Sanctions against Russia: In China, Putin will continue to receive money

 "Russia not only stores 15 percent of its reserves in China. Putin can access billions more there to weaken Western sanctions.

 

The effectiveness of the sanctions against Russia and the political survival of Vladimir Putin as the head of state depend more and more on the question of how China positions itself towards Moscow after the Russian war against Ukraine. According to experts, Russia will continue to be able to finance itself in China, despite efforts by the West to cut off the country from the international financial system. Depending on the estimate, the Russian central bank holds investments with China's central bank in Beijing with an equivalent value of 77 to 90 billion dollars, mostly in the yuan currency. This equates to 13 percent to 15 percent of Russia's total reserves, depending on the estimate, making it Russia's largest foreign currency holding in any other country.

 

On Sunday, following the announcement that he would block the Russian central bank's international reserves, EU foreign policy chief Josep Borrell admitted that in recent years Moscow had increasingly transferred them to countries where the West could not freeze them like China. "I don't think any sanctions or measures can stop Russia from withdrawing its reserves from the People's Bank of China (PBoC)," Alicia Garcia-Herrero, Asia chief economist at investment bank Natixis in Hong Kong, told the F.A.Z.

 

In addition to the $90 billion worth of reserves held in China, the Chinese central bank and the Bank of Russia agreed on a mutual currency exchange (swap line) agreement worth around $25 billion after the return to Russia of Crimea in 2014. This is a kind of loan that Chinese companies can use to pay for Russian energy imports such as natural gas. This is intended to reduce the dependence of both countries on the dollar and the international financial system, which is dominated by America.

 

Secondary sanctions could follow

 

China's government said on Monday that Russia was "not an ally, but a strategic partner". At the same time, however, China's government reiterated that Beijing will not support the sanctions against Moscow. "China and Russia will continue their normal trade relations in the spirit of mutual respect, equality and mutual benefit," said a Beijing Foreign Ministry spokesman.

 

According to the Bloomberg news agency, the state-owned Chinese commercial banks stopped lending for the import of Russian raw materials after the US imposed sanctions. However, Beijing's commercial banks such as the Industrial & Commercial Bank of China (ICBC) and the Bank of China (BoC) have previously halted business with other countries to avoid violating American sanctions and risk being cut off from the banking payment network SWIFT.

 

Asked whether Chinese companies such as Huawei and Xiaomi would continue to supply high technology to Russia, Beijing on Monday replied that it opposed sanctions.

 

If the West wants to prevent the People's Republic from putting up a rescue package for Russia, America must issue secondary sanctions against China, said economist Garcia-Herrero. These "secondary actions," unique to American law, penalize non-US companies or countries for doing business with the target of primary sanctions -- in this case, Russia."