SHANGHAI- As western governments ratchet up sanctions against Russia over its invasion of Ukraine, Moscow’s emerging markets allies are exploring channels for trade and financing to continue.
The other members of the erstwhile BRICs group – Brazil, India and China – are treading cautiously for fear of tripping on the sanctions, but the beginnings of a parallel financial system centered on Beijing are becoming detectable.
The United States and Europe have banished big Russian banks from the main global payments system SWIFT and announced other measures to limit Moscow’s use of a $640 billion war chest.
So the willingness of the emerging market giants to sustain business relations with Russia highlights a deep rift over Europe’s biggest crisis since the World War II, and threatens to chip away the dominance of the US dollar in global trade.
Chinese businesses and banks are now scrambling for ways to limit the impact of sanctions on their relations with Russia, with settlement of transactions in yuan seen rising at the expense of the dollar. The western curbs, which aim to cut Russia out of the global financial system, could also deepen commercial links between Moscow and Beijing.
In India, as concerns mount over sustaining supplies of Russian fertilizer, government and banking sources say there is a plan to get Russian banks and companies to open rupee accounts with a few state-run banks for trade settlement as part of a barter system.
Brazil’s President Jair Bolsonaro said his country will remain neutral in the conflict.
Deng Kaiyun, who heads Zhejiang’s chamber of commerce that represents Chinese private businesses that trade with Russia, said doing transactions without SWIFT was not a big issue, as the two countries both started de-dollarization five years ago.
“Yuan-rouble settlement has become a normal business at major banks nowadays … We business people are already accustomed to that,” Deng said, adding yuan is increasingly popular with Russians.
The sanctions are prodding Russian and Chinese companies to open accounts at Chinese banks that have subsidiaries in Russia, said a Moscow-based lawyer who represents Chinese businesses.
“SWIFT is not the only payment system. If you block this channel, business people need to find alternatives,” said the lawyer, who declined to be named due to sensitivity of the topic.
