Resilience of Russian Economy, beyond doubt

Bloomberg reports that Russian government has touted robust domestic demand in boosting its 2024 growth forecast on Tuesday. While some might be tempted to dismiss the move as geopolitical bravado in the face of the US stepping up Ukraine aid, Russian economic strength is real.

In fact, Moscow’s new 2.8% GDP projection weighs in under the IMF’s latest ‑ also upgraded forecast, of 3.2%, released last week.

It might be tempting to put this resilience down to a massive defense build-up. But the Washington-based IMF had much the same assessment as President Vladimir Putin’s team: a strong job market and swift wage rises are helping to power consumer spending. The fund even cautioned “there are some signs of overheating,” with unemployment at a record low.

What about all the Western sanctions, the mass emigration of Russian talent and the departure of a number of global corporate giants? Alexander Isakov at Bloomberg Economics offers some insight.

The sanctions on Russian energy aren’t as tight as they were for, say, Venezuela and Iran, thanks in large part to the West not wanting to worsen its own cost-of-living shock with a further surge in oil prices.

Some financial sanctions had already been imposed in 2014 after the Crimea invasion, and Russia had already amortized that cost.

Russian households remain confident thanks to a tight labor market, with the jobless rate at 2.8%. A largely voluntary military recruitment model, using monetary incentives, has let consumers keep calm and carry on.

Since some large multinationals have stayed in place, will Russia’s economy just keep on ticking?

Isakov notes that part of job market’s tightness is indeed a side effect of fiscal outlays tied to the war, funded in part by energy exports. Moscow needs crude prices to stay around the current US$90 a barrel levels to keep the budget balanced — a slump to, say, US$60 could make things difficult.

The IMF sees growth slowing to 1.8% next year, and cautioned that Russia’s potential growth rate has dropped to around 1.25% from 1.7% before the war.

This would mean that Russia’s income per capita may no longer converge toward Western European levels in the medium to long term, but for now, Russia’s chugging right along

 

Iran oil sector annual growth doubles

Iranian oil sector has witnessed a twofold increase in its annual economic growth in autumn 2023, reports country’s Finance and Economic Affairs said.

Ehsan Khandouzi, who made the statement in a press conference, added the oil industry’s growth reached 21.8% in the season from 10.8 % registered in autumn 2022, the country has largely succeeded in overcoming sanctions.

The 13th administration has made great efforts to neutralize sanctions since it took office in August 2021, the official underlined, praising the incumbent government’s economic diplomacy and attention to foreign investment.

Last week, Iran’s Plan and Budget Organization (PBO) head, Davoud Manzour, said the country’s economic growth in autumn 2023 was reported at 5.1% including the oil sector’s growth and 2.5% without oil.

According to Khandouzi, Iran’s non-oil trade with 15 neighboring states during the 11 months of the current Iranian calendar year hit US$55 billion, 2.5% higher than the figure during the corresponding period in its preceding year.

Foreign investments made since the incumbent government took over have exceeded US$11 billion, adding the oil sector has attracted US$4.8 billion, the industrial sector US$3.8 billion, the services sector US$617 million, and the agricultural sector US$580 million.

 

Bangladesh: Opposition Fears Sanctions

Politicians, economists and analysts on Saturday said that the ruling Awami League (AL) will be responsible mainly if any Western sanctions or restrictions are imposed on Bangladesh as the government remains largely indifferent to their repeated calls for upholding democracy and human rights.

On Friday, making an oblique reference to the main opposition Bangladesh Nationalist Party (BNP), Prime Minister Sheikh Hasina said that the party is plotting to create a famine situation in February–March with the support of some foreign countries.

Earlier, in a recent statement AL General Secretary, Obaidul Qauder said that the BNP is relentlessly conspiring to have sanctions imposed against the people of the country with false and fabricated information.

Former President of Communist Party of Bangladesh Mujahiul Islam Selim told New Age that the AL government has no wish for holding inclusive and credible elections and it will be responsible if any sanctions are imposed for undermining the democratic electoral process and violating human rights as well.

The ruling AL and all other political parties and the people as well know that no free, fair and credible general elections can be held under a partisan government, said Selim.

Moreover, the AL also knows that they will invariably lose if a free, fair and credible general election is held, said the senior politician.

For this they became eager to hold a false and farcical general election, Selim added.

The government could still hold an inclusive general election by following the special constitutional clause and convening parliamentary sessions to pass the bill of caretaker government, he said.

Referring to the Prime Minister’s complaint that Bangladesh may face a famine after the general election, Selim said that such a comment can be a foreboding sign for the country and the wrong policies of the government would be responsible for that.

BNP standing committee member Abdul Moyeen Khan said, “If this were to be true that the BNP is responsible for the Western sanctions imposed on certain Bangladeshis who are undermining a free and fair election process then this would pre-suppose that BNP is running the decision making process of the Western Governments ! The absurdity of such Awami allegations is obvious to everyone and doesn’t deserve any consideration whatsoever.”

“The fact of the matter is, the forthcoming elections have already been rendered into a sham election by way of publicly horse trading the parliament seats not only between their partners but also with their domesticated opposition aspirants well before the actual election has even taken place. Such an election caricature cannot be acceptable to any democracy loving people whether inside or outside the country,” he observed.

Former cabinet secretary Ali Imam Majumder told New Age that if any sanctions are imposed on Bangladesh from the Western countries, alongside economic impact it would be shameful for the nation.

Former diplomat Humayun Kabir said that accusing the opposition for possible sanctions is nothing but a political rhetoric.

 The European Union and United States are major markets for Bangladesh’s garment sector. If any sanctions are to be imposed on this sector, it will be dangerous for Bangladesh.

Economists said that the country’s foreign exchange reserve and import payments would be badly affected, if any kinds of economic sanctions are imposed on the country in such a struggling economic situation.

Former World Bank Dhaka office chief economist Zahid Hussain said that any kinds of sanctions or trade penalties would create impact on the country as the economy has already been struggling due to shortage of dollars.

‘If any sanctions affect the country’s export-oriented industries, mainly the readymade garment industry, it would create an adverse impact on the country’s foreign exchange reserve and employment as well,’ he added.

Asked about the risk of famine by March 3 and whether the government has taken adequate measures to tackle such a crisis, he said that the government has to disseminate what kind of measures it has taken to overcome the situation.

Dhaka University economics professor MM Akash said that any kind of economic sanctions or penalties would create dollar shortages to lead to a crisis in the imported goods.

The chance of famine is little if the government takes adequate early measures as the country’s agricultural sector is quite strong. The poor people will not be affected much. But, the middle and higher income groups will suffer the brunt of crisis as they would not be able to use imported goods due to dollar shortages.

On September 22, the US Department of State said that they had started imposing visa restrictions on individuals involved in undermining the democratic election process in Bangladesh.

Under this policy, the US said that it would be able to restrict the issuance of visas for any Bangladeshi individuals believed to be responsible for, or complicit in, undermining the democratic election process in Bangladesh.

 

United States pays US$43 million to Iran

Iran has received US$43 million in damages from the United States under a case of the Iran-United States Claims Tribunal.

The amount of money was placed into the country’s bank account in The Hague, the Netherlands, according to the Center for International Legal Affairs of the Legal Vice Presidency of the Iranian President on Sunday.

The case involves Iranian properties that had not been transferred to Iran after the conclusion of the Algiers Declarations.

“The Iran-United States Claims Tribunal issued Award No. 604 in favor of Iran and ruled that the US government must compensate for the damage it caused to the government of the Islamic Republic of Iran,” read the statement.

It went on to add, “Following repeated and persistent follow-ups by the Center for International Legal Affairs of the Legal Vice Presidency of the Iranian President to secure Iran’s rights based on the verdict, the amount of US$43 million has been deposited by the US government into the account of the Islamic Republic of Iran at a Dutch bank in The Hague in damages and its interest.”

The move comes as the United States has suffered a string of legal setbacks in international courts against the Islamic Republic.

Luxembourg released US$1.7 billion of Iran’s frozen assets following a ruling issued by the European country's Supreme Court, the Central Bank of Iran (CBI) reported on Saturday.

As reported, with the legal actions and follow-ups of the CBI, at the current stage, the legal obstacles to access US$1.7 billion assets of this bank in Luxembourg have been removed and this fund is now available to the Central Bank of Iran.

Back in September, the administration of the US President Joe Biden had given foreign banks a general waiver that allowed them to move US$6 billion of frozen Iranian assets from South Korea to Qatar without worrying about Washington’s sanctions.

With the waiver, banks in Europe, West Asia, and Asia could convert blocked Iranian funds in South Korea into cash that can be transferred to Qatar’s central bank and used by Tehran to buy non-sanctioned commodities without breaking US sanctions.

 

European energy crisis may be back soon

According to the Financial Trend Forecaster, European natural gas prices soared almost 40% on the risk of a global liquefied natural gas shortage. European wholesale power prices remain below the record highs of the energy crisis but have steadily climbed as the volatility in the international commodity spectrum underscores the fragility of the European energy system.

Unfortunately, the European Union bureaucrats declared the end of the energy crisis as if it were the result of decisive policy action, but the reality is that the energy problem in the EU was only diminished by purely external factors: a very mild winter and the decline in global commodity prices due to the central bank rate hikes. Thus, the energy crisis remains, and the problems of security of supply and affordability of the system persist.

The European Union’s dependency on Russian gas has not been solved; it has only been disguised by a massive increase in dependency on coal (lignite) in the case of Germany and expensive liquefied natural gas imported from the rest of the world.

At the end of 2022, Germany’s energy mix was the clearest example of its energy policy failure. Hard coal and lignite accounted for 31.2%, natural gas 13.8%, and mineral oil 0.8%, with nuclear at 6.0%. After almost 200 billion euros in renewable subsidies, Germany needs more coal and imported natural gas.

What did the government decide after facing the mistake of shutting down almost all its nuclear fleet? Double down and continue with the process of closing the remaining ones. No wonder Germany is in recession. Its industrial model requires abundant and affordable energy, and the different governments have made the cost of energy uncompetitive.

Same is the problem with Spain, the government decided to implement an “Iberian exception” that eliminates the cost of gas from the wholesale power price only to charge it back to consumers as a surcharge in the bill. The result is Spain has the fifth highest electricity bill in Europe, which sent hundreds of millions of euros to France and Portugal that purchased the subsidized energy while the Spanish consumer paid the bill to natural gas producers, and its imports of Russian liquefied natural gas (LNG) soared, but the government tried to convince citizens that LNG from Novatek is not Russian gas because it is not a pipeline Gazprom supply, even when the supplier is a leading Russian energy multinational.

Even worse, the consumers have not seen the improvement in commodities in their bills. If we look at the latest reported Eurostat figures of household electricity prices, these increased in all but two EU Member States in the second half of 2022, compared with the second half of 2021, just as commodities slumped in international markets.

The average for the EU stands at 252 euros per MWh and 261 euros per MWh for the euro area. This is 20% to 30% higher than the average residential electricity rate in the United States, according to data from Energy Sage.

The European energy crisis was not solved. It was disguised thanks to a mild winter and the slowdown in coal and gas imports from China. European governments continue to place all their bets on a misguided energy transition that ignores security of supply and competitiveness and will make the EU depend on China for rare earths and metals as well as the US and OPEC for commodities.

The European Union should have abandoned ideological decisions and allowed technology, competition, and industry to provide the optimal solution that delivers a competitive and secure supply of energy.

Deciding to forbid the development of domestic resources and focus on intermittent and volatile sources of energy before the battery technology is fully operational is an enormous mistake that condemns the European Union to suffer higher costs and lower growth. Environmental policies must be considered from a global perspective.

The EU accounts for less than 10% of global emissions but almost 100% of the cost. It needs to focus on competitiveness, security of supply, and respect for the environment from an industrial perspective. Ignoring the importance of making the most of nuclear, hydroelectric, gas, and all other available sources is dangerous.

In China or the United States, affordability, security of supply, and competitiveness are the drivers of energy policy.

In Europe, it is a misguided view of “not in my backyard” that is making the continent more dependent on others, not less. Subsidies are delaying the necessary development of intermittent and volatile energy sources because policymakers reject the importance of creative destruction and competition as driving forces of progress. Interventionism is not delivering better or cheaper energy; it is making the European Union lose in the technology and energy security race.

Iran will reopen embassy in Saudi Arabia on Tuesday

The Iranian Foreign Ministry announced on Monday that the country would re-open diplomatic missions in Saudi Arabia in the next two days.

Nasser Kanaani, spokesman of the ministry, said in a statement that the Iranian embassy in the Saudi capital Riyadh and consulate general and representative office to the Organization of Islamic Cooperation (OIC) in Jeddah will officially re-open on Tuesday and Wednesday.

The decision was part of the process to finish implementing the agreements, reached between Saudi Arabia and Iran to resume bilateral relations, according to a statement published on the ministry’s website. Iran has appointed Alireza Enayati, a veteran diplomat, as its ambassador to Saudi Arabia.

Meanwhile, a diplomatic source in Riyadh said that the reopening of the Iranian embassy will take place on Tuesday at 6:00 pm in the presence of new Ambassador Enayati. “To implement the agreement...Iran’s embassy in Riyadh, our Consulate-General in Jeddah and the office of our permanent representative to the Organization of Islamic Cooperation will be officially re-opened on Tuesday and Wednesday,” Kanaani said earlier.

Kanaani added that the embassy in Riyadh and its consulate-general in Jeddah had already begun operating to help Iranian pilgrims heading to Saudi Arabia to perform Hajj, set to start by the end of June. The announcement comes after Tehran named Alireza Enayati as its ambassador to Saudi Arabia last month.

Under a Chinese-brokered deal reached in March, Saudi Arabia and Iran agreed to re-establish relations, which were severed in 2016 following an attack on the Saudi embassy in Tehran and consulate in Mashhad.

 

Lloyd’s Register drops ships of top Indian carrier of Russian oil

Lloyd's Register has told India's Gatik Ship Management, a major carrier of Russian oil since the Ukraine war that it will withdraw certification of 21 of its vessels by June 03, 2023.

It is the latest setback for Gatik, which was also been forced to find new flags for 36 of its ships after they were deflagged by the St. Kitts & Nevis International Ship Registry.

"Lloyd's Register is committed to facilitating compliance with sanctions regulations on the trading of Russian oil," it said in an email to Reuters. "Where supported by evidence, we withdraw class and services from any vessels found by the relevant authorities to be breaching international sanctions."

Classification societies such as Lloyd's Register in London provide services including seaworthiness checks, certification that is vital for securing insurance and entry to ports.

Lloyd's Register said, 11 of the Gatik vessels it was declassifying were also certified by the Indian Register of Shipping (IRClass).

Gatik, which is based in the Indian city of Mumbai according to shipping databases, did not respond to emailed requests for comment.

A major US insurer, the American Club, also told Reuters it was no longer providing cover for Gatik ships, while Russian insurer Ingosstrakh said it would not work with Gatik in future.

Neither the insurers, Lloyd's Register nor the flag registry spelled out exactly why they have dropped business with Gatik.

 

UAE new hub of Russian gold

The United Arab Emirates has become a key trade hub for Russian gold since Western sanctions over Ukraine cut Russia's more traditional export routes.

The records, which contain details of nearly a thousand gold shipments in the year since the Ukraine war started, show the Gulf state imported 75.7 tons of Russian gold worth US$4.3 billion - up from just 1.3 tons during 2021.

China and Turkey were the next key destinations, importing about 20 tons each between February 24, 2022 and March 03, 2023. With the UAE, the three countries accounted for 99.8% of the Russian gold exports.

Ever since the Ukraine conflict started, many multinational banks, logistics providers and precious metal refiners stopped handling Russian gold, which had typically been shipped to London, a gold trading and storage hub.

The London Bullion Market Association banned Russian bars made from March 07, 2022, and by the end of August 2022, Britain, the European Union, Switzerland, the United States, Canada and Japan had all banned imports of Russian bullion.

The data shows Russian gold producers quickly found new markets in countries that had not imposed sanctions on Moscow, such as the UAE, Turkey and China.

Louis Marechal, a gold sourcing expert at the Organization for Economic Co-operation and Development said there was a risk Russian gold could be melted down and recast and then find its way back into US and European markets with its origin masked.

"If the Russian gold comes in, is recast by a local refiner, sourced by a local bank or trader and then sold on into the market, there you have a risk," he said. "This is why carrying out due diligence is instrumental to end buyers wishing to ensure they respect sanctions regimes."

The UAE government's Gold Bullion Committee said the state operated with clear and robust processes against illicit goods, money laundering and sanctioned entities.

"The UAE will continue to trade openly and honestly, with its international partners, in compliance with all current international norms as set down by the United Nations," it said.

In a bid to further isolate Russia, Washington has warned countries, including the UAE and Turkey, they could lose access to G7 markets if they do business with entities subject to US sanctions.

Rising concerns about US proxy war with Russia

Reportedly a number of Republican lawmakers, including three senators have expressed grave concerns about a United States proxy war with Russia.

“A proxy war with Russia in Ukraine is not in the strategic interest of the United States and risks an escalation that could spiral out of control” they warned in a letter to President Joe Biden.

The Ukraine war has entered its second year with no end in sight as Washington brushes aside any peace initiatives by third parties, the latest by China and Brazil.

The lawmakers warned that the American aid to Ukraine threatens further escalation while lacking much needed strategic clarity.

The United States is the number one financial sponsor of the war. To date, it has contributed US$113 billion, mostly in military assistance, which the lawmakers said is aimed to prop up a government that is historically mired in corruption.
They pointed out that this comes at a time when the American people suffer from record inflation and a crippling national debt.Time and again, the executive branch has used debt as a tool to finance foreign wars to the detriment of the American taxpayer.

The legislators have highlighted how the US strategy towards Ukraine is pushing Washington's two greatest adversaries closer together.

In early February 2022, the presidents of China and Russia reminded the world of their no limits partnership in their first face-to-face meeting in two years.

On Friday, China’s Foreign Ministry said no country has the right to interfere in its relationship with Russia, as the two sides are sovereign, independent countries.

A spokesperson said, "China and Russia follow the principle of no-alliance, no-confrontation and no-targeting of any third party and are committed to developing a new type of major-country relations featuring mutual respect, peaceful coexistence and win-win cooperation. This is entirely different from the US practice of forming exclusive blocs and stoking bloc confrontation.

“Both China and Russia see the US as inextricably opposed to their interests and security. The depth of US involvement in Ukraine only gives credence to this narrative,” the letter said.

In their address to Biden, the American lawmakers said US national interests and those of the Ukrainian people are best served by encouraging negotiations to end the conflict. "We strongly urge you (Biden) to advocate for a negotiated peace".

Ironically, this is the same approach that the entire world has been advocating for, with the exception of the US-led NATO military alliance. 

Russia, in particular, has repeatedly warned that pouring weapons into Ukraine will only prolong the war and the suffering of the Ukrainian people.

“The current strategy of sanctions and drawn-out aid will only prolong the conflict, leading to escalation and more violence. Our national and economic security demands an alternative,” the lawmakers wrote. 

The letter pointed out US military assistance also extends to military training and intelligence support and warned of the risk of provoking a direct war with Russia.

"The extent of our aid makes it increasingly difficult to deny Russian accusations of US complicity in a proxy war. Vladimir Putin's advisors are already framing the conflict as a military confrontation Russia and NATO, and above all the United States and Britain, Russian tolerance for fighting a proxy war with NATO could run out at any point."

They added that Moscow's decision to take military action in Ukraine should be evidence enough of its willingness to use military force and should give us pause in continuing to push the limits at the risk of catastrophe.

"With every new aid package and every new weapon provided to Ukraine, the risk of direct conflict with Russia climbs," the letter added.

"The Biden administration’s virtual blank check funding of this conflict for as long as it takes, without any defined objectives or accountability, distracts from our country’s most pressing challenges."

“Unrestrained US aid for Ukraine must come to an end, and we will adamantly oppose all future aid packages unless they are linked to a clear diplomatic strategy designed to bring this war to a rapid conclusion.”

They also spoke of a delusional US strategy, which has made the US military weaker as it will take months or, in some cases, years to manufacture a depleted weapons stockpile being shipped to Kyiv.

“Should our actions entangle us in a confrontation with Russia now or should conflict erupt in the Indo-Pacific in the coming years, we fear that our military will be woefully unprepared to meet these challenges as a direct result of what has been shipped to Ukraine,” they said.

The senators and representatives also criticize the Biden administration’s decision to send High Mobility Artillery Rocket System (HIMARS) to the Ukrainian military. That decision was seen as a serious provocation, given the enhanced capabilities these weapons afforded, according to the lawmakers.

The letter mentions the Biden administration's plans to ship M1 Abrams tanks to Ukraine, which require months to ship and training for Ukrainian crews, and to send ground-launched small-diameter bombs, which would also require months to ship.

On top of the US$113 billion that Congress has authorized for Ukraine, the Biden administration is still drawing funds from the US$45 billion package approved in December 2022. That aid is expected to be exhausted by the summer, meaning the White House will likely ask Congress to authorize more funds soon.

In February, Representative Mathew Gaetz accused the Biden White House as well as members of both parties of spending tens of billions of dollars in Ukraine to keep a war going that does not satisfy any US national interest other than making US weapons manufacturers happy.

"How much more for Ukraine? Is there any limit?" Gaetz asked on the floor of the US House of Representatives. "Which billionth dollar really kicks in the door? Which redline we set will we not later cross?"

US Representative Marjorie Taylor Greene recently told US media that Ukraine was not the 51st state and that she has to focus on fixing the problems her constituents and the American people are facing.

“We’re ignoring our own people’s problems... the United States needs to be pushing for peace in Ukraine, not funding a proxy war with Russia.”

“Politicians have given over US$100 billion of taxpayer money to Ukraine,” a spokesperson for Senator Rand Paul said. “Taxpayers deserve to have a full accounting of how their money is being used overseas, particularly before even more is asked of them and especially since priorities in our own nation are being neglected.”

The arguments against blank checks for Ukraine appear to be gaining popularity among regular Americans. The support for unconditional military aid has decreased notably, from 60% in May 2022 to 42% this February. The biggest drop has come from Republicans, according to a poll by The Associated Press-Norc Center for Public Affairs Research.

The letter comes as Ukraine received US-made Patriot surface-to-air guided missile systems, which will further satisfy US arms manufacturers.

Can Yuan Replace US Dollar?

Chinese entrepreneur Wang Min is delighted about Russia's embrace of the yuan. His LED lights company can price contracts to Russian customers in yuan rather than dollars or euros, and they can pay him in yuan. It's win-win, he says.

Wang's plans have been transformed by the conflict in Ukraine and the subsequent Western sanctions on Moscow that have shut Russia's banks and many of its companies out of the dollar and euro payment systems.

His contract manufacturing business with Russia has been small in the past, but now he's preparing to invest in warehousing there.

"We hope that next year sales in Russia can account for 10-15% of our total sales," said the businessman from China's southern coastal province of Guangdong, whose annual revenue of about US$20 million mainly comes from Africa and South America.

Wang is seeking to capitalize on a rapid "yuanization" of Russia's economy this year as the isolated country seeks financial security from Asian powerhouse China. He sees a win-win situation in Chinese exporters reducing their currency risks and payment becoming more convenient for Russian buyers.

While the yuan, or renminbi, has been making gradual inroads into Russia for years, the crawl has turned into a sprint in the past nine months as the currency has swept into the country's markets and trade flows, according to a Reuters review of data and interviews with 10 business and finance players.

Russia's financial shift eastwards could boost cross-border commerce, present a growing economic counterweight to the dollar and limit Western efforts to pressure Moscow by economic means.

Total transactions in the yuan-rouble pair on the Moscow Exchange ballooned to an average of almost 9 billion yuan (US$1.25 billion) a day last month, exchange data analyzed by Reuters showed. Previously, they rarely exceeded 1 billion yuan in an entire week.

"What happened was that it became suddenly very risky and expensive to keep traditional currencies - dollar, euro, British pounds," said Andrei Akopian, Managing Director of Moscow-based investment firm Caderus Capital, citing the potential danger of a bank that keeps foreign currency deposits being sanctioned.

"Everybody was motivated and even pushed towards the rouble or other currencies including, and first of all, the renminbi."

Indeed, yuan-rouble trading totalled 185 billion yuan in October, more than 80 times the level seen in February when Russia launched what it refers to as a special military operation in Ukraine near the end of the month, according to exchange data.

The surge of interest has seen the yuan's share of the currency market jump to 40-45% from less than 1% at the start of the year, said Dmitry Piskulov, international projects head at the Moscow Exchange's foreign-exchange market department.

By comparison, the dollar/rouble pair, which commanded more than 80% of trading volumes on the Russian market in January, has seen its share drop to about 40% as of October, according to exchange data and the central bank.

Until April, Russia didn't even make the top 15 list of countries using the yuan outside mainland China, in terms of the value of inbound and outbound flows, according to data from global financial networking system SWIFT.

It has since jumped to No. 4, lagging only Hong Kong, the city's former colonial ruler Britain and Singapore.

To put this in a global context, though, the dollar and euro are still by far the dominant currencies, representing more than 42% and 35% of flows respectively as of September this year. The yuan has risen to almost 2.5% from below 2% two years earlier.

Wang's business optimism is echoed by Shen Muhui, who heads a trade group for small exporters to Russia in neighbouring Fujian province. He said more and more Russian buyers were opening yuan accounts and settling transactions directly in the Chinese currency, which he said was a big advantage.

"The Russia-Ukraine conflict has brought opportunities for Chinese businessman," said Shen, adding that his association had received many inquiries from Chinese companies interested in doing business in Russia.

It's not only Chinese companies, or small companies, joining the yuan train. Seven Russian corporate giants, including Rusal, Rosneft and Polyus, have raised a total of 42 billion yuan in bonds on the Russian market, according to Reuters calculations, and the list could grow with No.1 lender Sberbank and oil firm Gazpromneft saying they're also considering renminbi debt.

Aluminium producer Rusal, which buys raw materials from China and then sells a large chunk of its finished goods there, told Reuters it had stepped up the share of yuan used in those purchases and sales this year, and that the share would continue to rise, though it declined to provide a detailed breakdown.

While President Vladimir Putin has long sought to reduce Russia's reliance on the dollar, geopolitics has turbo-charged this trend in 2022.

China, the world's No. 2 economy, is the biggest global power not to join economic sanctions against Russia. Indeed, Putin and Chinese President Xi Jinping sealed a no limits partnership in February, weeks before Moscow launched what it describes as a "special military operation" in Ukraine.

The yuan comprised about 19% of Russia's trade settlements with China in 2021 versus the dollar's 49% share, Andrey Melnikov, deputy director at international cooperation department at the Russian central bank, said in September.

While 2022 figures haven't been published yet, the Chinese currency is gaining ground, according to Melnikov, who told a conference that demand for yuan liquidity had risen sharply due to reduced access to traditional payment methods and the freezing of its overseas gold and foreign exchange reserves.

The central bank declined to comment for this article.

Bank governor Elvira Nabiullina is tracking the growth, telling lawmakers this month that the influx of yuan illustrated a transformation of the currency composition of our economy.

Regulators are also aware of potential perils, such as a disparity between a growing number of yuan-held current accounts and deposits of the currency, with yuan-denominated lending only starting to develop.

The central bank has said lenders should seek to reduce the growing risks of yuanization of their balance sheets - or gaps between yuan assets and liabilities - by increasing payments in yuan for imports, investing in yuan-denominated securities or using yuan in trade transactions with other countries.

Regulators do not plan to limit yuan usage now and may encourage banks to use more by relaxing provisioning requirements for the currency while tightening them for dollars and euros, Elizaveta Danilova, director at the central bank's financial stability department, told a conference this month.

Netanyahu-Ben Gvir government may bring Israel economic sanctions

On Tuesday, voters turned out in record numbers in order to have their say in the democratic process, resulting in the election of a government led by former Prime Minister Benjamin Netanyahu and including outspoken political extremist Itamar Ben-Gvir, if its campaign promises are fulfilled, could radically impact the nation’s economy.

The economy that Netanyahu government stands to inherit is actually doing pretty well, compared to other developed countries. Israel currently boasts the second-lowest inflation rate in the OECD and one of its highest growth rates. As such, the country’s incoming leaders will have more economic degrees of freedom than other nations may have.

With that in mind, “The promises made by these parties are such that they can very quickly lead Israel down the rabbit-hole,” said Prof. Dan Ben-David, Head of Shoresh Institution for Socioeconomic Research and an economist at Tel-Aviv University. According to him, the threat posed to Israel’s economic well-being by the nation’s new leadership is both present and substantial.

“In terms of straightforward economics, they are promising tons of money to various sectors. Netanyahu has promised free education from the age of zero, he talked about freezing interest rates and arnona (municipal tax payments), he promised to give full funding to all of the Haredi schools,” Ben-David said. “That’s going to cost a lot of money, not to mention the fact that it’s completely going to mortgage Israel’s future.”

Basic economics aside, there is a critical political factor in play. If Ben-Gvir’s Otzma Yehudit Party manages to reform the country’s judicial and political systems as it intends to do, it could lead to severe ramifications on the world stage.

“Those actions can basically bring down the developed world’s wrath on us,” Ben-David warned. “When you have Jewish supremacists in leading political cabinet positions, what does that say about Israel’s ability to defend itself against accusations of apartheid elsewhere? All you need to do is look at what happened in South Africa to get a glimpse of the kind of economic sanctions that we may get hit with if this government follows through with even a part of the things that they promised to do.”

A sufficient amount of serious economic turmoil from mishandling or severe sanctions could in turn lead to the evacuation of Israel’s largest economic contributors, Ben-David warned.

“It could happen way before the international community wakes up. The entire hi-tech industry, all of the physicians and the entire senior faculty in all of the research universities in Israel make up less than 4% of the population,” he said. “If a critical mass of the young, educated and skilled people in Israel reach the conclusion that it’s game over and leave in the next few years, then the game ends a lot quicker than it would have otherwise.”

It is still uncertain which of the many promises made by the entering parties will come to fruition, but if Israel’s new leadership doesn’t tread carefully, those who put them there could be in for even more change than they asked for.