Money transactions
Chinese banks are increasingly refusing Russian transactions for fear of becoming the target of US sanctions.
During his visit to Beijing this week, Sergei Lavrov, Russia’s Foreign Minister, met with Chinese President Xi. This was interpreted as yet another proof that ties between China and Russia are closer than ever and that the West’s attempts to distance Beijing from Russia’s war with Ukraine are making little difference.
Without China’s support, Russia will go under economically. That is why the Americans in particular are trying to convince Beijing to stop supporting the Russian defense industry. China supplies essential electronic components, much to Washington’s chagrin. Janet Yellen, the US Treasury Secretary, was also in Beijing last week. She mainly spoke about the difficult trade relations, but Yellen also warned that Chinese companies and banks that contribute to Russia’s war industry can expect “serious consequences.”
The US does not laugh at banks or companies that circumvent sanctions against Russia. The American threats are also making an impression in China, especially after US President Joe Biden signed an executive order about this in December. Since then, Chinese banks have become much more reluctant to do business with Russian companies, especially if they want to purchase electronic components in China.
The Russian state newspaper Kommersant reported on Friday that Chinese banks have been blocking payments from Russian companies that place such orders since the end of March. They no longer even want to accept payments for purchases of parts for laptops or servers. Even contracts that have been in place for years are no longer honored.
Putin to Beijing
Russian oil companies are also finding it increasingly difficult to get their money. China has become one of the largest importers of Russian oil, but oil producers have to wait months for their money. This has everything to do with the fear that Chinese banks themselves will become the target of American sanctions. They make their mark: American sanctions have greater consequences for them than the profits they make from the Russian transactions.
Only Russia’s VTB State Bank has a fully operational office in Shanghai. All Russian companies are now opening an account there, but this leads to long waiting times before all formalities are completed. VTB is therefore planning to open more offices in China. Moscow would like other Russian banks to be able to open offices in China, but that is not easy.
The fact that the Russian media are drawing attention to the payment problems indicates that American pressure is starting to weigh. Kommersant spoke to several entrepreneurs who confirmed this – Russia is almost completely dependent on China for its computer parts. They insist that the Russian central bank sit down at the table with the Chinese about this. Moreover, the problem is bigger than China. Banks in Turkey and the Emirates are also becoming increasingly difficult to handle Russian transactions.
In May, the Russian president himself will travel to Beijing to strengthen the unique ties of friendship with Xi. There is a good chance that the banking crisis will be discussed.
