As of: March 1, 2024, 4:59 a.m
By: Bona Hyun
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Press
Split
Only recently did Chinese central banks restrict payment transactions with Russia.
The relationship begins to crumble - dialogues are unsuccessful.
Moscow – Russia faces difficult times.
Economic problems such as high inflation, labor shortages and a collapse in oil and gas revenues are weighing heavily on Vladimir Putin.
The Russian president must rely all the more on help from his allies.
China, on which Russia is becoming more dependent and an important trading partner for Putin, could turn him down.
Setback for Putin – China could leave Russia hanging
The focus of the latest talks between Russia and China is the possibility of China lending in the Russian banking sector. “Negotiations with the Chinese partners have been going on for a long time.
There has been no decision so far,” Russian Finance Minister Anton Siluanov told the
RIA Novosti
news agency on Monday (February 26).
According to Siluanow, no agreement has yet been reached on taking out loans in the Chinese currency Yuan.
Putin is dependent on China's help in the Ukraine war.
But the relationship is crumbling.
© Eraldo Peres/dpa
For years, President Xi Jinping has been working on internationalizing the renminbi, which is denominated in yuan.
Even before the war, Russia was one of the countries with whose help Beijing wanted to promote the internationalization of its currency.
After the annexation of Crimea in 2014, the Chinese central bank and the Bank of Russia agreed on a mutual currency exchange agreement (swap line) regarding the reserves held in China.
The agreement is comparable to a kind of loan that Chinese companies can use to pay for Russian energy imports such as natural gas.
Both countries want to reduce their dependence on the dollar and the American-dominated international financial system.
China's banks supported Putin with billions - but that could soon be over
China's lending in the Russian banking sector is an important source of funding for Putin.
According to calculations by the Kyiv School of Economics for the
Financial Times,
lending had quadrupled by the end of March 2023.
The Industrial and Commercial Bank of China (ICBC), Bank of China, China Construction Bank and Agricultural Bank of China increased their combined exposure to Russia by $2.2 billion to $9 in the 14 months following the Ukraine war. 7 billion dollars.
This emerged from data from the Russian Central Bank.
ICBC and the Bank of China alone accounted for around $8.8 billion.
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The Chinese lenders have replaced Western banks that Russia no longer supports due to international sanctions and pressure from its own countries.
But that could soon be over: three out of four major Chinese state banks – including ICBC – announced that they would no longer accept payments from sanctioned Russian financial institutions.
The Russian daily newspaper
Izvestia
reported this on Wednesday (February 21).
The Chinese banks' decision was apparently triggered by concerns about the effects of secondary sanctions.
Several banks are allowing Putin to run - out of concern about Western sanctions
The announcement that China's largest central bank plans to restrict business with Russia could deeply worry Putin.
Banks in the United Arab Emirates (UAE) have also frozen Russian accounts.
Recent events could be signs of the impact of Western sanctions.
The sanctions from the US Treasury Department target, among other things, foreign financial companies and banks that support Russia's war efforts in Ukraine and help Moscow procure military equipment.
(bohy)