Western sanctions are posing a severe threat to Russia's economy, warns Vladimir Chistyukhin, the First Deputy Chairman of the Central Bank of Russia.
Speaking at the St. Petersburg International Legal Forum, he emphasized the urgent need to resolve payment issues, even if it means using unconventional methods.
Chistyukhin urged that all possible mechanisms, including swaps, clearing systems, and cryptocurrency, should be considered to address the payment problems.
"What seemed outdated or unpopular yesterday—like swaps, clearing systems, or crypto—needs to be tested and tried," he stated. The urgency is clear: without proper transaction mechanisms for international trade, Russia's economy could face a disastrous collapse.
The Impact of Western Sanctions
Since winter, Russian companies have struggled with payment issues following the expansion of U.S. Treasury powers to cut off any bank assisting the Russian military-industrial complex from dollar transactions.
This move led to payment blockades by banks in Turkey, the UAE, and China, severely impacting Russia's import and export capabilities.
By early spring, 80% of transactions between Russia and China were suspended, according to the Chongyang Institute for Financial Studies at Renmin University in Beijing.
Even high-level discussions between Russian President Vladimir Putin and Chinese President Xi Jinping failed to significantly improve the situation.
Plans for an isolated network of Chinese banks willing to process transactions with Russia without fear of sanctions fell short of expectations.
Further Complications
In late May, Kazakhstani banks also began blocking transfers from Russia, citing issues with Bank of China regularly rejecting Kazakh payments for sanctioned products.
The U.S. Treasury's June 12 sanctions against the Moscow Exchange and its key settlement structures led to the suspension of trading in dollars, euros, and Hong Kong dollars in Russia.
Additionally, U.S. sanctions targeted subsidiaries of major Russian banks in China, India, and Hong Kong, as well as subsidiaries of the defense-related Promsvyazbank in these countries.
The expanded definition of Russia's defense industry now includes all companies on the sanctions list, even those not directly involved in military production, making financial transactions even more challenging.
Decline in Imports
The sanctions have already taken a toll on Russian imports, which dropped by 9% to $84.6 billion from January to April. The decline was widespread, affecting imports from Europe and the Americas by 19%, Asia by 4%, and Africa by 5%.
Analysts from Promsvyazbank predict that new sanctions could cut another 15-20% of imports. "It’s crucial to see how partners from friendly countries respond to the new wave of geopolitical pressure," they noted. With the U.S. imposing sanctions on subsidiaries of major Russian banks in India and China, adapting to new sanctions will be more challenging and could further reduce Russia's export volumes.
As the economic landscape becomes increasingly difficult, the Russian economy faces an uncertain future, heavily dependent on how it navigates the complex web of international sanctions.
