Russia’s rising trade in the yuan in the wake of the war in Ukraine and western sanctions may end up undermining the US dollar, according to the European Bank for Reconstruction and Development.

“You see that this increase in the usage of the Chinese currency is coming at the expense of the US dollar,” EBRD Chief Economist Beata Javorcik said in an interview. Sanctions have “also given impetus to countries to think about diversifying invoicing currencies, and long-term this could erode the dominance of the dollar.”

Commerce between Russia and China has surged after the sanctions imposed on the Kremlin by the US and its allies upended trade routes and shifted more shipments toward Asia.

Russia has also moved to settle a much bigger share of its trade in yuan at the expense of dollars and euros. The Chinese currency accounted for 34% of Russian imports in July and made up 25% of exports, according to the latest figures published by the central bank in Moscow.

Still, even as trade in yuan between the two countries surged, the Chinese currency was increasingly being used by third countries that had swap lines with the People’s Bank of China, and that were not party to sanctions against Russia, according to an academic paper released on Wednesday, co-authored by Javorcik.

The study looked at transaction level data on Russia’s imports between January 2016 and December 2022.

“Many of these swap lines, they predate the war,” Javorcik said. The “war has given impetus to using the Chinese yuan as a currency.”