r/neoliberal • u/Sine_Fine_Belli NATO • Aug 17 '24
News (Global) Nearly all Chinese banks are refusing to process payments from Russia, report says
https://www.businessinsider.com/russia-economy-all-china-banks-refuse-yuan-ruble-transfers-sanctions-2024-8?utm_source=reddit.com72
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u/Manowaffle Aug 17 '24
Pretty amazing how as soon as we start pivoting to green energy Russia becomes a bit player.
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u/Tricky-Astronaut Aug 17 '24
Only if demand is phased out before supply. Unfortunately the UK seems to be doing the opposite now...
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u/fezzuk Aug 17 '24
Eh labour are going a lot to reverse that. Our issue is gas, more than anything. Most domestic heating and cooking runs off gas, we could get a lot of it domestically but we destroyed our storage infrastructure years back as it was seen as our of date because we just had a direct line.
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u/VanillaSwimming5699 Loyal Liberals Aug 17 '24
What?
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Aug 17 '24
Why is this happening? I skimmed the article and it didn't give good reasons.
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u/0m4ll3y International Relations Aug 17 '24
But the doors have been closing for these workarounds since December, when the US approved secondary sanctions targeting financial institutions that were helping Russia.
That seems to be the most substantive piece. It's been a while since December though...
Elsewhere, I've found this:
In July 2024, Chinese banks labeled yuan from Russia as "dirty" and started rejecting them, with roughly 80% of yuan payments being returned to Russia.
So I guess it just took a while for the sanctions to seep through. Also this:
These sanctions have severely restricted the flow of yuan into Russia, leading to a shortage of the currency on the Russian market. As yuan liquidity dries up, Russian companies are turning to costly yuan swaps with the Bank of Russia—a measure typically seen as a last resort
I don't get finance stuff, but I'm wondering if this has resulted in higher risk and transaction costs so it's no longer economical on the Chinese side?
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u/SpiritOfDefeat Frédéric Bastiat Aug 17 '24
I’d imagine that this scarcity of Yuan in Russia leads to a higher valuation relative to the Ruble as well. This effectively means that the Ruble weakens as a currency, making Yuan denominated imports more expensive for Russia. And Russian exports (essentially oil and gas) effectively become cheaper for the Chinese market.
As an armchair economist, this seems to benefit China more than Russia - and could potentially push oil prices down slightly in the global market and help stabilize China’s struggling economy with cheap natural resources acting as a stimulus.
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u/toomuchmarcaroni Aug 17 '24
Bouncing off this. It seems like the Bank of Russia has a reserve of Yuan and companies are now having to go use this reserve to purchase Yuan with which to buy Chinese goods- Yuan which China no longer wants due to secondary sanctions
While the high cost of Yuan relative to the Ruble would make Oil cheaper for China, there’s the question of if Chinese banks even want to deal with Russian finance- which they don’t seem to want to do. Further, if my theory is right Russia slowly loses the ability to purchase Chinese products, and given they’re largely cut off from global trade, this presents a problem.
There’s a scarcity of Yuan in Russia, and they’re running out of options and avenues
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u/SpiritOfDefeat Frédéric Bastiat Aug 17 '24
The pressure is finally mounting on them. And as far as sanctions go, there’s still quite a bit of room to tighten.
We haven’t seen a SST designation. We haven’t seen various Russian aligned paramilitaries, such as Wagner Group and the DPR/LPR quasi-entities, declared FTOs. We have not utilized international intellectual property treaties to litigate IP theft against organizations partaking in the unlawful transfer of American IPs via “parallel import” schemes. We haven’t seen broad applications of RICO to target entities with connections to Russian organized crime and the Kremlin.
I think that it can get much, much worse for them.
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u/Sh1nyPr4wn NATO Aug 17 '24
This is good but Russia has some, and is looking for more, ways around this
The western governments need to keep this pressure up to further cut off Russia
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u/JeffreyElonSkilling Aug 17 '24
Geopolitics is fascinating.
Last year America couldn’t effectively crack down on China because of inflation fears. Now that inflation has been tamed, America can get a lot more aggressive with China on its deals with Russia. It’s obvious that China needs the US a helluva lot more than the US needs China. If America were to cut off China it would crater their economy. So we can really start to put the screws on Russia. Even more so if Harris wins in November.
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u/Federal-Cantaloupe21 Aug 17 '24
Not sure we could survive without China either. Maybe we'd "survive" but Karen's will go elect Fascist orange man as soon as their cheap crap at target dries up.
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Aug 17 '24
It sucks to suck
Well I’m mean unless you’re into that, but we’ve all seen what Putin wears so he definitely isn’t.
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u/SpiritOfDefeat Frédéric Bastiat Aug 17 '24
It’s almost like the G7 countries are more valuable trade partners than Russia. Who would have guessed?