Western sanctions are so tight that Russia and China could soon use an ancient trading system. It's worked before.

Last edited Tue Aug 13, 2024, 10:28 AM - Edit history (1)

Russia and China are planning to revive the age-old practice of barter trade to get around Western sanctions, Reuters reported on Thursday. The deals could involve agriculture and could come as soon as this fall, the news agency reported, citing anonymous trade and payments sources. One source at a Russian industrial firm told the news agency that Russian firms were also talking about the exchange of metals for Chinese machinery imports.

Such arrangements are being discussed as trade between the two countries has become increasingly difficult amid tightening Western sanctions against Russia over its full-scale invasion of Ukraine in February 2022. Recently, about 80% of bank transfers made in the Chinese yuan were bouncing back with no explanation after being stalled for weeks while banks decide whether they could transact, Russian media outlet Kommersant reported last month.

Before this year, Russia and its trade partners skirted sanctions by using smaller banks and other payment modes or non-US dollar currencies to circumvent the West's ban of some Russian banks from the widely used SWIFT messaging system. However, this strategy has been hitting snags since the US approved secondary sanctions targeting financial institutions that were helping Russia. These restrictions prompted global banks from China to the United Arab Emirates, Turkey, and Austria to reduce transactions with Russia. Since barter trade doesn't require monetary payments, it would allow Russia and China to skirt such issues.

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https://www.businessinsider.com/russia-economy-russia-china-barter-trade-us-secondary-sanctions-payments-2024-8