After Vladimir Putin Meets Xi Jinping, Russia and China Establish Payment Alternatives to Evade US Sanctions for Now

By Jace Dela Cruz

Jun 21, 2024 02:29 AM EDT

Following the US sanctions on the only Russian bank branch in China last week, trade options between Russia and China have been constrained. Nevertheless, Reuters sources said that Russian President Vladimir Putin's visit to China last month secured alternative payment methods for the two nations.

TOPSHOT-CHINA-RUSSIA-DIPLOMACY — TOPSHOT - In this pool photograph distributed by the Russian state agency Sputnik, Russia's President Vladimir Putin and China's President Xi Jinping shake hands during a signing ceremony following their talks in Beijing on May 16, 2024.
(Photo : SERGEI BOBYLYOV/POOL/AFP via Getty Images)

Russia-China Trade Options

After Vladimir Putin's visit, specially authorized banks have been established in border regions to counter the US sanctions on VTB Bank's Shanghai branch. These banks permit Russian companies to open non-resident accounts with Chinese banks.

The Reuters sources noted that this measure is essential for maintaining the flow of income and goods between Russia and China. Trade between the two countries achieved a record $240 billion in 2023.

Russia, China Evading US Sanctions

This strategy, which involves smaller regional banks, currently evades US sanctions. According to Reuters, this setup allows bilateral payments to continue, although it could expose some Chinese financial institutions to US sanctions as they look for ways to circumvent the restrictions.

Using banks in border regions makes it easier for intermediaries working on behalf of Russian firms to conduct transactions. This scheme also reduces potential repercussions for China.

However, a senior US Treasury official noted that the department is already identifying smaller banks that are still helping to process transactions that support the military output of Russia.

Since Russia launched a full-scale invasion of Ukraine in February 2022, Russian banks were blocked from the SWIFT global payments system, while many Western nations and firms severed ties with Russia.

As he departed Beijing in May, Vladimir Putin touted the two countries' flourishing strategic alliance and his personal relationship with Chinese leader Xi Jinping, praising his talks with Xi as "substantive."