payments in yuan. Not only in trade with China but also with third countries, including African and Latin American states. This was followed by the Kremlin's actual agreement to receive a loan from China in the latter's currency.

Russia is running out of money for a rainy day

Meanwhile, in almost 2 years of full-scale war, Russia has spent half of the money from the National Welfare Fund (NWF), the main source of resources for a rainy day. By the end of 2023, almost 4 trillion rubles were spent from the NWF, and now only 5 trillion remain in its so-called liquid part (savings in foreign currency and gold that can be easily spent if necessary).

At the same time, the fund also includes an illiquid part. In general, the total amount of the NWF decreased by 12%, to 12 trillion rubles. However, the illiquid part, which exceeds the liquid part, can only be invested by the state, so it will not be possible to inject this money into the economy.

As analysts explained, Russia has less money for a rainy day because during the first half of 2023, Russian oil was traded at a discount to other brands, the ruble was relatively strong, so the necessary volumes were not collected - and the currency was sold from the NWF. However, in the summer, the situation changed: prices rose, the ruble weakened, and the authorities were ready to finally replenish the "kubyshka".

"But after Prigozhin's mutiny, the dollar soared to 100 rubles. And the additional demand for currency would have accelerated the devaluation even more, so the NWF was not replenished," they said.

Due to the need to finance the expensive war - "the National Defense and National Security items increased by 60% compared to 2021" - budget expenditures exceeded the statutory rate by 3 trillion rubles. In addition, the budget deficit was also higher than forecast.

However, it is noted that the NWF "is only a part of Russia's reserves". Therefore, it is incorrect to say that Russia is running out of money to spare. However, there are indeed many doubts about the future of the fund.

"Formally, if the same rate of spending is maintained, the liquid part of the fund will be exhausted by 2025. ... After the [Russian presidential] elections in March 2024, experts expect new sanctions and, as a result, problems for the economy that may require new rounds of funding," the analysts summarized.

As OBOZ.UA reported earlier, the Russian economy, inflamed by the war against Ukraine, is operating at its limits and showing increasing signs of overheating. Accordingly, it will no longer be able to continue its rapid growth. At the same time, Russia itself is increasingly dependent on the continuation of the war, the costs of which are acting like a drug on its economy.

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