As of: April 7, 2024, 5:08 a.m
By: Bona Hyun
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Press
Split
Russia's economy is weakening. Instead of helping, several trading partners want to withdraw from business. The reason is the fear of tougher sanctions.
Moscow - China, India and Türkiye have one thing in common: they are important trading partners for Russia's economy. Although they were close to Russia for years, small cracks in economic relations are now becoming apparent. This is a bitter setback for President Vladimir Putin.
Russia's economy increasingly isolated - sanctions are driving Putin's partners to flee
It didn't stop at just one bank: three people's banks in China stopped payment transactions with Russia. Putin also left China's largest People's Bank hanging. In recent weeks, other Chinese credit institutions have joined in and restricted business. If all Chinese banks stop accepting yuan payments from Russia, it would pose a major problem for Russia's economy. The Chinese currency Yuan plays an important role for Russia, but at the same time this great dependence on China is Putin's downfall.
Putin is feeling the pressure of sanctions against Russia's economy. © IMAGO/Sergei Bobylev
In a recent report, Russia's central bank admitted it had limited options other than the Chinese yuan for its reserves. According to the Russian Central Bank, the role of the yuan as an international currency and its liquidity have increased “noticeably” in recent years.
International banks turn their backs on Putin because of sanctions
Experts suspect that banks are withdrawing from Russian business out of concern about US sanctions. President Joe Biden announced in December 2023 that he would sanction foreign banks that enable Russia to conduct important transactions. Banks that are indirectly involved in business with the Russian defense industry could also face exclusion from the US financial system.
Against this background, banks from Turkey and the United Arab Emirates also want to allow Putin to appear. According to
Reuters
, a source said Biden's December announcements made it clear to banks and businesses that the "threat of U.S. secondary sanctions is real."
Russia's economy under pressure: Important trading partner in the oil business is hesitant
Another important partner is turning away from the oil business, much to the annoyance of the Russian economy. The development should not come as a surprise. Hardeep Singh Puri, India's Minister for Petroleum and Natural Gas, had already made it clear that Indian companies would always secure the cheapest crude oil available. If sanctions violations become apparent, Indian trade would turn away from Russia entirely.
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According to the
Reuters
news agency , Indian refiners are currently concerned about the new Western sanctions. It could become more difficult to find ships to transport Russian crude oil in the future, and freight costs could also increase.
Putin faces challenges because of sanctions
Recent data shows that India is buying more and more oil from the US. American oil shipments to India rose sharply in March, according to data from crude oil tracking firm Kpler. At the same time, Russian oil imports have fallen by about 800,000 barrels a day since peaking last year,
Bloomberg
data shows. Even though the United States benefits from oil exports, officials emphasize that they have not explicitly asked India to reduce Russian oil imports.
The American think tank Wilson Center states in an analysis from February 2024 that the pressure of sanctions on Russia's economy is increasing. The behavior of the allies would indicate that Russia wants to radiate great self-confidence to the outside world. However, there are always concerns about the economic situation. Russia's economy faces an uncertain future. (with material from Reuters)