Following the suspension of Visa and Mastercard services in Russia, at least three Russian banks have announced plans to continue their financial operations using China’s UnionPay system.
Analysts say Russia’s strategy to avoid Western sanctions through China’s financial system also puts the Chinese Communist Party (CCP) at risk of consequences.
On March 6, the three major Russian banks, Sberbank, Alfa-Bank and Tinkoff, announced plans to begin issuing credit cards using China’s UnionPay system. The Bank of China Insurance Regulatory Commission (CBIRC) also promised to “continue its business and financial operations” without sanctions against Russia at a press conference on March 3.
“Only major Chinese banks comply with Russian sanctions”
Albert Song, senior financial analyst in China, said the CCP is a dilemma about economic relations with Russia as some major Chinese banks oppose CBIRC’s pledges and limit lending to Russian commodities. It states that it has fallen into.
“The four largest banking institutions in China, the international financial institutions, are more vulnerable to potential sanctions from the West because they are part of the US dollar-based global financial system,” Song told The Epoch Times. rice field.
He said these banks are complying with past US sanctions against Iran and Hong Kong authorities because they want to avoid being involved in not complying with Western sanctions.
The Beijing-based Asian Infrastructure Investment Bank (AIIB) also announced on March 3 that it has suspended “all activities related to Russia and Belarus,” with the exception of four major banks.
As one of the founding members of the 6-year-old AIIB, Russia holds 6% of the voting rights, which is the third largest country after China and India.
It is also worth noting that the AIIB was established as part of Xi Jinping’s Belt and Road Initiative to reduce the position of US leadership in the World Bank and the IMF.
“Small banks operating only in China are not affected by sanctions from the West. Therefore, large banks should transfer their Russian-related businesses to these small and medium-sized banks as a way to avoid sanctions. Let’s do it, “said Son.
“That is, what we are seeing now is that after a $ 630 billion freeze in foreign exchange reserves as part of sanctions against the Central Bank of Russia, Russia has formed an alliance with the CCP to trade energy resources and sanctioned commodities. Is that you are forced to acquire. And agricultural products. “
The international financial system relies on U.S. technology
As outlined in the 2021 periodical published by China’s Russia, East Europe and Central Asia Institute, “Cross-Border Interbankment System (CIPS) for International RMB Transactions is a U.S. equipment, software, And relies heavily on the SWIFT banking system. As a result, all cross-border transactions are monitored by the United States. China’s Union Pay is the United States to monitor payment system algorithms and credit card creation. It also relies on BMC software services based in. “
PSC Cart Standard, a US financial technology company, serves more than 100 banks in Russia, so the reliance of the financial system on US technology also applies to Russia’s domestic payment system. “All Russian and Chinese financial institutions are trying to avoid financial sanctions for violating the US’long-arm doctrine’policy,” the periodical said.
At a press conference on March 7, White House spokesman Jen Psaki emphasized the ability of the United States to “take action” if China refuses to comply with the financial sanctions imposed on Russia.
Saki also said that Russia cannot “completely backfill the effects of the G7 and others” because Russia has strengthened its ties with China before the invasion of Ukraine and the G7 accounts for 50% of the world’s GDP. Stated.
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Kathleen Lee has been contributing to The Epoch Times since 2009, focusing on topics related to China. She is an engineer and chartered in Australian civil and structural engineering.