Chinese banking institutions are delaying payments to Russian oil and gas companies due to concerns about potential secondary U.S. sanctions. This decision is affecting Moscow’s foreign exchange earnings and disrupting cross-border energy trade, according to sources familiar with the matter.
Reports from Reuters indicate that banks in China, the United Arab Emirates, and Turkey have increased compliance requirements related to sanctions in recent weeks, leading to delays in payments to Russian energy sellers. Some banks have even frozen accounts related to trade in Russian goods.
The delays in payments are a result of fears of potential U.S. sanctions on individuals or entities engaged in transactions with Russia. Financial institutions in these countries are requiring written guarantees from customers to ensure compliance with sanctions lists.
Russian Presidential Spokesperson Dimitry Peskov confirmed the payment delays from Chinese banking institutions but remains optimistic about the future of Russia-China economic and trade relations despite the pressure from the U.S. and the European Union.
The issue also extends to RMB-ruble swaps, impacting Russia’s energy export trade. The West imposed economic sanctions on Russia following its invasion of Ukraine, affecting energy exports. Additional challenges arose in December 2023 when the U.S. Treasury Department issued an executive order warning of potential sanctions on banks circumventing energy price caps.
Banks in the UAE have faced increased scrutiny on payment transactions with Russia, leading to delays of up to two months in some cases. These delays are not limited to U.S. dollar transactions but also affect direct trades between China and Russia involving RMB and rubles.
The Central Bank of Russia reported a significant increase in exports settled in RMB with China, highlighting the growing importance of RMB in bilateral trade. Russian media also reported that a Chinese settlement bank suspended its business with Russia due to concerns about U.S. sanctions, prompting discussions between Russian and Chinese officials.
The situation reflects the complex dynamics of international trade and the impact of geopolitical tensions on global financial transactions. If left unresolved, the delays in payments could have far-reaching consequences for both Russian energy companies and their international partners.