The Western sanctions campaign against Russia is impacting business between Russian entities and China, a crucial marketplace for Moscow amid economic isolation during the war on Ukraine. The Moscow Times reported a decrease in both exports and imports between the two countries, with Chinese banks refusing to engage with some Russian clients for fear of violating Western sanctions. Trade between Russia and China has increasingly been conducted in yuan since the invasion of Ukraine, as Russia was cut off from the SWIFT payment system and adopted the Chinese currency for transactions. However, the share of imports and exports in yuan has recently decreased, posing challenges for Russian foreign trade.
President Joe Biden’s order for the Treasury Department to impose secondary sanctions on foreign banks aiding Russia has further complicated Russian foreign trade. Some major Chinese banks have halted processing Russian payments, and others are resorting to taking payments through third parties, making trade more costly and time-consuming. Russian companies are facing delays of up to six months due to concerns over secondary sanctions causing Chinese banks to tighten controls. Despite this, there are still thousands of Chinese banks without exposure to potential U.S. sanctions, providing some relief for Russian entities engaged in trade with China.
China is Russia’s largest trade partner, with business between the two countries reaching a record high of around $240 billion in 2023. Despite Western sanctions on Russia, China has largely refused to back them and has been reluctant to exert pressure on Moscow to end its invasion of Ukraine. Beijing has maintained a neutral stance in the conflict but continued economic and political cooperation with Russia has raised concerns among Western and Ukrainian officials about China’s support for the Kremlin’s operations. Any disruption in trade with China could be concerning for the Kremlin, given the country’s significance as a vital trading partner for Russia.
The refusal of Chinese banks to engage with some Russian clients due to fear of violating Western sanctions has impacted trade between Russia and China. While the use of yuan for transactions between the two countries has increased since the Russian invasion of Ukraine, there has been a recent decline in the share of imports and exports conducted in yuan. President Biden’s order for the Treasury Department to impose secondary sanctions on foreign banks aiding Russia has further complicated Russian foreign trade, with major Chinese banks halting processing of Russian payments and causing delays for Russian companies. Despite China’s status as Russia’s largest trade partner, concerns remain about China’s support for the Kremlin amid ongoing conflict in Ukraine and the impact of Western sanctions on Russian-Chinese business relations.
Russia’s economic isolation during the war on Ukraine has made China a vital marketplace for Moscow, with trade between the two countries reaching new heights. However, challenges have arisen due to Western sanctions causing some Chinese banks to refuse engagement with Russian clients. The use of yuan for trade transactions between Russia and China has increased, but recent data shows a decrease in the share of transactions conducted in yuan. The imposition of secondary sanctions by the U.S. has further complicated Russian foreign trade, causing delays and additional costs for Russian companies. Concerns about China’s support for Russia amid the conflict in Ukraine raise questions about the future of Russian-Chinese business relations and the impact of Western sanctions on their economic ties.
