Anastasia Gorbacheva11:16, 06/21/24

The window for them to make payments to Russian companies may narrow.

Russia and China have found alternative options for making payments after the introduction of US sanctions . After Vladimir Putin’s visit, special banks were created in border regions that allow Russian companies to open non-resident accounts in Chinese banks.

Reuters writes that in 2023, trade between Russia and China has grown to a record $240 billion . Maintaining the flow of income and goods is critical to the Kremlin, but depends on ensuring smooth payments.

The workaround, which involves small regional banks that remain under Washington’s radar, shows how Moscow and Beijing must take increasingly difficult steps to maintain their ability to process payments.

The scheme, which involves small banks that have limited or no business with countries that the Russian Federation considers unfriendly, reduces potential risks for China. However, the window for them to make payments to Russian companies may narrow as the US is working to identify such banks.

“After Putin’s visit, banks have appeared in one of the Chinese provinces that open NRA accounts for Russian companies in China,” one of the sources said. “Today we are not even talking about … large and medium-sized banks. None of them work with Russia. This is a problem that we really need to recognize.”

US sanctions

After the US imposed sanctions on more Chinese firms, many of them may have decided to end all business relations with Russia, and imports from China could decline, says Evgeniy Kogan, an investment banker and professor at the Higher School of Economics in Russia. Sanctions against subsidiaries of Russian banks in China also create problems, he added.

VTB was already under sanctions, but the US Treasury changed the restrictions on Russian banks that were previously subject to sanctions to include foreign organizations, including the Shanghai branch of VTB, which will complicate payments.

When a Russian company buys or sells goods or services to a Chinese trading partner, it must be able to receive or pay cash through payment systems operated by banks. Thus, the Russian Alfa Bank has been working for several months on opening two Chinese branches – in Shanghai and Beijing, but without success.

“American sanctions are the most frightening, including for our Chinese partners,” says the source. “As the Chinese say, they fear them like a tiger.”

According to the interlocutor, the threat of introducing additional sanctions that could block access to the dollar frightens Chinese banks, which do not want to lose world markets, even if profitable trade can be carried out with Russia.

For Russia, payment problems are hurting export earnings, disrupting supply chains and driving up import prices, and its oil companies are facing months of payment delays.

(C)UNIAN 2024