In the wake of the ongoing Ukraine war and subsequent sanctions, Russia’s adoption of the Chinese yuan could potentially undermine long-term dollar dominance, according to Beata Javorcik, Chief Economist at the European Bank for Reconstruction and Development (EBRD). This shift is primarily attributed to the diversification of invoicing currencies.

The statement was made on Wednesday, suggesting that Russia’s strategic move towards the Chinese currency is a part of a broader trend of de-dollarization. This trend has been gaining momentum due to geopolitical tensions and economic sanctions that have isolated Russia from Western financial systems.

The EBRD economist pointed out that this shift towards the yuan may lead to a significant change in global currency dynamics. The diversification away from the dollar in international transactions can potentially erode its dominance in the long run.

While the immediate impact on the dollar’s status as a global reserve currency might be limited, the gradual adoption of alternative currencies like the yuan could lead to significant shifts over time. As more countries consider similar moves in response to geopolitical pressures, this trend could accelerate, leading to a more multipolar currency world.

The EBRD’s observations come amidst an increasing number of reports highlighting Russia’s pivot towards the East, particularly China, in light of Western sanctions. This move is seen as a strategic effort by Russia to mitigate the impact of these sanctions and maintain its economic stability.

As these developments unfold, it remains to be seen how global currency dynamics will evolve and what implications this will have for international trade and finance.