SHANGHAI - Russia's central bank and sovereign wealth fund may account for nearly a quarter of foreign holdings of Chinese bonds, analysts at ANZ Research calculated, potentially offering shelter from Western sanctions imposed over Moscow's invasion of Ukraine.

Russia's financial markets have been thrown into turmoil by sanctions imposed over the invasion, the biggest attack on a European state since World War Two.

In the face of those sanctions, Russian companies have been exploring workarounds with emerging market allies, especially China, with settlement of transactions in yuan seen rising at the expense of the dollar.

In a note this week, ANZ economists and strategists said they estimate yuan bond holdings of Russia's central bank and the Russian National Wealth Fund at $80 billion and $60 billion, respectively.

Foreign holdings of bonds on China's interbank bond market totalled 4.07 trillion yuan ($644.13 billion) at the end of January, the latest month for which data is available. 

"We are watching if Russia will liquidate the assets if (yuan) cash is needed to meet other payment obligations," ANZ said.

Yuan accounted for 13.1% of the Russian central bank's foreign currency reserves in June 2021, compared with just 0.1% in June 2017. Dollar holdings dropped to 16.4%, from 46.3%.

But while Russia could potentially make use of yuan assets and China's Cross Border Interbank Payment System (CIPS) to counter the impact of Western sanctions, including bans on some Russian banks from the SWIFT global financial messaging system, the crisis is unlikely to significantly boost use of the yuan, they said.

"CIPS is a mainly a RMB clearing system and more than 80% of transactions on CIPS rely on SWIFT telegram. It is not an immediate replacement for SWIFT."

Underscoring the impact of sanctions over the invasion, rating agencies Fitch and Moody's slashed Russia's sovereign credit rating to "junk" status, following a similar move from S&P Global last week. 

Russia calls its action in Ukraine a "special operation".

($1 = 6.3186 Chinese yuan)

(Reporting by Andrew Galbraith; Editing by Kenneth Maxwell) ((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging: andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))