Over on Twitter, a recent post by user @Prune602 intrigued me. Sadly, the tweet only included an image of the headline and a link to a Russian website (the Moscow Times).There was an English translation button, but I couldn’t get it to work on this article. So I used Apple’s mobile Translate app. Here’s what it said about how sanctions are biting Russia-China trade.
China has blocked Russia 80% of payments in yuan
https://www.moscowtimes.ru/2024/07/29/kitai-perekril-rossii-80-platezhei-v-yuanyah-a137986
Translated with Apple mobile Translate app.
The situation with Russian payments to China continues to deteriorate: Chinese banks began to return about 80% of transfers in yuan to Russia, knowledgeable sources told Kommersant.
According to them, the Chinese side has been tightening the requirements “increasing” since December 2023. Then U.S. President Joe Biden signed a decree allowing the U.S. Ministry of Finance to impose secondary sanctions against credit institutions of third countries for cooperation with Russian sanctioned companies and assistance to the military-industrial complex (MIC).
After another tightening of sanctions in June, when the United States included all sanctioned persons in the definition of the military-industrial complex of the Russian Federation, including Russian banks, transfers on the Chinese side began to hang for several weeks, after which they are often canceled without explanation, says one of the interlocutors of Kommersant. As a result, according to him, the client incurs losses on the exchange rate and conversion. “Everyone will take the commission, and the payment will not be executed,” said the source.
“In our experience, banks do not ask for anything: money just hangs on correspondent accounts for 30-40 days and comes back,” says Alexey Sapozhnikov, managing partner of the consulting company Sapozhnikov and Partners.
According to him, sometimes the goods arrive in Russia and the Chinese supplier cannot receive their money for five to six months. However, often deliveries continue on a post-payment basis, Sapozhnikov added.
Russian companies increasingly have to resort to the services of intermediaries – payment agents or “trading houses,” says Oleg Ushakov, founder of Sagrada Legal. “In the first case, agents are responsible only for payment services, in the second case, we are talking about the fact that such houses are entrusted not only with the transfer of payment, but also with the function of movement of goods,” Ushakov explained.
The Point
Prune60’s point is that sanctions are not a 0-1 choice. There are many other avenues for sanctions to affect an economy. Anything that throws sand in the economy’s gears increases costs and adds some bite to the sanctions.
In this case, sanctions have increased the cost of Russia-China trade. Sometimes, China delays accepting Russian payments in yuan. That also presumably delays shipments of the product Russia is trying to buy. In other cases, the payment is refused outright and no shipment is made at all. This points to increasing transaction costs as a vehicle for sanctions to work.
The Source
I learned about this from Twitter user @Prune602. Here’s the Twitter bio:
Prune60 twitter bio (click for larger image)
I’m gonna guess that “Queen” has the meaning usually applied to British royalty. I will henceforth refer to @Prune602 using feminine pronouns. Here’s the first tweet in the thread:
Prune60 tweet (click for larger image)
And here’s the full Twitter thread. (I apologize for the bad formatting, but Threadreader seemed to have a few problems.)
