In response to U.S. sanctions against Russia for its war in Ukraine, Chinese banking giants, including the Industrial and Commercial Bank of China (ICBC), have restricted transactions from Russia, further isolating Moscow. This move comes as a blow to Russia, as China has been a key supporter of the country’s economy through trade and investment. The U.S. sanctions targeted industries that were seen as supporting Russia’s military supply chain, prompting Chinese banks to be more cautious and avoid any potential repercussions.
Russian traders have been experiencing difficulties in making payments to Chinese banks since the U.S. sanctions were imposed. According to reports, as many as 80 percent of transfers between Russia and China were being returned by late last month. Major Chinese banks, including ICBC, China CITIC Bank, and Industrial Bank Co., have stopped accepting Russian payments in Chinese yuan. Additionally, banks like the Bank of Taizhou, Bank of Ningbo, and Ping An Bank have also restricted their business with Russian customers. The Bank of China has reportedly begun limiting transactions with Russian customers and is scrutinizing transactions to ensure they are not connected to countries that are subject to Western sanctions.
The restrictions imposed by Chinese banks have made it difficult for Russian businesses to conduct transactions with Chinese partners for importing equipment. Transactions with large Chinese banks are now subject to long delays and additional verification requirements, often resulting in the transfer being declined without explanation. Russian payments that do go through are mainly being handled by smaller lenders, but even they are starting to face scrutiny. Using the U.S. dollar as an alternative to the yuan is not a feasible option, as payments in dollars can easily be tracked back to the U.S. As a result, there is a shift towards making payments through third countries that are friendly to Russia, which then relay the money to Chinese partners.
The situation highlights the challenges faced by Russian businesses in conducting transactions with Chinese partners amid increasing restrictions from Chinese banks. The restrictions are a result of the U.S. sanctions targeting industries supporting Russia’s military supply chain, which has prompted Chinese banks to be more cautious. Russian traders have been experiencing difficulties in making payments to Chinese banks, with many transfers being returned. Major Chinese banks have stopped accepting Russian payments in Chinese yuan, further complicating business transactions between the two countries. As a result, Russian businesses are exploring alternative payment methods through third countries to circumvent the restrictions imposed by Chinese banks.
