Russia Reacts After Chinese Bank Threatens Putin’s Economic Lifeline

Moscow has dismissed concerns surrounding a Chinese bank’s decision to pause all dealings with its exporters, a move that put at risk Russia’s primary economic outlet at a time of increased isolation by the West.

Andrey Rudenko, Russia’s deputy foreign minister, denied that his country’s businesses were experiencing any problems settling payments with neighboring China, including through the Financial Messaging System, the Russian equivalent to the SWIFT financial transactions service.

“No, we don’t have such an issue. A couple of Chinese banks refrain so far as [a] precaution, over fears to be sanctioned. But we are confident that this problem will be solved,” Russia’s state news agency Tass quoted Rudenko as saying on Friday.

China has not openly criticized President Vladimir Putin’s decision to invade Ukraine two years ago this month. The Beijing leadership has offered the Kremlin meaningful political support, even as many Chinese companies and financial institutions try to avoid running afoul of Western sanctions.

Several major Chinese banks—wary of dealings with Moscow’s defense industry—restricted Russian partner access to their services or cut ties altogether. The Chinese payment system UnionPay, which was once touted as a suitable replacement for MasterCard and Visa, also pulled out to limit its exposure.

But that did not stop China’s two-way trade with Russia from booming last year. Increased energy and agriculture purchases helped push their annual turnover to $240.1 billion in 2023, up 26.3 percent from a year earlier, according to Chinese customs data.

Last week, the Russian business newspaper Vedomosti said Zhejiang Chouzhou Commercial Bank had suspended all transactions for clients from Russia as well as Belarus. The bank in eastern China, whose exposure to Western sanctions was thought to be limited, was a main institution used by Russian exporters, the paper said.

The bank’s decision to pause settlements with Russian and Belarusian businesses, in any currency, may have been linked to an expansion of U.S. financial controls announced in recent weeks, new restrictions that could put it at risk of secondary sanctions.

Experts who spoke to Newsweek said the effects likely would be felt later, after the current Lunar New Year period typically associated with lower levels of economic activity in China.

The Chinese Foreign Ministry did not immediately respond to Newsweek‘s request for comment.

Rudenko, whose remarks suggested the bank may have been overcautious in its actions, remained confident that Moscow and Beijing would resolve the matter, Tass reported.

He pointed to Russia’s expanding trade with China, which the Kremlin said was settled almost exclusively in the Russian ruble or Chinese yuan last year. “And this is the first demonstration of the fact that we solve such problems,” Rudenko said.

The diplomat’s comments closely mirrored that of Kremlin spokesperson Dmitry Peskov, who told reporters last week that Moscow had “a close dialogue with our Chinese friends and, of course, we will solve all the problems that arise.”

Russia has been eager to play up the successful “de-dollarization” of its wartime economy. Elvira Nabiullina, who heads Russia’s Central Bank, told the RIA Novosti news agency in late January that over a third of all Russian imports and exports with China were now being settled in the yuan.