China's Banks Stall Russian Imports, Citing Sanctions and Routing Issues

This situation is highlighted by the service themoscowtimes.com, which notes that Chinese banks have started requiring information about shipment routes from Russian importers. The reason for this became evident recently when the Bank of China refused payment for a shipment of plastic household items. The refusal was due to the shipment's route, including transport through Zabaykalsk to the Moscow region via TransContainer, a Russian railway operator mentioned by the service to one of the importers.

TransContainer, previously a subsidiary of the national railways and now owned by the Delo group, is the largest operator for rail shipments, boasting over 140,000 containers and 40,000 rail platforms. The company had built a modern terminal in Zabaykalsk to boost rail imports from China. However, Western sanctions have thwarted these plans. In late February, Transcontainer found itself on the US's list of strictest restrictions due to its connections with the Russian military sector and involvement in ammunition supplies from North Korea.

Washington also warned Chinese banks at the end of February, announcing potential secondary sanctions if they continued to support Russia in bypassing restrictions. This has led to significant difficulties in transferring dollars and yuan between the PRC and Russia. Logistics companies estimate that only one in five direct transfers successfully reach their recipient without hitches, with the majority being held up in Chinese banks requiring extensive information about payment purposes.

Some importers use intermediaries from third countries to circumvent these issues, albeit at a 5 to 20 percent increase in operation costs.

The challenges in making payments to China have caused a drop in Russian imports. In late April, the Central Bank of Russia noted that the sluggish import dynamics starkly contrasted with the robust domestic demand performance. Russian importers also pointed out the unfeasibility of shipping goods by sea due to enormous additional costs associated with route changes. Containers are only dispatched from rail terminals once the exporter receives payment. Opting for the shipping route through Kazakhstan also presents difficulties, as Kazakh authorities scrutinize goods closely related to sanctions, according to an importer quoted by themoscowtimes.com.

In some cases, the sea route remains the only option, but according to companies importing to Russia, this is linked to a nearly 50 percent increase in costs.