Only 10 percent of Russian traders have been able to pay suppliers for goods from China this month, their struggles further highlighting the risks of foreign business dealings during the Kremlin's military campaign in Ukraine.
Cautious Chinese banks, wary of running afoul of U.S. rules that threaten secondary sanctions for aiding in any way President Vladimir Putin's wartime economy, appear to be conducting lengthy due diligence checks before releasing rubles to local recipients, with some yuan and dollar payments going through, The Moscow Times said on Tuesday.
Russian importers told the online newspaper that making cross-border transactions was like "paying roulette" with their money, with funds either delayed, held up indefinitely or vanishing into the financial system with little recourse.
Russian businesses have encountered difficulties with Chinese banks from the very start of the Russia-Ukraine war two years ago last month, with lenders carefully vetting transactions to avoid losing access to lucrative Western markets.
The political leadership in Beijing has gone further than any other major power to back the legitimacy of the Kremlin's decision to invade Ukraine. However, despite public complaints about the far-reaching nature of American-led sanctions, behind the scenes the Chinese government has reluctantly followed the rules and appears to have ordered many of its largest state-owned financial institutes to do the same.
The Kremlin continues to tout robust trade figures between the strategic partners, but Russia's import business owners told The Moscow Times that the payment problems go all the way back to China's main institutions, including the Bank of China, China Construction Bank and the Industrial and Commercial Bank of China, all of which have said they will no longer accept payments.
"We are trying to figure out from whom the Chinese bank will accept payment. Money leaves Russia, but then just freezes. We are still waiting for a decision on payments from February 21 and 28," according to one electronic goods importer, who said payments usually clear in one to three days.
"Paying directly to China now is like playing roulette," another importer told the Times.
Newsweek reached out by email to the Russian Foreign Ministry and China's Ministry of Commerce for comment.
Traders who made payments to Chinese sources last week described a settlement success rate of 1 in 10. "Three of our suppliers have requested additional information for their banks on our contract," one of them told the Times, an independent news site.
Just last month, Moscow said cross-border settlements were continuing smoothly. Andrey Rudenko, the No. 2 official at Russia's Foreign Ministry, denied that his country's traders were experiencing systemic issues, expressing confidence that any delays would soon resolve themselves.
Russian businesses at first believed the recent holdups were the result of February's Lunar New Year break in China, but the problems have persisted.
The Times said the issue was connected to a December executive order from President Joe Biden, which placed sanctions on foreign banks that assist Russia's already isolated economy.
The relatively vague definition of assistance is spooking Chinese banks, which are likely erring on the side of caution.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
John Feng is Newsweek's contributing editor for Asia based in Taichung, Taiwan. His focus is on East Asian politics. He ... Read more
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