Washington has consistently issued warnings about the potential consequences of engaging in trade cooperation with Russia, emphasizing the likelihood of imposing secondary sanctions on entities or institutions that support the Russian defense industry. Evidently, these warnings have had a tangible impact. According to sources from the Russian newspaper Kommersant, Chinese banks are now taking decisive actions to sever ties with Russian institutions. This follows a similar decision made earlier by Turkish entities.
The disconnection between Chinese banks and Russian credit institutions, akin to the actions of Turkish banks, is reported by the Russian newspaper. These reports draw on sources within the Russian banking sector and foreign trade, indicating a significant development in financial relationships.
One source cited in the newspaper attributes this shift to "pressure from the United States." Towards the end of December, the U.S. Treasury explicitly communicated its intention to impose sanctions on foreign banks found to be "supporting Russian military efforts." On December 22, 2023, President Joe Biden signed an executive order enabling the imposition of sanctions on banks engaged in selling prohibited goods to the Russian defense industry.
In the case of Turkey, the U.S. sanctions have resulted in a near paralysis of export operations to the Russian Federation, as reported by the Ekonomim service a day earlier. Sources from Kommersant also affirm that virtually all major Turkish banks engaged in cooperation with Russia are now blocking payments in lira and rubles while closing accounts for their Russian counterparts. Consequently, the financial relations between these Turkish banks and Russian credit institutions have virtually ceased to exist.
Adding another layer to the situation, Bloomberg sources indicate that Chinese banks are poised to cease servicing companies on sanction lists and will halt the provision of financial services to the Russian defense industry. This decision is expected to apply irrespective of the currency and jurisdiction in which transactions occur, underscoring the far-reaching impact of the geopolitical landscape on global financial relationships.
Since Russia's aggressive actions against Ukraine, China has emerged as the largest trading partner for the Kremlin. Chinese exports to Russia have surged by 69%, constituting 41% of the country's total imports. However, despite this economic partnership, Russia has become, in the eyes of China, an dwarf. Russia's modest 3.3% share in China's overall foreign trade does not even secure a position in the top five main markets for China. In sharp contrast, China exports four times more goods to the European Union than to the Russian Federation and more than three times more to the United States. The significance of trade with the EU and the USA stands at 13.2% and 11.2%, respectively, of Chinese exports. This underscores the limited economic impact of Russia within the broader context of China's international trade relations.
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