Russian companies and banks are turning to China's currency, the yuan (also known as the renminbi), as the doors to the US dollar-based global financial system close due to sanctions.
Launching Axios, James Fok, author of "Financial Cold War: A View of Sino-US Relations from the Financial Markets," said sanctions against Russia are gradually helping to internationalize the renminbi.
"But that doesn't mean the renminbi will suddenly start to rival the dollar in any meaningful way. To do that, you have a lot of other pieces that have to fall into place," Fok said.
According to information compiled by Reuters, Russian companies rushed to Chinese banks to inquire about opening accounts.
FESCO Transportation Group, a Russian logistics company, told customers last week that they would accept payments in yuan.
After Visa and Mastercard suspended their operations in Russia, several Russian banks are considering switching to UnionPay, China's state-owned card payment system.
Chinese leaders have sought to implement policies aimed at internationalizing the yuan. For example, by advocating for the yuan to be included in the International Monetary Fund special drawing rights basket in 2016.
However, China's push towards internationalization of the yuan over the past decade has been half-hearted, with less than 2% of global payments using the yuan.
Beijing is reluctant to relinquish control of the currency, and does not want to endure the potential ill effects of having a globally dominant currency.
The government's tight capital controls make it difficult to move assets out of China, which hampers international yuan transactions.
Despite Russian interest, Chinese banks are wary of the risk of secondary US sanctions, meaning the US government's ability to penalize non-US companies doing business with sanctioned entities.
"Sanctions will definitely mean that Russia will eventually hold on to more of the renminbi," Fok said.
But for other countries to be willing to do more transactions in the yuan, the Chinese government will need to loosen capital controls and improve the rule of law — or a split in the global financial system will have to occur to make the yuan appear more attractive than the dollar.
"There are a lot of pieces on the chessboard that haven't been moved," said Fok. "More likely, it will be played for decades."
Previously, Reuters reported, a Chinese bank with a branch in Moscow had seen a surge in demand from Russian companies looking to open new accounts.
According to a Reuters source who asked not to be named, the spike came as the country's businesses struggle with international sanctions following the invasion of Ukraine.
"Over the past few days, 200-300 companies have approached us, wanting to open new accounts," a person who works at the Moscow branch of the Chinese state bank and has direct knowledge of its operations, told Reuters.
He declined to be named or his bank identified because he was not authorized to speak to the media.
It's not clear how widespread Russia's demand is for new accounts at Chinese banks, but the banker's source told Reuters that many companies were looking for new accounts to do business with China. He expects yuan transactions by these companies to increase.
Western governments shut Russia's economy out of the global financial system, prompting international companies to halt sales, cut ties and dump tens of billions of dollars in investments.