Today’s News
Russian companies are encountering increased payment delays and rising transaction costs with China partners, with tens of billions of yuan stuck in limbo, according to sources familiar with the issue.
These complications have grown worse in August after Chinese banks tightened compliance measures, following Western threats of secondary sanctions on those dealing with Russia.
Image Source: Reuters
Chinese state banks have been halting transactions with Russian entities “en masse,” causing significant payment backlogs, said a source close to the Russian government. China is Russia’s largest trading partner, accounting for a third of its foreign trade in 2023. It provides vital industrial equipment and consumer goods to Russia and imports key commodities like oil and gas.
The issue began in June when the U.S. Treasury warned banks in China and other countries of potential sanctions for working with Russia. This prompted Chinese banks to adopt stricter transaction policies, significantly affecting cross-border payments.
A source from a major Russian e-commerce platform noted that, at one point, all payments to China stopped, drastically reducing trade volumes. Some companies resorted to creative solutions, like purchasing gold, transporting it to Hong Kong, and selling it there to circumvent restrictions.
To navigate around Chinese banks’ compliance checks, some Russian businesses have been using chains of intermediaries in third countries. However, this has increased transaction fees to as high as 6% from almost zero previously. “For many small companies, this means a complete shutdown,” added another source close to the government.
The Kremlin acknowledged the payment difficulties but expressed confidence that both nations would find solutions. “With such volumes and in such an unfriendly environment, it is impossible to avoid some problematic situations,” Kremlin spokesperson Dmitry Peskov said, emphasizing the constructive nature of their bilateral relations.
While transactions involving large companies like Russia’s commodity exporters and China’s major exporters continue smoothly, smaller firms trading in consumer goods face significant obstacles. Nonetheless, both Russian and Chinese governments remain committed to maintaining their economic ties amid external pressures.
Bilateral trade between Russia and China rose to USD 137 billion in the first half of 2024, following a record USD 240 billion in 2023, per China’s customs data. Despite challenges, both countries continue to assert that their trade relations are in line with WTO rules and oppose any “illegal unilateral sanctions.”
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