As Kommersant found out, the sanctions really complicate the work of the Russians not only with the West, but also in the markets traditionally considered to be free from these risks, in particular in China. At the end of September, Moscow directly posed to Beijing the question of difficulties in servicing Russian clients in Chinese banks. Market participants and experts confirm the seriousness of the problem. It is particularly acute for people from the US SDN list, but there are also restrictions for those who are not formally affected by sanctions. The Chinese side is not in a hurry to take measures, calling into question the effectiveness of the notorious “turn to the East” and the prospects for this market as an alternative to tightening sanctions.
“Kommersant” was able to get acquainted with the minutes of the meeting of the subcommittee on financial cooperation between the Russian Federation and the PRC, which took place from 27 to 28 September in Shenzhen. The parties discussed "barriers to the timely implementation of interbank payments and the opening of correspondent accounts." According to Kommersant’s sources, during the meeting, representatives of the Russian Federation insistently raised the issue that Chinese banks were blocking or delaying the operations of Russian companies. Representatives of the People’s Bank of China (an analogue of the Russian Central Bank, but not having supervisory functions) in response turned out to be only “ready to continue” to transmit information to the Chinese commercial banks “about the nature of the existing sanctions restrictions”. The interlocutors of “Kommersant” insist that difficulties arise even among legal entities and individuals who are not affected by the sanctions.
For the first time about the difficulties with attracting money "not only from Western but also from Eastern markets," said in December 2014, the head of Sberbank, German Gref. In June 2015, on the pages of Hong Kong Finance Asia, the first deputy chairman of VTB, Yuri Soloviev, confirmed that “most Chinese banks refuse to conduct operations with Russian credit organizations.” However, more in the public field, the problem did not rise until this fall. On September 15, Vladimir Danilov, a representative of the Central Bank of the Russian Federation in China, officially mentioned the restrictions: “There are problems associated with a number of Chinese banks expanding interpretation of third-country restrictive measures against Russia. Commercial banks of China often refer to the sanctions of the EU countries and the USA as the reason for the refusal to service the payments of clients of Russian banks. ”
Since then, market participants and officials have been reluctant to comment on the situation. However, representatives of three Russian and two Chinese banks with branches in both countries explained to “Kommersant” that the problem initially appeared after the first rounds of sanctions at the end of 2014, by the end of 2015 it was possible to “more or less solve” the problem before the beginning of 2018 year the situation remained stable. However, since January – February, and especially since May, it has worsened, especially for companies that were on the US SDN list in April, in particular for the structures of Oleg Deripaska and Viktor Vekselberg.
"It is easier to block than to understand"
The Moscow representative of one of the largest Chinese state-owned banks believes that the exacerbation of difficulties occurred in connection with the “accumulation of information about sanctions.” According to him, every quarter, Russian subsidiaries of large Chinese banks (ICBC, Bank of China, China Construction Bank, etc.) send a report on updates in the area of sanctions to the head office in Beijing. The document is studied and sent to the other subsidiaries as a guide to action. This, according to the interlocutors of “Kommersant”, allows “to observe the sanctions in the amount of the necessary minimum.”
With the American and European counterparties, Chinese banks from the top four make up to 90% of their foreign operations, while only a few percent accounts for the Russian Federation. “Recall the fate of ZTE, which was practically destroyed,” said a representative of one of the largest Russian banks in Beijing. “After this incident, the Chinese began to blow on the water.” The second largest Chinese electronics manufacturer ZTE, which purchased up to 25% of components from American companies, was convicted in March 2017 of selling products prohibited by US sanctions to Iran and the DPRK. ZTE was fined $ 1.2 billion and ordered to punish managers. But the results did not satisfy Washington, and in April 2018, American companies were banned from working with ZTE. This led to a stop of the Chinese conglomerate with 75 thousand employees. In the end, ZTE agreed to pay another $ 1 billion fine, change the entire management and allow the United States to monitor the work of its department responsible for the enforcement of sanctions.
In such conditions, says an employee of a Chinese bank operating in Moscow, for many small regional banks of the PRC, with which Russian counterparties often do business, it is easier to refuse work: “when a person from a small bank sees in his computer a payment marked“ Russia ” , he has two options - to spend a lot of time figuring out if this company is not connected with the person under the sanction, or just to block the operation. ” A former employee of the Chinese branch of one of the Russian banks that fell under sanctions confirms that the regional offices are the biggest problem. “They do not understand the essence of the sanctions, do not want to substitute the bank and decide to block the payment. A personal call to the bank often helped, but it was not always possible to quickly pull out all the payments, and at best they were hanging for seven or ten days, ”he says.
According to the director of the Asian program of the Moscow Carnegie Center Alexander Gabuev, problems arise also because the volume of trade between the countries has historically been small. “Many Chinese banks simply did not have time to hire risk assessors in relations with Russia, who are widely represented in European banks. Therefore, it is easier for them to block any transactions with the Russians than to understand, ”he says.
Interviewed “Kommersant” entrepreneurs and employees of companies doing business with China and just living in the country, confirmed that the problems in the past six months arise constantly. Individuals and legal entities with Russian shareholders also have problems, the representative of the Skolkovo Foundation in China, Yevgeny Kosolapov, said. “It seems that the Chinese banks have lowered the sanctions list without explaining how to interpret it. And they interpret it extensively. For example, refusing to accept payments from Sberbank, although sanctions do not prohibit ordinary interbank payments. Moreover, they pass through US correspondent banks. But as a result, the received payment can be converted only at the branch manager level. The same with the opening of bank accounts. They are allowed at the top of banks, reinsured in branches, ”he says.
"Just hang in the system"
According to Kommersant’s sources, the biggest difficulties are with the defendants of the SDN list. In particular, Oleg Deripaska’s structures faced problems in making payments through Chinese banks during the procurement of equipment, fuel and lubricants and components for automobiles. We are talking about the return of funds and refusals to issue bank guarantees in 2018. Moreover, emphasizes one of the interlocutors of “Kommersant”, in 2017 this was not. Among the banks that blocked operations were Bank of China, ICBC, China Construction Bank. Oleg Deripaska’s En + Group declined to comment.
Among other examples, Kommersant sources call Aviaexport, which supplies and maintains aircraft and equipment (problems with Bank of China, failed to contact the company), as well as Bi-and-Bi JSC (B & B, China Construction & Bank). B & B produces more than 200 items of chocolate, jelly and other products under the Ju-Ju-Juv, Podolchanka, Pchelka brands, etc. The capacity of the company based on the Podolsk experimental confectionery factory is more than 2.5 thousand tons per month. The B & B confirmed that they supply products to China, but did not discuss problems with banks. The representative of the online platform for the export of Russian products to China Dakaitaowa, whose main owner is the son of Russian Prosecutor General Yuri Chaika Igor, declined to comment.
In the gold-mining Polymetal, which sells concentrate in the PRC, they assured that they did not encounter any problems, adding that when working with counterparties they prefer to cooperate with Russian and European banks. In the MMC Norilsk Nickel (about a quarter of the volume sold in Asia) point out "isolated cases of delays in the execution of instructions," but all "non-critical level and safely resolved." The company says that in order to prevent problems and develop relations with Chinese partners, they hold meetings, discuss business prospects, specific areas of interaction. “They also gave them the opportunity to participate in the placement of our Eurobonds, in a syndicated loan, we place funds in the Moscow branches of Chinese banks,” they added in Norilsk Nickel.
Olga Merekina, editor-in-chief of the Russian-language newspaper Magazheta, who lives in Shanghai, told Kommersant that they warned China Merchants Bank branches: it’s better not to receive legal entities from Russia, they’ll just hang in the system and don’t mention the country in general . When trying to open a company, according to Mrs. Merekina, a huge package of documents was demanded from the founders of the Russian Federation, “promises that money will not be transferred from Russia” and much more. “Then endless interviews began, calls from bank employees of different levels to clarify the same questions. They even came home, although this had never happened before, ”she explained, emphasizing that a year ago there were no problems with opening an account in the same bank.
Co-owner of the Moscow confectionary factory "Victory" Vitaly Muravyov said that the company supplies products to China through distributors and has not encountered any problems. But he knows that some Chinese banks “have begun to approach caution in cooperation with Russian state-owned banks,” when it comes to guarantees and letters of credit. A top manager of a large agricultural holding claims that Russian enterprises of the military-industrial complex have faced problems. At the same time, the source of “Kommersant” in a large Russian exporter believes that the difficulties are connected “not primarily with sanctions, but with the general weak level of support for client relations in Chinese state-owned banks.”
Not less problems and the citizens. According to Kommersant interlocutors, since May they have been denied opening accounts at Ping An Bank, Agricultural Bank of China, Bank of Communications, Dalian Bank, Shanghai Pudong Development Bank. In this case, no documents explaining the procedure for such treatment of Russians, bank employees do not impose.
"The results are very modest"
The situation could be corrected by Beijing’s political will: in the end, almost all of the country's banks are fully or partially owned by the state. However, according to the Kommersant interlocutors who participated in the Russian-Chinese negotiations, the PRC authorities are not in a hurry to help their “strategic allies” solve the problem. It is raised at all bilateral meetings, starting at least from the summit between Vladimir Putin and Xi Jinping in Qingdao on June 8–9. “The Chinese express sympathy, clap their shoulders and promise to correct the“ excesses on the ground, ”but so far the results are modest,” admits one of the Kommersant interlocutors in diplomatic circles.
The source of “Kommersant” from a Chinese bank suggested, as an option, the expansion of trade in yuan and rubles according to the scheme used by the Chinese in Africa. “CITIC Construction built a whole city in Angola in the early 2010s, and the government paid with oil. Oil received CNPC, which paid off with CITIC yuan, ”he said. The interlocutor of “Kommersant” asserts that according to the scheme excluding the use of dollars, they have already agreed to build a high-speed railway line Moscow-Kazan.
Deputy Economy Minister Sergei Gorkov October 18, explained that Moscow and Beijing are working on the signing of an intergovernmental agreement, which will simplify the procedure of trade in yuan and rubles. However, the Chinese banker specifies that such operations have a natural limitation: “current operations can be paid for, but forward contracts cannot be concluded for more than three to six months, because the rate can change dramatically.”
In order for this pair of currencies to be more actively used in trade, the support of states is necessary when hedging risks, confirm in VEB. “Investors have a real interest not only in short-term operations for buying and selling products, but also in longer-term and long-term contracts in national currencies that are associated with project financing,” state corporations say. “Long-term contracts in national currencies would help improve the investment climate and settlement environment, less payment stops. ” But, they add in VEB, for effective interaction between Russian banks and companies, on the one hand, and Chinese banks, on the other, it is necessary to create a unified payment system, form a unified infrastructure for exchanging interbank messages, as well as a unified money transfer system.
“Kommersant” was able to get acquainted with the minutes of the meeting of the subcommittee on financial cooperation between the Russian Federation and the PRC, which took place from 27 to 28 September in Shenzhen. The parties discussed "barriers to the timely implementation of interbank payments and the opening of correspondent accounts." According to Kommersant’s sources, during the meeting, representatives of the Russian Federation insistently raised the issue that Chinese banks were blocking or delaying the operations of Russian companies. Representatives of the People’s Bank of China (an analogue of the Russian Central Bank, but not having supervisory functions) in response turned out to be only “ready to continue” to transmit information to the Chinese commercial banks “about the nature of the existing sanctions restrictions”. The interlocutors of “Kommersant” insist that difficulties arise even among legal entities and individuals who are not affected by the sanctions.
For the first time about the difficulties with attracting money "not only from Western but also from Eastern markets," said in December 2014, the head of Sberbank, German Gref. In June 2015, on the pages of Hong Kong Finance Asia, the first deputy chairman of VTB, Yuri Soloviev, confirmed that “most Chinese banks refuse to conduct operations with Russian credit organizations.” However, more in the public field, the problem did not rise until this fall. On September 15, Vladimir Danilov, a representative of the Central Bank of the Russian Federation in China, officially mentioned the restrictions: “There are problems associated with a number of Chinese banks expanding interpretation of third-country restrictive measures against Russia. Commercial banks of China often refer to the sanctions of the EU countries and the USA as the reason for the refusal to service the payments of clients of Russian banks. ”
Since then, market participants and officials have been reluctant to comment on the situation. However, representatives of three Russian and two Chinese banks with branches in both countries explained to “Kommersant” that the problem initially appeared after the first rounds of sanctions at the end of 2014, by the end of 2015 it was possible to “more or less solve” the problem before the beginning of 2018 year the situation remained stable. However, since January – February, and especially since May, it has worsened, especially for companies that were on the US SDN list in April, in particular for the structures of Oleg Deripaska and Viktor Vekselberg.
"It is easier to block than to understand"
The Moscow representative of one of the largest Chinese state-owned banks believes that the exacerbation of difficulties occurred in connection with the “accumulation of information about sanctions.” According to him, every quarter, Russian subsidiaries of large Chinese banks (ICBC, Bank of China, China Construction Bank, etc.) send a report on updates in the area of sanctions to the head office in Beijing. The document is studied and sent to the other subsidiaries as a guide to action. This, according to the interlocutors of “Kommersant”, allows “to observe the sanctions in the amount of the necessary minimum.”
With the American and European counterparties, Chinese banks from the top four make up to 90% of their foreign operations, while only a few percent accounts for the Russian Federation. “Recall the fate of ZTE, which was practically destroyed,” said a representative of one of the largest Russian banks in Beijing. “After this incident, the Chinese began to blow on the water.” The second largest Chinese electronics manufacturer ZTE, which purchased up to 25% of components from American companies, was convicted in March 2017 of selling products prohibited by US sanctions to Iran and the DPRK. ZTE was fined $ 1.2 billion and ordered to punish managers. But the results did not satisfy Washington, and in April 2018, American companies were banned from working with ZTE. This led to a stop of the Chinese conglomerate with 75 thousand employees. In the end, ZTE agreed to pay another $ 1 billion fine, change the entire management and allow the United States to monitor the work of its department responsible for the enforcement of sanctions.
In such conditions, says an employee of a Chinese bank operating in Moscow, for many small regional banks of the PRC, with which Russian counterparties often do business, it is easier to refuse work: “when a person from a small bank sees in his computer a payment marked“ Russia ” , he has two options - to spend a lot of time figuring out if this company is not connected with the person under the sanction, or just to block the operation. ” A former employee of the Chinese branch of one of the Russian banks that fell under sanctions confirms that the regional offices are the biggest problem. “They do not understand the essence of the sanctions, do not want to substitute the bank and decide to block the payment. A personal call to the bank often helped, but it was not always possible to quickly pull out all the payments, and at best they were hanging for seven or ten days, ”he says.
According to the director of the Asian program of the Moscow Carnegie Center Alexander Gabuev, problems arise also because the volume of trade between the countries has historically been small. “Many Chinese banks simply did not have time to hire risk assessors in relations with Russia, who are widely represented in European banks. Therefore, it is easier for them to block any transactions with the Russians than to understand, ”he says.
Interviewed “Kommersant” entrepreneurs and employees of companies doing business with China and just living in the country, confirmed that the problems in the past six months arise constantly. Individuals and legal entities with Russian shareholders also have problems, the representative of the Skolkovo Foundation in China, Yevgeny Kosolapov, said. “It seems that the Chinese banks have lowered the sanctions list without explaining how to interpret it. And they interpret it extensively. For example, refusing to accept payments from Sberbank, although sanctions do not prohibit ordinary interbank payments. Moreover, they pass through US correspondent banks. But as a result, the received payment can be converted only at the branch manager level. The same with the opening of bank accounts. They are allowed at the top of banks, reinsured in branches, ”he says.
"Just hang in the system"
According to Kommersant’s sources, the biggest difficulties are with the defendants of the SDN list. In particular, Oleg Deripaska’s structures faced problems in making payments through Chinese banks during the procurement of equipment, fuel and lubricants and components for automobiles. We are talking about the return of funds and refusals to issue bank guarantees in 2018. Moreover, emphasizes one of the interlocutors of “Kommersant”, in 2017 this was not. Among the banks that blocked operations were Bank of China, ICBC, China Construction Bank. Oleg Deripaska’s En + Group declined to comment.
Among other examples, Kommersant sources call Aviaexport, which supplies and maintains aircraft and equipment (problems with Bank of China, failed to contact the company), as well as Bi-and-Bi JSC (B & B, China Construction & Bank). B & B produces more than 200 items of chocolate, jelly and other products under the Ju-Ju-Juv, Podolchanka, Pchelka brands, etc. The capacity of the company based on the Podolsk experimental confectionery factory is more than 2.5 thousand tons per month. The B & B confirmed that they supply products to China, but did not discuss problems with banks. The representative of the online platform for the export of Russian products to China Dakaitaowa, whose main owner is the son of Russian Prosecutor General Yuri Chaika Igor, declined to comment.
In the gold-mining Polymetal, which sells concentrate in the PRC, they assured that they did not encounter any problems, adding that when working with counterparties they prefer to cooperate with Russian and European banks. In the MMC Norilsk Nickel (about a quarter of the volume sold in Asia) point out "isolated cases of delays in the execution of instructions," but all "non-critical level and safely resolved." The company says that in order to prevent problems and develop relations with Chinese partners, they hold meetings, discuss business prospects, specific areas of interaction. “They also gave them the opportunity to participate in the placement of our Eurobonds, in a syndicated loan, we place funds in the Moscow branches of Chinese banks,” they added in Norilsk Nickel.
Olga Merekina, editor-in-chief of the Russian-language newspaper Magazheta, who lives in Shanghai, told Kommersant that they warned China Merchants Bank branches: it’s better not to receive legal entities from Russia, they’ll just hang in the system and don’t mention the country in general . When trying to open a company, according to Mrs. Merekina, a huge package of documents was demanded from the founders of the Russian Federation, “promises that money will not be transferred from Russia” and much more. “Then endless interviews began, calls from bank employees of different levels to clarify the same questions. They even came home, although this had never happened before, ”she explained, emphasizing that a year ago there were no problems with opening an account in the same bank.
Co-owner of the Moscow confectionary factory "Victory" Vitaly Muravyov said that the company supplies products to China through distributors and has not encountered any problems. But he knows that some Chinese banks “have begun to approach caution in cooperation with Russian state-owned banks,” when it comes to guarantees and letters of credit. A top manager of a large agricultural holding claims that Russian enterprises of the military-industrial complex have faced problems. At the same time, the source of “Kommersant” in a large Russian exporter believes that the difficulties are connected “not primarily with sanctions, but with the general weak level of support for client relations in Chinese state-owned banks.”
Not less problems and the citizens. According to Kommersant interlocutors, since May they have been denied opening accounts at Ping An Bank, Agricultural Bank of China, Bank of Communications, Dalian Bank, Shanghai Pudong Development Bank. In this case, no documents explaining the procedure for such treatment of Russians, bank employees do not impose.
"The results are very modest"
The situation could be corrected by Beijing’s political will: in the end, almost all of the country's banks are fully or partially owned by the state. However, according to the Kommersant interlocutors who participated in the Russian-Chinese negotiations, the PRC authorities are not in a hurry to help their “strategic allies” solve the problem. It is raised at all bilateral meetings, starting at least from the summit between Vladimir Putin and Xi Jinping in Qingdao on June 8–9. “The Chinese express sympathy, clap their shoulders and promise to correct the“ excesses on the ground, ”but so far the results are modest,” admits one of the Kommersant interlocutors in diplomatic circles.
The source of “Kommersant” from a Chinese bank suggested, as an option, the expansion of trade in yuan and rubles according to the scheme used by the Chinese in Africa. “CITIC Construction built a whole city in Angola in the early 2010s, and the government paid with oil. Oil received CNPC, which paid off with CITIC yuan, ”he said. The interlocutor of “Kommersant” asserts that according to the scheme excluding the use of dollars, they have already agreed to build a high-speed railway line Moscow-Kazan.
Deputy Economy Minister Sergei Gorkov October 18, explained that Moscow and Beijing are working on the signing of an intergovernmental agreement, which will simplify the procedure of trade in yuan and rubles. However, the Chinese banker specifies that such operations have a natural limitation: “current operations can be paid for, but forward contracts cannot be concluded for more than three to six months, because the rate can change dramatically.”
In order for this pair of currencies to be more actively used in trade, the support of states is necessary when hedging risks, confirm in VEB. “Investors have a real interest not only in short-term operations for buying and selling products, but also in longer-term and long-term contracts in national currencies that are associated with project financing,” state corporations say. “Long-term contracts in national currencies would help improve the investment climate and settlement environment, less payment stops. ” But, they add in VEB, for effective interaction between Russian banks and companies, on the one hand, and Chinese banks, on the other, it is necessary to create a unified payment system, form a unified infrastructure for exchanging interbank messages, as well as a unified money transfer system.
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