Russia is finding itself increasingly abandoned by its key allies as U.S. sanctions tighten due to the war in Ukraine. Longtime allies of Russian President Vladimir Putin, such as China, Turkey, the United Arab Emirates, and India, are displaying caution in response to the threat of U.S. secondary sanctions. China, for example, has seen large banks stop accepting payments from sanctioned Russian financial institutions, while banks in Armenia and Kyrgyzstan are no longer accepting cards linked to the Russian Mir payment system. India, once a major buyer of Russian oil, has reportedly stopped purchasing Russian premium crude oil. Russian oil firms are experiencing delays in payments for crude and fuel as banks in China, Turkey, and the UAE fear U.S. retaliation.
In response to these actions, the U.S. has taken steps to directly sanction foreign banks facilitating significant transactions for Russia. A December executive order issued by President Joe Biden allows the U.S. to target banks engaged in business with firms supporting Russia’s defense industry. The Treasury Department has warned financial institutions against facilitating circumvention and evasion of sanctions, threatening to take decisive action against those that do so. The U.S. has expanded sanctions on Russia throughout Putin’s war in Ukraine, freezing foreign exchange reserves and cutting off Moscow from the SWIFT banking system. Additional measures include a ban on Russian oil imports and imposing a price cap on firms involved in insuring, financing, and shipping Russian oil exports above $60 a barrel.
Reports indicate that banks in China, the UAE, and Turkey are becoming more cautious in dealing with Russian transactions, acknowledging the threat of U.S. secondary sanctions. Banks and companies have experienced delays and suspensions of accounts linked to Russian trading activities. However, Kremlin spokesperson Dmitry Peskov has downplayed these issues, attributing them to pressure from the U.S. and European Union. Despite the challenges, he expressed confidence in maintaining trade and economic relations with China. The Wilson Center, a U.S. think tank, has noted the mounting pressure from sanctions on the Russian economy and the impact of recent financial maneuvers by Russia.
The Wilson Center’s analysis suggests a disconnect between Russia’s outward display of confidence, fueled by minor battlefield victories and political chaos in the U.S., and an underlying sense of insecurity. The think tank speculates that concerns about the Russian economy ahead of the symbolic anniversary of the war and the presidential election could explain recent domestic repression and spending increases in Russia. Despite skepticism, the sanctions against Russia are seen as effective, with further pressure expected to impact the Russian economy. The situation underscores the complex dynamics at play as Russia faces increasing isolation from its allies and heightened pressure from U.S. sanctions.
