Russia has been forced to rapidly grow its use of the Chinese yuan when invoicing imports, new research has found, as efforts intensify to bypass western sanctions on dollarised trade.

In fresh analysis of Russian trade data, the European Bank of Reconstruction and Development (EBRD) finds that Russia invoiced 20% of all imports in the yuan in 2022, a sharp uptick from 3% in the previous year.

The upswing in Chinese yuan invoicing came at the expense of both the dollar and the euro, both of which had consistently been used for roughly 80% of Russia’s imports prior to the war – but fell to a low of 67% last year.

There has been a “substantial increase in the use of the yuan in Russia’s imports from China, accompanied by a declining share of the US dollar”, says EBRD chief economist, Beata Javorcik.

She says the bank has “also observed an increase in the use of the yuan as an invoicing currency by third countries”.

The findings are outlined within an EBRD working paper titled Exorbitant privilege and economic sanctions, analysing millions of transactions involving Russian firms from January 2016 to the end of 2022.

The report lays bare the impact of western sanctions imposed on Russian firms – and their banks – such as the exclusion of major lenders from the Swift payments system in response to the Ukraine invasion.

Such restrictions have driven up costs and made US dollar invoice processes more complex, the EBRD says.

The rise in yuan invoicing was most notable for imports coming from China. Russian importers only invoiced 20% their imports from China in the yuan in 2021 but this share grew to over 60% last year.

There was also a jump in yuan invoicing for imports from third countries, including Taiwan, the Philippines, Malaysia, the UAE, Thailand, Japan, Tajikistan and Singapore. In one notable example, Russia invoiced 18% of all imports from Mongolia in the yuan last year, up from zero in 2021.

The data suggests Russian importers are using the yuan when seeking to bypass US and EU sanctions on certain goods.

The yuan’s share of transactions related to internationally sanctioned dual-use and industrial-capacity goods was typically between 6 to 8% higher than for non-sanctioned goods, the EBRD finds.

The research comes amid a growing push by Russia and China, alongside other members of the Brics alliance, to reduce their reliance on the US dollar.

The Brics group is set to be expanded from January, and experts say the upcoming entry of Saudi Arabia will add impetus to de-dollarisation efforts, given the state accounted for 17% of global crude exports last year.

Members of the group, which also includes India, Russia, Brazil and South Africa, have floated the idea of a common Brics currency, which could be used for both international trade and investments.

However, Brics members made little mention of these plans in a statement published following their latest summit in Johannesburg.

After that event, held in August, they instead “stressed the importance of encouraging the use of local currencies in international trade and financial transactions between Brics as well as their trading partners”.

Such developments have given rise to suggestions that the yuan could challenge the US dollar’s role in global trade.

The EBRD warns that while the US dollar’s dominance in global trade makes sanctions more effective, there is evidence that such measures may ultimately erode the greenback’s status in the coming years.

“The results are consistent with the use of trade sanctions gradually weakening the exorbitant privilege enjoyed by the US dollar and leading to the fragmentation of international payment systems, with the emergence of alternative global currencies such as CNY,” the bank says.

At a recent GTR conference in Geneva, one commodities trader said a split is emerging between a US dollar sphere on the one side, “and on the other side, Russia and China… starting to use the Chinese currency”.

They suggested a dichotomy may develop where the two spheres use different currencies for the same products, and then a third group of countries that are “happy to use whichever”.

But while the yuan is increasingly being used for bilateral trade settlements, the greenback remains dominant.

Between 1999 to 2019, the dollar accounted for 96% of trade invoicing in the Americas, 74% in the Asia Pacific, 79% in the rest of the world and 66% in Europe, the US Federal Reserve noted in June.

A July research note from Goldman Sachs said yuan usage remains “limited globally, especially relative to the size of China’s GDP and its influence in trade”, and pointed to Beijing’s capital controls as a key limiting factor.