Sberbank has issued its first yuan denominated letters of credit (L/Cs), becoming Russia’s first bank to do so.

The L/Cs were issued to facilitate funding from the Export-Import Bank of China for the Russian pharmaceutical company, Pharmasyntez.

Multi-million deal
The L/Cs were issued by Sperbank in response to a request from the drug manufacturer for credit guarantees in the Chinese currency.

Pharmasyntez was seeking the L/Cs as part of a deal for it to supply drugs worth over 29 million yuan (US$4.6 million) to China according to a statement issued by Sberbank.

US dollar implications
Sberbank is the first Russian bank to issue yuan denominated L/Cs since the two countries agreed to allow such transactions under a November 2014 agreement.

The agreement envisages wider financial cooperation between Russia and China and includes a three-year ruble-yuan currency swap worth more than US$20 billion.

Both countries have demonstrated ambitions to loosen their reliance on the US dollar in international trade.