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Russian Imports of Chinese Cars Face Payment Hurdles Amid U.S. Sanctions

According to a report by Reuters, Alexei Podshchekoldin, the president of the Russian Automobile Dealers Association, has revealed that Russia’s imports of cars from China to supply its domestic market have been severely affected by payment issues stemming from U.S. sanctions.

Due to the U.S. threat of secondary sanctions against Chinese banks facilitating trade between Russia and China, several major banks have been reluctant to proceed. Consequently, Russia and China have resorted to complex measures to avoid payment delays, including the use of small regional Chinese banks as alternative solutions.

Podshchekoldin has pointed out that this issue is particularly problematic for Russian small-scale importers whose funds have been returned. The outcome is a reduction in the export of Chinese cars to Russia, leading to lost business for Russian importers and the potential for additional costs.

Podshchekoldin explains, “Even with Russian banks managing ruble accounts in China, transactions with China are no longer possible. Initially, only major Russian and Chinese banks could engage in transactions, but these banks have been gradually added to the sanctions list. Consequently, funds must pass through multiple banks, and all transactions must go through second or third-party banks.”

Regarding payment issues, Podshchekoldin emphasizes, “This is a serious problem, and even our largest domestic manufacturers have encountered it when purchasing parts.” He hopes for a joint bank or some form of electronic solution.

Podshchekoldin also suggests the idea of barter trade but acknowledges that, unlike basic raw materials like oil, wheat, sugar, and natural gas, it is challenging for Russian authorities to agree on the prices of cars and components.

Since the Russia-Ukraine conflict in February 2022, Western automakers have largely withdrawn from the Russian market, presenting a significant opportunity for Chinese car manufacturers to quickly fill the void left by their Western competitors. Now, Chinese car manufacturers have captured over half of the Russian car market. According to Chinese customs statistics, from January to May 2023, China’s exports of cars to Russia increased by 36% to reach $4.86 billion.