Economy

As Russia’s invasion of Ukraine has intensified, so have the rhetorical gymnastics of diplomats from the country’s giant neighbour that is also one of its few large remaining international partners: China.Their attempts to balance Beijing’s policy of support for global peace and stability while avoiding any criticism of Moscow are a sign that the war is unlikely to derail China’s quasi-alliance with Russia, diplomats and analysts said.“The Chinese foreign ministry is doubling down on their alignment to Russia, so we are learning in real time what they mean when they say there are ‘no limits’ in their partnership,” said Evan Medeiros, a China expert at Georgetown University and former senior Asia policy adviser to Barack Obama. China’s close ties with Russia theoretically created a “strategic trilemma” for Beijing, potentially clashing with its other foreign policy principles, such as protection of states’ sovereignty, and with other important economic relationships with the US, Europe and elsewhere, he said. “But they are clearly privileging their alignment with Russia and pursuing something I would call pro-Russia neutrality.”Beijing has been here before. Both in 2008, when Russia sent troops into Georgia, and in 2014, when Moscow annexed Crimea, Beijing avoided directly backing Russia’s actions but also refused to criticise them.“China and Russia handle their partnership on two levels. On one level is rather non-committal rhetoric about conflicts in each other’s neighbourhoods, and on another is the strong alignment when it comes to great power competition,” said Alexander Korolev, a lecturer at the University of New South Wales who researches the China-Russia relationship. “There is a stronger rhetorical support from China for Russia in its resistance against Nato expansion this time.”A volunteer guards a main road leading into Kyiv © AFP via Getty ImagesWhen Russian president Vladimir Putin visited Beijing for the Winter Olympics this month — he was one of the few foreign leaders to do so — Chinese president Xi Jinping threw his weight behind Putin’s opposition against Nato expansion. On Friday, China abstained in a vote on a UN draft resolution condemning Russia’s attack on Ukraine.Some western analysts wonder, however, whether this time, by starting a war in Europe, Putin may be putting too great a strain on the partnership.“Russia does have a penchant for destabilising actions, while China has this desire to rise to great power status on its reputation for prudence and stability,” Andrea Kendall-Taylor, senior fellow at the Center for a New American Security and a former intelligence officer working on Russia, said at a debate this week. She added this contradiction might introduce fissures in the relationship. “So far it has deepened without any side having to incur any cost for the other. That is going to be put to the test in this case,” she said.Until the eve of the attack, Chinese state media was still calling US warnings of a Russian invasion disinformation. “It was a shock to wake up to [the invasion] because we still thought that he was bluffing,” a Chinese diplomat said, referring to Putin. “There is an element of surprise in the expert community and among the public about the mode and scale of Russia’s action,” said Zhang Xin, a Russia expert at East China Normal University. “It is possible that more concrete information was exchanged between the two leaders.”Zhang said it was “slightly embarrassing” for the government to reiterate principles, such as respect for territorial integrity, while accommodating Russia’s military action and also being at odds with Chinese interests such as the aim for common development and prosperity in Eurasia.But this seemed to be a minor concern for Beijing. “No matter how much bloodshed we see in this conflict, unless it becomes an all-out regional war and great powers get pulled in, I don’t think it will have an impact on China’s bilateral ties with Russia,” Zhang said.One reason is the personal stamp Putin and Xi have put on the relationship.“There is definitely some personal rapport and chemistry between them, to the extent that you could almost speak of a personal alliance,” said Artyom Lukin, an associate professor at Far Eastern Federal University in Vladivostok, who believed Putin informed Xi of his plans. “Putin is not completely mad — he must have understood that he needed support from China on this. Moreover, not informing Xi could have been a personal affront.”Analysts also said Xi had shown a higher acceptance of risk and friction in foreign policy during his nearly nine years in office than his immediate predecessors, reflected in his pursuit of a more confrontational and assertive stance in disputes with neighbours. This made Putin’s actions more palatable to him.Sanctions may be a more serious test. China is expected to offer Russia respite, for example by increasing commodities trade through state-owned policy banks that have less trouble circumventing US sanctions.“Look to North Korea for reference: All trade with them is banned under international sanctions and yet China accounts for 95 per cent of their foreign trade,” Lukin said.

This week, China removed restrictions on imports of Russian grain, opening up another source of agricultural export revenues just as Moscow faced new western sanctions.China’s foreign minister Wang Yi warned on Saturday that sanctions would not only hurt the economies of Moscow and the west but would also prevent a political resolution of the conflict.“Sanctions won’t solve [old] problems,” said Wang in a phone call with Annalena Baerbock, his German counterpart. “They will create new ones.”In Washington, policy experts therefore believe that only raising the cost of backing Russia could make China think again.“I don’t think Beijing is terribly uncomfortable with Putin’s play. So if you want to change that calculus, you have to change the pay-off,” said Yun Sun, director of the China programme at the Stimson Centre. “If Russia works with Chinese financiers, in order to block that channel, the US needs to increase the cost for China Eximbank and China Development Bank,” she added.But for now, western governments have their hands full with responding to Russia’s invasion. “The Russia conversation is moving fast,” Medeiros said. “But the ‘what do we do about the Russia-China relationship’ conversation — it has started, but it has not reached terminal velocity.”With additional reporting by Sun Yu in Beijing More

WASHINGTON (Reuters) – China so far does not appear to be helping Russia evade Western financial sanctions on Moscow over its invasion of Ukraine, but doing so would “do profound damage” to China’s reputation, a senior Biden Administration official said on Saturday.”The latest signs suggest that China’s not coming to the rescue,” the official told reporters after announcing that the United States and its allies agreed to impose sanctions against Russia’s central bank and disconnect key Russian banks from the SWIFT international financial transaction network.The official said that recent reports that some Chinese banks have stopped issuing letters of credit for purchases of physical commodities from Russia were a positive sign.This “suggests that, much like has been the pattern for years and years, China has tended to respect the force of U.S. sanctions,” the official added.China is Russia’s biggest trade partner for both exports and imports, buying a third of Russia’s crude oil exports in 2020 and supplying it with manufactured products from cell phones and computers to toys and clothing.The China-Russia trade relationship has grown significantly since 2014, when the West first imposed sanctions against Russian entities over Moscow’s annexation of Crimea. Graphic – Russia’s biggest oil customer: China by far: https://graphics.reuters.com/UKRAINE-CRISIS/SANCTIONS/dwpkrldklvm/chart.png Some of that trade is conducted in China’s yuan currency, which could technically fall outside of sanctions aimed at cutting Russia off from transactions in U.S. dollars, euros, sterling and other major currencies.But Chinese banks that do business with Russian banks and other entities hit with full blocking sanctions and put on the Treasury’s “specially designated nationals” list could face sanctions themselves and loss of access to the U.S. financial system.The official said that if China were to help Russia evade U.S. sanctions, “it really would be an unfortunate signal for China’s vision of the world,” and give “tacit or explicit accommodation to Russia’s invasion of a sovereign country in the heart of Europe.””It would do profound damage to its reputation in Europe, but really across the world,” the official said of China. More

WASHINGTON — The Biden administration and key allies announced on Saturday that they would remove several of the largest Russian banks from the SWIFT financial messaging system, essentially barring them from international transactions. They also said they would impose new restrictions on Russia’s central bank to prevent it from using its large international reserves to undermine sanctions.The actions, agreed to by the European Commission, Britain, Canada, France, Germany, Italy and the United States, represented a significant escalation in the effort to impose severe economic costs on Russia over President Vladimir V. Putin’s decision to invade Ukraine.“Russia’s war represents an assault on fundamental international rules and norms that have prevailed since the Second World War, which we are committed to defending,” the countries said in a joint statement. “We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”The action was a remarkable change of direction for European powers that, until recent days, were reluctant to end a 30-year effort to integrate Russia in the European economy. Now, like the Biden administration, European nations appear to be headed toward a policy of containment.But, out of a sense of political self-preservation, they stopped short of barring energy transactions with Russia. The result is that Germany, Italy and other European nations will continue purchasing and paying for natural gas that flows through pipelines from Russia — through Ukrainian territory that is suddenly a war zone.Some in Europe, along with President Volodymyr Zelensky of Ukraine, had called for all Russian institutions and individuals to be cut off from SWIFT in an effort to bring the Russian economy to its knees. About 40 percent of the Russian government’s budget comes from energy sales.Nonetheless, Ursula von der Leyen, the president of the European Commission, said that “cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports.”Ms. von der Leyen said that the trans-Atlantic coalition would also try to cripple Russia’s central bank by freezing its transactions and making it “impossible for the central bank to liquidate assets.”The targeting of Russia’s central bank could, in the end, prove more consequential than the SWIFT measures. Russia has spent the last several years bolstering its defenses against sanctions, amassing more than $630 billion in foreign currency reserves by diverting its oil and gas revenue. Those reserves can be used to prop up the ruble, whose value has fallen dramatically amid the latest rounds of sanctions.Biden administration officials said on Saturday that there would be new restrictions by the United States and allies against selling rubles to Russia, undercutting the country’s ability to support its currency in the face of new sanctions on its financial sector. That, in turn, could cause inflation — and while administration officials did not say so explicitly, they are clearly hoping that could fuel protests against Mr. Putin’s rule in Russia.“We know that Russia has been taking steps since 2014 to sanctions-proof its economy, in part through the stockpiling of foreign exchange reserves,” said Emily Kilcrease, a senior fellow at the Center for a New American Security. “The central bank sanctions will limit their ability to leverage this asset, along with constraining their ability to conduct monetary policy of any sort to manage the economic damage from other sanctions.”The United States and its allies also took measures to put pressure on Russia’s elites. A senior American official, briefing reporters on Saturday evening, said that Europe and the United States would create a task force to “identify, hunt down and freeze the assets” of Russian companies and oligarchs that are subject to sanctions, “their yachts, their mansions and any ill-gotten gains that we can find and freeze under the law.” He said the goal would also be to throw them out of “their luxury apartments” and end “their ability to send their kids to fancy colleges in the West.”The idea is to strike those who are closest to Mr. Putin and undermine their ability to live in both Russia and the West. One step, the United States and its allies said, will be to limit the sale of so-called golden passports that allow wealthy Russians who are connected to the Russian government to become citizens of Western nations and gain access to their financial systems.While the steps are some of the harshest taken yet, the announcement falls short of a blanket cutoff of Russia from SWIFT, which some officials see as a nuclear option of sorts. Such a move would have essentially severed Russia from much of the global financial system.And some experts say that it may only drive Russia to expand the alternative to the SWIFT system that it created several years ago when it began attempting to “sanction-proof” its economy. But Russia’s equivalent system is primarily domestic; making it a competitor to SWIFT, officials say, would require it to team up with China.The moves on Saturday came on the same day that Germany’s chancellor, Olaf Scholz, announced that his government was approving a transfer of antitank weapons to the Ukrainian military, ending his insistence on providing only nonlethal aid, such as helmets.At the same time, in a post on Twitter, Germany’s foreign minister, Annalena Baerbock, and its economy minister, Robert Habeck, acknowledged that the country’s government was now moving from opposing a SWIFT ban to favoring a narrowly targeted one.Understand Russia’s Attack on UkraineCard 1 of 7What is at the root of this invasion? More

BRUSSELS/WASHINGTON (Reuters) – The United States and its allies on Saturday moved to block certain Russian banks’ access to the SWIFT international payment system in further punishment of Moscow as it continues its military assault against Ukraine.The measures, which will also include restrictions on the Russian central bank’s international reserves, will be implemented in the coming days, the nations said in a joint statement that also vowed further action to come.”We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin,” the leaders of the European Commission, France, Germany, Italy, Great Britain, Canada and the United States wrote.”Even beyond the measures we are announcing today, we are prepared to take further measures to hold Russia to account for its attack on Ukraine,” they added.The move comes after the United States and its allies slapped sanctions this week on major Russian banks as well as on Russian President Vladimir Putin himself, among others, as Moscow’s forces pushed into the heart of Ukraine toward Kyiv.”As Russian forces unleash their assault on Kyiv and other Ukrainian cities, we are resolved to continue imposing massive costs on Russia. Costs that will further isolate Russia from the international financial system and our economies,” said Ursula von der Leyen, president of the European Commission, the European Union’s executive.The actions are aimed at preventing Putin from using $630 billion in central bank foreign currency reserves in the invasion of Ukraine and to defend a plunging rouble.Cutting Russian banks out of the SWIFT system – the world’s main international payments network – deals a blow to Russian trade and makes it harder for Russian companies to do business. “Putin’s government is getting kicked off the international financial system,” a senior U.S. administration official said.SWIFT, or the “Society for Worldwide Interbank Financial Telecommunication”, is a secure messaging system that facilitates rapid cross-border payments, making international trade flow smoothly.It has become the principal mechanism for financing international trade. Each year, trillions of dollars are transferred using the system.The U.S. official told reporters that if one of the banks cut off from SWIFT wants to make a payment with a bank outside of Russia, it will likely need to use a phone or fax machine. But the official said most banks worldwide would likely stop all transactions with Russian banks removed from the network.The United States and its allies will finalize the list of banks that will by cut off from SWIFT, the official said, adding that banks already under U.S. and European sanctions would be the first ones considered. U.S. President Joe Biden announced sanctions on Thursday that were aimed at limiting Russia’s ability to do business in dollars, euros, pounds and yen. Among the targets were five major Russian banks including state-backed Sberbank and VTB, the country’s two largest lenders. In response to questions at the time, Biden said there was no agreement to take the SWIFT action – suggesting that the view of allies who were holdouts had since turned heavily against Putin. ‘WAR CHEST’The new measures announced on Saturday will also stop Russia from “using its war chest,” von der Leyen said, paralysing the assets of its central bank, freezing its transactions and making it impossible for the central bank to liquidate its assets.”We’re disarming fortress Russia by taking this action,” the U.S. official said, adding that other actions targeting the central bank could be finalized over the weekend.The United States slapped sanctions on Iran’s central bank in 2019 following attacks on oil facilities in Saudi Arabia that were claimed by the Iran-aligned Houthi movement in Yemen. At the time, then-U.S. President Donald Trump said the moves, aimed at cutting off Iran’s remaining funding sources, were “the highest sanctions ever imposed on a country.””Sanctioning the central bank – that has got to be the biggest hammer left in the tool shed,” said Paul Marquardt, a lawyer with Davis Polk in Washington where he advises clients on U.S. sanctions.The allies on Saturday also pledged to limit the sale of citizenship via so-called golden passports used by some wealthy Russians to gain residency in Western nations and access to their financial systems.The partners will also launch a task force to “identify, hunt down and freeze the assets of sanctioned Russian companies and oligarchs, their yachts, their mansions, and any ill-gotten gains that we can find and freeze.”EU foreign ministers will discuss the sanctions package at a virtual meeting on Sunday evening, the fourth time they come together in a week. Edward Fishman, an Atlantic Council fellow who worked on Russia sanctions at the State Department during the Obama administration, said the measures announced on Saturday are a significant escalation.By signaling their joint commitment to the moves, Fishman said, the West was “giving Putin one more chance to back down before they unleash the full range of the economic arsenal on Russia.” More

LONDON/NEW YORK (Reuters) – The United States, Britain and European Union ratcheted up sanctions against Moscow on Saturday as Russia continued its assault against Ukraine, saying they would block access to the SWIFT international payment system.Here is a rundown of how sanctions which have already been announced impact banks and investors:WHAT HAS BEEN ANNOUNCED SO FAR?The United States, Britain, Europe and Canada committed on Saturday to removing some Russian banks from the SWIFT payments system, deploying what the French finance minister had earlier called a “financial nuclear weapon” because of the damage it would cause to Russia as well as its trading partners. The latest round of sanctions came after the U.S. Treasury Department said it was targeting the “core infrastructure” of Russia’s financial system, sanctioning two of its largest banks – state-backed Sberbank and VTB. Also on the sanctions list are Otkritie, Sovcombank and Novikombank and some senior executives at state-owned banks. U.S. banks must sever their correspondent banking ties – which allow banks to make payments between one another and move money around the globe – with Russia’s largest lender, Sberbank, within 30 days.Officials in Washington also wielded the government’s most powerful sanctioning tool, adding VTB, Otkritie, Novikombank and Sovcombank to the Specially Designated Nationals (SDN) list. The move effectively kicks the banks out of the U.S. financial system, bans their trade with Americans and freezes their U.S. assets.The U.S. sanctions also target two Belarusian state-owned banks – Belinvestbank and Bank Dabrabyt – over the country’s support for Moscow’s attack. The U.S. sanctions came soon after the British government said it would impose an asset freeze on all major Russian banks, including VTB, and stop major Russian companies from raising finance in Britain. Russian banks would be cut off from sterling markets and clearing payments, British Prime Minister Boris Johnson said.Britain also announced asset freezes and travel bans on members of Russia’s political and financial elite, including those who have long enjoyed high-rolling London lifestyles. More than 100 individuals, entities and subsidiaries will ultimately be sanctioned. EU leaders have agreed sanctions on Moscow that target 70% of the Russian banking market, European Commission President Ursula von der Leyen said on Friday.The bloc imposed a ban on issuing bonds, shares or loans in the EU for refinancing Alfa Bank and Bank Otkritie, after freezing assets at Rossiya Bank, Promsvyazbank and VEB earlier in the week.The top three Russian banks Sberbank, VTB and Gazprombank, however, do not face an EU asset freeze.The bloc also set a cap of 100,000 euros ($112,700.00) for EU bank accounts of Russian citizens, who will not be allowed to buy euro denominated shares.Refinancing in the EU of Russian state-owned enterprises is also forbidden, with the exception of some utilities. Securities settlement houses in the EU will not be allowed to serve Russian counterparties.WHAT NEXT?Russia’s large banks are deeply integrated into the global financial system, meaning any sanctions on the biggest institutions could be felt far beyond its borders. Cutting them from SWIFT would make transactions more difficult and costlier.But it is also expected to hurt the country’s trading partners in Europe and elsewhere. While further details are awaited, Germany suggested on Saturday that the allies were looking for “targeted and functional restriction of SWIFT” to limit collateral damage.A ban from SWIFT would come on top of other sanctions that limit the ability of some of Russia’s largest banks to do business internationally.U.S. Treasury said Thursday’s sanctions would disrupt billions of dollars worth of daily foreign exchange transactions conducted by Russian financial institutions. Overall, these institutions conduct about $46 billion worth of forex transactions, 80% of which are in dollars. “The vast majority of those transactions will now be disrupted,” it said.The sanctions target nearly 80% of all banking assets in Russia. Sberbank said that it was prepared for any developments.VTB said it had prepared for the most severe scenario. Sovcombank, Otkritie and Novikombank did not reply to requests for comment. The Russian embassy in the United States also did not immediately reply to a request for comment.WHAT WOULD HIT HARDEST?Banks and Western creditors have been fearing Russia getting blocked from SWIFT, which is used by more than 11,000 financial institutions in over 200 countries.Such a move would hit Russian banks hard but the consequences are complex. Western officials have said blocking Russia is technically difficult and would hurt trading partners. There have been concerns, for example, about how payments for Russian energy imports would be made and whether foreign creditors would get paid.Analysts said Russian institutions are better able to cope with sanctions than eight years earlier, although that does not mean they would not hurt.WHICH FOREIGN BANKS ARE MOST EXPOSED?Many foreign banks have significantly reduced their exposure to Russia since its annexation of Crimea in 2014 but several Western banks have been involved in deals and have other relationships.Shares of banks with significant operations in Russia such as Austria’s Raiffeisen Bank International and France’s Societe Generale (OTC:SCGLY) were hard hit last week.Italian and French banks each had outstanding claims of some $25 billion on Russia in the third quarter of 2021, based on Bank of International Settlement figures.Austrian banks had $17.5 billion. That compares with $14.7 billion for the United States. ($1 = 0.8873 euros) More

LONDON (Reuters) – The European Union, along with the United States and other Western partners, has announced further sanctions on Russia for its invasion of Ukraine, including cutting off a number of Russian banks from the SWIFT interbank payments system.SWIFT is the world’s main international payments network. Here is more about what it does and why it matters:WHAT IS SWIFT?SWIFT, or the “Society for Worldwide Interbank Financial Telecommunication”, is a secure messaging system that facilitates rapid cross-border payments, making international trade flow smoothly. Banks which connect to the SWIFT system and establish relationships with other banks can use SWIFT messages to make payments.The messages are secure so that payment instructions are typically honoured without question. This allows banks to process high volumes of transactions at speed. It has become the principal mechanism for financing international trade. In 2020, around 38 million SWIFT ‘FIN messages’ were sent each day over the SWIFT platform, according to its 2020 Annual Review. Each year, trillions of dollars are transferred using the system.WHO OWNS SWIFT?SWIFT, founded in the 1970s, is a co-operative of thousands of member institutions which use the service. Based in Belgium, SWIFT made a profit of €36 million in 2020, according to its 2020 Annual Review. It is run principally as a service to its members.WHY IS A SWIFT BAN SO SERIOUS?Excluding Russian banks from SWIFT restricts the country’s access to financial markets across the world.Russian companies and individuals will find it harder to pay for imports and receive cash for exports, borrow or invest overseas.Russian banks could use other channels for payments such as phones, messaging apps or email. That would let Russian banks make payments via banks in countries which have not imposed sanctions but since alternatives are likely to be less efficient and secure, transaction volumes could fall and costs rise.HOW WOULD SWIFT BAN ON RUSSIA AFFECT OTHER COUNTRIES?Exporters would find selling goods to Russia riskier and more expensive.Russia is a big buyer of manufactured goods. The Netherlands and Germany are its second and third biggest trading partners, based on World Bank data, although Russia is not a top 10 export market for either country.Foreign buyers of Russian goods would also find it more difficult, potentially prompting them to seek alternative suppliers.But when it comes to Russian oil and gas, foreign buyers could find it harder to find replacement suppliers.Russia is the main EU supplier of crude oil, natural gas and solid fossil fuels, according to the European Commission https://ec.europa.eu/eurostat/cache/infographs/energy/bloc-2c.html. IS SWIFT BOUND BY ECONOMIC SANCTIONS?SWIFT is bound by Belgian and European Union rules, which would include economic sanctions.SWIFT’s website says: “Whilst sanctions are imposed independently in different jurisdictions around the world, SWIFT cannot arbitrarily choose which jurisdiction’s sanction regime to follow.” In March 2012, the European Union barred SWIFT from serving Iranian firms and individuals which had been sanctioned in relation to Tehran’s nuclear programme. The list included the central bank and other big banks. More

WASHINGTON (Reuters) – The United States, Britain, Europe and Canada on Saturday moved to block Russia’s access to the SWIFT international payment system as part of another round of sanctions against Moscow as it continues its assault against Ukraine.The measures, which will also include restriction on the Russian central bank’s international reserves, will be implemented in the coming days, the nations said in a joint statement. More

ABUJA (Reuters) – Nigeria will offer a naira incentive to exporters of semi-processed or finished goods made at home in a push to shore up the country’s dollar supply, the central bank said.Nigeria is facing chronic dollar shortages while rising demand has put pressure on the naira, as providers of foreign exchange, such as offshore investors, exited after the COVID-19 pandemic triggered an oil price crash.The central bank in a circular dated Feb. 25, said it will pay 65 naira ($0.16) to exporters for every repatriated dollar through official channels and sold to the currency market, and it will pay 35 naira for funds repatriated for other uses.The central bank said this month that it was hoping Nigeria can reach earnings of $200 billion a year in foreign exchange from non-oil exports over the next three to five years.”In an effort to reduce exposure to volatile sources of foreign exchange and to earn more stable and sustainable inflows of FX, the Central Bank of Nigeria introduced the (race to $200 billion) programme,” it said.Nigeria sells oil and cocoa on global markets to dollars but imports petrol and chocolate at higher cost, the central bank said at the announcement of the scheme.Exporters sometimes sell their proceeds on the unofficial market where the dollar exchanges at a premium to the naira, or keep funds abroad, an action the central bank wants to change.In March, the bank offered 5 naira to recipients of remittances from the Nigerian abroad for every imported dollar through licenced channels. It later extended the offer indefinitely, saying that remittances had increased five-fold.Remittances or money transfers make up the second largest source of foreign exchange receipts after oil exports in Nigeria, Africa’s biggest economy. ($1 = 415.39 naira) More