Sanctions

Market Rupture: Russia Faces Acute Yuan Shortage Amid Liquidity Crisis

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The Russian banking system is struggling with a severe shortage of Chinese yuan, the only major foreign currency still available for unrestricted international trade. On Thursday, overnight yuan lending rates on the Moscow Exchange skyrocketed to 44% per annum. Throughout the past year, these rates hovered near zero, but by mid-March 2026, they spiraled out of control, hitting 20% on Wednesday before the latest surge. The deficit stems from declining export revenues and the Finance Ministry’s decision to halt currency sales from the National Wealth Fund. Banks have exhausted the Central Bank’s 5-billion-yuan swap limit as of March 18. Unlike dollars or euros, yuan liquidity is strictly tied to trade, as Chinese banks remain reluctant to provide direct credit to Russian entities. This shortage has triggered a ruble collapse, pushing the yuan to 12.65 rubles and the dollar past the 86-ruble mark. Analytical summary: The March 2026 currency crisis exposes the inherent fragility of Russia’s “yuanization” strategy. Switching to the yuan has failed to provide stability, as Russia lacks access to deep capital markets, and Chinese institutions remain wary of secondary sanctions. For the EU, this serves as a clear indicator that the Kremlin’s financial buffers are thinning; the inability to secure liquidity even in a “friendly” currency leads to uncontrolled devaluation and rising costs for importers, inevitably fueling domestic inflation.

Russia Enters Fifth Year Unable to Liquidate Billions in Accumulated Indian Rupees

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India is still searching for ways to utilize accumulated Russian rupees, which remain effectively “frozen” in exporter accounts. According to Bloomberg, the Reserve Bank of India (RBI) is exploring options for Russian firms to direct these funds into domestic investments. Senthil Kumar, a senior RBI official, noted that Russian banks are constantly pushing for flexible solutions to address the liquidity deadlock. The issue traces back to 2022, when India surged purchases of discounted Russian oil using local currency. However, due to restrictions on the rupee’s international circulation, these funds became trapped. As early as 2023, the value of stranded payments reached $39 billion. Currently, India only permits partial reinvestment into its local stock market, subject to numerous regulatory hurdles. Analytical summary: The rupee crisis in March 2026 vividly illustrates the “de-dollarization trap” catching the Russian economy. Shifting trade to national currencies with “friendly” nations has resulted in a massive loss of liquidity: a huge portion of export revenue has turned into “dead capital” that cannot be used for imports or to stabilize the ruble. For the EU and global partners, this confirms that Russia’s financial isolation is working through indirect mechanisms, effectively forcing Moscow to subsidize the Indian economy by trading energy for non-convertible digits on a balance sheet.

China’s State Refiners Resume Russian Oil Purchases Amid Middle East Supply Crunch

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China’s state-owned oil companies, which suspended Russian oil purchases late last year, are returning to the market. According to Reuters, trading arms of Sinopec and PetroChina issued inquiries for Russian crude this week for the first time since November, taking advantage of a relaxation in U.S. sanctions. Indonesia, Thailand, and Pakistan are also reportedly in similar talks. The primary driver is a severe physical supply shortage. The blockade of the Strait of Hormuz, a transit point for about 20% of global oil and gas, has sharply restricted access to Middle Eastern supplies. Major exporters have been forced to scale back: Saudi Arabia cut production to 8 million barrels per day, while the UAE temporarily lost 60% of its output. Under these conditions, Russian crude remains the most viable alternative, staying cheaper than competing grades from Brazil and West Africa. Analytical summary: The return of China’s state giants to Russian contracts in March 2026 is a direct consequence of Middle Eastern instability, which has proven more effective for Moscow than any lobbying efforts. For the EU, this signals that the global energy deficit provides a “window of opportunity” for the Kremlin to bypass technological and financial isolation. However, this success is situational: China is acting out of energy survival rather than political solidarity. Russia’s reliance on Asian demand only deepens as the Strait of Hormuz remains blocked, granting Beijing more leverage to demand even steeper discounts once the crisis subsides.

European Council President Costa calls for security talks with Moscow while maintaining sanctions

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The President of the European Council, António Costa, has stated that the European Union must prepare for security negotiations with Russia. In an interview with the EFE agency, the politician emphasized that Brussels should be ready to develop a dialogue to avoid undermining U.S. President Donald Trump’s efforts to establish long-term peace in Ukraine. At the same time, Costa insisted on maintaining strict economic pressure. He advocated for continuing the embargo on Russian energy imports, calling this path fundamental for the EU. Earlier, EU Energy Commissioner Dan Jørgensen voiced a similarly “uncompromising” position. Analytical summary: António Costa’s statement in March 2026 appears to be an attempt to balance two opposing positions, which raises questions about the consistency of the EU’s strategy. On one hand, Brussels declares readiness for dialogue, effectively acknowledging the need for diplomatic concessions under pressure from Washington. On the other, it insists on continuing the energy blockade, which, amid global resource shortages, continues to strain the European economy itself. This ambiguity poses risks to EU unity: an attempt to “align” with the Trump administration while maintaining old sanction mechanisms may result in the EU being excluded from shaping the new security architecture, remaining merely an enforcer of restrictive measures that are losing their effectiveness.