Page 21 - RusRPTJun24

Russia in February in a move that will potentially disrupt Russia’s $200bn a year trade turnover.
The bank played a key role in settling trade deals between China and Russia. As a result Russian firms have been turning to smaller Chinese banks that do not have business in the US and so are not exposed to sanctions, but reports say settling trade deals has become complicated and can take months to complete as a result.
In March the same thing happened in Turkey, where several leading Turkish banks cut ties in an effort to avoid being sanctioned themselves, which has also driven trade between Russia and Turkey down. Turkish banks abruptly closed their Russian clients’ accounts and stopped doing business with Russians, which will disrupt the flourishing trade relations.
Russia has become Turkey’s biggest trade partner, importing $4.32bn worth of goods in January alone, twice as much as from China and four times as much as from Germany, the second and third largest partners respectively.
The SWIFT sanctions were imposed only days after Russia’s invasion of Ukraine in February that have effectively barred Russia from using the dollar, but trade with the rest of the world has flourished. The OFAC executive orders are part of a series of smart sanctions that the US has been increasingly employing since the end of last year that are proving more effective.
The new restrictions have not stopped the trade, but they have made it more complicated and increased costs for Russia. Experts told the Financial Times that if the trend continues Russia could find itself in the same position as Iran, with its trade hampered due to the difficulties associated with making international payments.
According to Trade Data Monitor Russia’s trade turnover with Turkey hit $586mn in 2023, up five-fold from pre-war levels, but in the first quarter of this year Turkish exports to Russia have fallen by a third y/y to $2.1bn, the FT reports. The value of the export of high priority goods has fallen to $93mn in the same period.
The US can track any transaction with dollars and is threatening Chinese and Turkish banks with a bar from operating in the dollar system, something none of these banks can afford, despite the good relations with Russia.
While the banks are easier for OFAC to police, due to their exposure to the US financial system, experts say that traders remain free to operate, but their business is stymied by the difficulties of finding a way to settle trade deals.
One solution is to settle more trades using national currencies. The Russo-Chinese mutual trade is now almost entirely settled using yuan and rubles, the Ministry of Finance (MinFin) said recently. The use of the ruble in Turkish trade is also on the rise. Russia recently opened up foreign access to be able to buy rubles on the Moscow Exchange.
In a parallel move, the EU is preparing a new fourteenth package of sanctions that is slated for adoption in the coming months but is unlikely to introduce any
21 RUSSIA Country Report June 2024 www.intellinews.com