Increased US sanctions targeting Gazprombank and numerous intermediary companies supplying Russia have severely impacted Russian-Chinese trade payments. Chinese banks, wary of US actions and potential violations, are delaying and scrutinizing yuan-denominated transactions, creating significant payment hurdles for Russian exporters. This cautious approach by Chinese financial institutions follows the blacklisting of approximately 100 companies, including some Chinese firms, for allegedly circumventing sanctions. The resulting payment delays and increased scrutiny contributed to a 7% decline in Russian exports during the final quarter of 2024.
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Under pressure from the U.S., UAE banks are significantly restricting transactions involving Russian companies, creating major disruptions to Russian trade. This tightening of financial restrictions impacts over fifty UAE banks, including Gazprombank, causing delays and outright refusals of payments. The increased scrutiny and processing times, escalating since November, severely hamper Russian businesses’ ability to conduct international trade, particularly for goods like electronics and industrial equipment. This trend mirrors similar difficulties reported in other countries, threatening to severely limit Russia’s access to crucial financial channels.
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Recent US sanctions on Gazprombank have caused the Russian ruble to plummet to its lowest level since the beginning of the Ukraine invasion, significantly impacting Russia’s already strained economy. This sharp decline, exceeding a third since August, is fueled by decreased oil prices and increased military spending, which has more than tripled since 2021. The sanctions limit Russia’s access to global finance, hindering its ability to fund the war and receive commodity revenues. While the Russian government claims the volatility is due to external factors and a strong dollar, experts warn of an overheating economy and the difficulties of combating inflation with a weak ruble.
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The United States imposed sanctions on Gazprombank, the last major Russian bank not previously sanctioned, citing its role in facilitating Russia’s military operations, including equipment purchases and soldier payments. These sanctions target Gazprombank and six subsidiaries, significantly limiting its access to global finance. While the US previously avoided sanctioning the bank to maintain European gas supplies, this decision reflects a shift in energy dynamics and aims to further degrade Russia’s war machine. The sanctions also target over 50 other Russian banks and 15 officials, and warn against participation in Russia’s alternative financial messaging system.
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New U.S. sanctions targeting Gazprombank, Russia’s third-largest bank, are under consideration. The sanctions, expected by the end of November, would prohibit Gazprombank from transactions with American banks, impacting its role in gas settlements with Europe and its management of substantial Russian foreign currency reserves. This action follows previous, less stringent Western sanctions that have allowed Gazprombank to retain access to SWIFT and major currencies, despite its connections to Kremlin insiders. The move has been communicated to G7 partners.
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John Q. Hosedrinker