Russia’s ‘economic isolation’ seen benefiting China amid fresh US sanctions
While trade between China and Russia may be affected in the short term, Beijing’s leveraging power in future negotiations is getting stronger, analysts say
“A significant share of payments is processed through VTB China – it’s a crucial bank for business,” he added. “Trade will grind to a halt until the new year, [which] will genuinely affect Russia-China trade in the short term.”
London’s Knightsbridge Strategic Group said that, to overcome sanctions, “China will almost certainly explore enhancing” payment methods such as the Cross-Border Interbank Payment System, the use of offshore yuan markets, and the creation of specialised Chinese financial institutions and regional banks that are not connected to Western international systems, as well as bartering.
“The increased economic isolation of Russia further skews the economic relationship in China’s favour, and China will likely continue to impose stringent conditions on pricing and supply agreements,” added Finley Grimble, founder of Knightsbridge Strategic.
The US Department of the Treasury’s Office of Foreign Assets Control expanded its sanctions by issuing an alert describing risks related to Russia’s SPFS, which the US department said, in a statement on Thursday, “the Kremlin created and uses to evade sanctions”.
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The new round of sanctions also pointed towards Gazprombank – which will end the European Union’s payments for natural gas by the end of 2024 – more than 50 internationally connected Russian banks, more than 40 Russian securities registrars, and 15 Russian finance officials.
Li Lifan, an expert on Russia and Central Asia at the Shanghai Academy of Social Sciences, said that the impact on China would be limited, just by looking at the natural gas sales, because both sides have agreed to settle payments with their currencies – the rouble and the yuan.