It could soon get a lot harder for Russia to deal in Chinese yuan

It may about to be way harder for Russia to get its hands on Chinese yuan.

That’s because a key license from the US Treasury that permits transactions from some of Russia’s financial institutions is about to expire. The result could involve a worsening yuan shortage in the nation, with Chinese banks possibly completely refusing to process payments from Russia, a person familiar with the matter told Reuters on Thursday.

The license, which is set to expire on October 12, allows some transactions between the Moscow Exchange and the National Clearing Center to gradually wind down, as opposed to being completely halted.

Dollar and euro trading on the Moscow Exchange have already been shut down with the latest round of Western sanctions. But once the Treasury license expires, all conversion transactions — including those involving Chinese banks and their subsidiaries — will be stopped, and their positions on the Moscow exchange will be closed, another source told the outlet.

That spells trouble for Moscow, which has come to lean on China’s currency heavily under Western trade restrictions. The yuan made up nearly 100% of all foreign-exchange transactions on the Moscow Exchange in June, according to one Bank of Russia review.

But Russian banks have nearly run out of their yuan stash, thanks to Chinese firms being more hesitant to do business with the nation. Chinese banks have also held up billions of dollars worth of yuan payments intended for Russia, Reuters reported last month, which has also contributed to the yuan shortage.