2024-03-27 15:28:00
Worried about secondary sanctions, Chinese banking institutions may delay payments to Russia
27.03.2024
Reuters has learned from multiple people familiar with the matter that Russian oil and gas companies are facing months of payment delays as banking institutions in China, Turkey and the United Arab Emirates worry about secondary U.S. sanctions. This is exactly what the United States wants to achieve: not only interrupting cross-border energy trade, but also interfering with Moscow’s foreign exchange earnings.
(Deutsche Welle Chinese website) Reuters learned from eight banking and foreign trade industry insiders that many banks in China, the United Arab Emirates, and Turkey have increased compliance requirements related to sanctions in recent weeks, resulting in the loss of funds to Moscow Energy. Sellers experienced delays in payments and in some cases even declined transactions.
It is reported that these financial institutions are afraid of US secondary sanctions and have begun to require customers to provide written guarantees to ensure that individuals or entities on the US Specially Designated Country List (SDN) will not participate in transactions or be called payees.
In the UAE, First Abu Dhabi Bank (FAB) and Dubai Islamic Bank (DIB) have frozen multiple accounts related to trade in Russian goods, two of the sources said. Four more sources said that Mashreq Bank in the United Arab Emirates, Ziraat Bankasi, Vakifbank, Industrial and Commercial Bank of China and Bank of China were still processing payment transactions, but that there had been a hiatus for several weeks. Even months of delay.
None of the banks declined or declined Reuters’ requests for comment.
Russian Presidential Spokesperson Dimitry Peskov admitted at a daily press conference that payments from Chinese banking institutions have been delayed. “The unprecedented pressure exerted by the United States and the European Union on the People’s Republic of China continues. Of course this will It will bring some problems, but it will not hinder the further development of Russia-China economic and trade relations.”
RMB-ruble swaps are also affected
After Russia invaded Ukraine in February 2022, the West imposed a number of economic sanctions on Russia, including an energy price capping mechanism: Western buyers cannot buy Russian crude oil at a price higher than $60 per barrel, otherwise they will not be able to obtain EU countries or Oil transit insurance services provided by companies from G7 countries. This resulted in Russia’s energy export trade being severely affected in the early months of the war. However, as Russia gradually turns its attention to buyers in Asia and Africa,Moscow regains stable energy trade revenue。
However, Moscow has faced trouble again since December last year when some companies and banks became aware of the threat of secondary U.S. sanctions, according to a person familiar with the matter. The person familiar with the matter was referring to an executive order issued by the U.S. Treasury Department on December 22, 2023, which warned that sanctions may be imposed on foreign banks for circumventing Russia’s energy price caps and called on them to strengthen compliance. . This is also the first time Washington has directly warned of imposing secondary sanctions on traders doing business with Moscow. Previously, secondary sanctions mainly targeted Iran’s foreign trade.
According to people in the foreign trade circle, with the issuance of the US executive order, financial institutions in China, the United Arab Emirates, and Turkey that have business dealings with Russia have increased their compliance inspections, begun to require additional documents, and trained more employees in order to Ensure transactions comply with energy price capping mechanisms.
A banking industry insider revealed that banks in the UAE will have to strengthen the review of payment transactions starting from the end of February. If they conduct transactions with China on behalf of Russian entities, they are required to provide information to U.S. correspondent banks and the U.S. Treasury Department. That led to delays in payments to Russia, another person familiar with the matter said. Some sources revealed that some transactions were even delayed for as long as two months; moreover, not only U.S. dollar transactions were affected, but even direct trade between China and Russia, in which RMB was exchanged for rubles, was often delayed for several weeks.
Elvria Nabiullina, Governor of the Central Bank of Russia, said that one-third of Russia’s exports to China are settled in RMB. Two years ago, the proportion of exports to China settled in RMB was only 0.4%.
(Reuters, etc.)
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