(MENAFN) According to a recent report by Reuters, a significant portion of transactions between Russia and China are facilitated through intermediaries, with estimates suggesting that up to half of these transactions utilize third-party channels. The use of intermediaries has been attributed to concerns among Chinese lenders about the potential exposure to secondary sanctions associated with facilitating direct transactions with Russia.
The reliance on third-party intermediaries has become particularly pronounced following the implementation of additional measures by United States President Joe Biden in December to deter transactions with Russia. The United States Treasury's calls for foreign banks to enhance compliance with anti-Russia sanctions have further incentivized the adoption of intermediary channels to mitigate risks.
In March, reports emerged that several Chinese banks, including the Industrial and Commercial Bank of China, ceased accepting payments in yuan from Russia due to fears of secondary sanctions. This development has underscored the importance of intermediary channels in facilitating cross-border payments between the two countries.
Sources speaking to Reuters on condition of anonymity revealed that these intermediaries are often represented by legal entities based in locations such as Hong Kong, Kyrgyzstan, Kazakhstan, and the United Arab Emirates, among others. These jurisdictions have opted not to align with sanctions policies targeting Russia, providing a conducive environment for facilitating transactions.
To expedite payment processes, some companies have reportedly adopted the services of payment agents, establishing chains of temporary firms to streamline transactions. This approach has gained traction among Russian entities, with nearly half of those engaging in transactions with Chinese counterparts opting for intermediary services, according to consultants cited in the report.
The use of third-party intermediaries has become increasingly prevalent among major Russian businesses, many of which have been subjected to sanctions related to the Ukraine conflict.
Some of these businesses initiated arrangements with intermediaries as early as a year ago, signaling a strategic shift towards utilizing alternative channels to conduct transactions with Chinese partners.
As geopolitical tensions persist and regulatory landscapes evolve, the reliance on third-party intermediaries in Russian-Chinese transactions underscores the complex dynamics of international trade and the imperative for businesses to navigate regulatory compliance and risk mitigation strategies effectively.
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