Amid ongoing sanctions from the Western countries, trade between China and Russia has seen a significant increase. However, since the United States expanded its sanctions criteria in June, several Russian bulk commodity exporters have expressed concerns that their trade with China is becoming a gamble, with more and more direct payments in Chinese Yuan being frozen or delayed.
According to a report by Bloomberg on July 17, executives from three bulk commodity exporters stated that after the latest round of US sanctions, it has become extremely difficult, if not impossible, to receive direct payments in Yuan from China, even when conducting trade directly with Russia.
A representative from a Russian agricultural trading company mentioned that some Chinese buyers of Russian agricultural products have encountered payment issues this month.
On June 12, the US Treasury announced a significant expansion of its secondary sanctions program against Russia, where any foreign financial institution engaging in transactions with sanctioned Russian entities would be deemed as directly cooperating with Russia’s military industrial base.
These secondary sanctions have effectively impeded the further use of the Yuan in Russia by suppressing bilateral trade and payments between China and Russia.
A report by Reuters on July 10 featured the Chairman of the Russian Automobile Dealers Association, Alexei Podshchekoldin, stating that the US sanctions have led to payment problems between China and Russia, posing a serious issue for the import of Chinese automobiles.
The latest sanctions in June aimed to prevent small-scale banks, particularly Chinese small banks, from providing war funds and technology to Russia. US Treasury Secretary Yellen mentioned on June 13 that “I think the large Chinese banks take agent relationships very, very seriously, and these are not the banks we’re most concerned about.” She added, “It’s the small banks” that pose more concern, and “some of these banks also want to be able to handle dollar payments and not be shut out of the US financial system.”
“US sanctions and secondary sanctions threats have led to more and more Chinese banks unwilling to conduct payments and trade settlements with Russia,” said Alexander Potavin, an analyst at Finam in Moscow, to Bloomberg.
Podshchekoldin told Reuters, “The problem is significant; even our largest domestic producers, such as manufacturers buying spare parts, are facing this issue.”
Additionally, sources informed Bloomberg that trade is still ongoing, but due to the significantly increased cost of payments, trade expenses are certainly higher.
The Central Bank of Russia noted in its July report on macroeconomic and financial trends that it observed a “decrease in the extent of Russia’s economic openness, reflected in the declining share of imports and exports as a percentage of GDP, while domestic demand and production play a more prominent role.”