Chinese banks join sanctions against Russia

The Russian government’s hopes that China will help it to overcome western sanctions are gradually being dashed by the harsh reality, finanz.ru writes.

Despite the fact that de jure Beijing has not placed any financial sanctions on Russia, Chinese banks have effectively adopted the restrictions imposed by the US and EU.

China’s commercial credit organizations are delaying transfers to Russian banks’ accounts, or outright refusing to make payments, said Vladimir Danilov, head of the Central Bank of Russia in China. Danilov made the statement while at the round table on “Russian-Chinese financial collaboration as a factor of economic development” in Harbin.

“The problems are related to the a number of Chinese banks’ expanded interpretation of third countries’ restrictive measures,” he explained: even the transactions of companies not on the sanction list are blocked.

Russian banks have observed a tightening of conditions. This “leads to delays with the payments of the Russian banks’ clients and counter-payments to Russian companies,” TASS cites Danilov as saying.

According to Anatoly Kozlachkov, Vice President of the Association of the Banks of Russia, difficulties have also arisen at the stage of opening correspondent accounts.

“These problems are understandable, they are related to sanction pressure,” said Kozlachkov, adding that Russia and China “need to find ways to deal with them for mutual success”.

The search has been underway for more than three years already. As early as June 2015, First Deputy Chairman of the VTB Group Yuri Soloviev complained that Chinese banks were refusing to transact with Russian banks, and had significantly reduced their involvement in foreign trade deals. In a column written for Finance Asia, Soloviev lamented “China’s contradictory position towards Russian banks following the imposition of sanctions by the US and EU”.

The process of de-dollarization and transition to national currencies for reciprocal trade, which was proclaimed by Russian President Vladimir Putin, is also struggling to progress. The dollar still remains the primary currency for payments, Danilov explained.

According to the Central Bank of Russia, 88% of export transactions to China and 73.6% of import transactions from China are done in dollars. China de facto refuses to receive rubles for goods sold to Russia: the proportion of import payments denominated in rubles is only 3.8%, which is less than it was in 2013 (3.9%).

Chinese companies are more willing to make payments in yuans – at the end of last year, 8% of export deals were done in yuans, as opposed to 1.7% four years ago.

The extent to which national currencies are used in payments “does not correspond to the potential of Russian-Chinese trade relations” Danilov remarked. These issues will be discussed again at the next session of the subcommission on financial collaboration on September 28 in Shenzhen, China.

  Russia, VTB Bank, China, Sanctions on Russia

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