Isabel van Brugen
Recent moves by a number of Russian President Vladimir Putin's longtime allies, including China, Turkey, the United Arab Emirates, and India, suggest they are becoming more cautious of U.S. secondary sanctions.
Russia's President Vladimir Putin meets with the Moscow State University rector at the Kremlin in Moscow on April 3, 2024. Russia is being abandoned by its key allies amid tightening U.S. sanctions imposed in response.
A number of large banks in China have stopped accepting payments from sanctioned Russian financial institutions, and banks in Armenia and Kyrgyzstan are no longer accepting cards that use the Russian Mir payment system, Moscow's alternative to Visa and Mastercard, after they suspended operations in the country over the war in Ukraine.
India, once a top purchaser of Russian oil, is reported to have stopped paying for Russian premium crude oil. Meanwhile, Russian oil firms are facing delays of up to several months to be paid for crude and fuel as banks in China, Turkey and the United Arab Emirates (UAE) fear retaliation from the United States, Reuters reported on March 27.
These nations have maintained their ties with Russia throughout the war, and Moscow has increasingly turned to them to help the country sidestep existing sanctions, according to the U.S. Treasury Department.
In December, President Joe Biden issued an executive order which allows the U.S. to directly sanction foreign banks facilitating significant transactions for Russia. Washington threatened to block such banks that conduct business with firms that support Russia's defense industry from its financial system.
"We expect financial institutions will undertake every effort to ensure that they are not witting or unwitting facilitators of circumvention and evasion," Treasury Secretary Janet Yellen said at the time. "We will not hesitate to use the new tools provided by this authority to take decisive, and surgical, action against financial institutions that facilitate the supply of Russia's war machine."
The U.S. has gradually expanded the sanctions it imposed against Russia throughout Putin's war in Ukraine, which he launched in February 2022. Russia's economy took a hit after foreign exchange reserves were frozen and Moscow was cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system.
Biden also announced a ban on Russian oil imports in March 2022, saying the move would target the Russian economy's "main artery," while the G7, the EU and Australia imposed a price cap banning firms from insuring, financing, and shipping Russian seaborne oil exports sold above $60 a barrel.
Reuters, citing eight banking and trading sources, said a number of banks in China, the UAE and Turkey have become increasingly wary of pressure from Washington. One source said Biden's December executive order made banks and companies realize that the "threat of U.S. secondary sanctions is real."
Two sources said that in the UAE, First Abu Dhabi Bank and Dubai Islamic Bank suspended a number of accounts linked to the trading of Russian goods. Four sources told the news agency that UAE's Mashreq bank, Turkey's Ziraat and Vakifbank and Chinese banks ICBC and Bank of China are still processing payments, but that there are major delays.
Kremlin spokesperson Dmitry Peskov has acknowledged the delayed payments, telling reporters during a recent press briefing that "unprecedented pressure from the United States and the European Union on the People's Republic of China continues."
"This, of course, creates certain problems, but cannot become an obstacle to the further development of our trade and economic relations (with China)," Peskov said.
Newsweek has contacted Russia's Foreign Ministry for additional comment by email.
The Wilson Center, a U.S. think tank, said in analysis in February that "the pressure from the sanctions is mounting and having an impact on the Russian economy."
It said recent moves from Russia's allies and the country's financial maneuvers "signal a discontinuity between the Kremlin's outward display of confidence, derived from a combination of recent if minor battlefield victories and the political chaos in the United States, and an underlying sense of insecurity."
"Renewed concerns about the health of the Russian economy in the run-up to the symbolic anniversary of the war and the Russian presidential election in mid-March could explain the recent uptick in domestic repression and spending," the think tank said.
"Despite naysayers, the sanctions against Russia are working. Time and a firm application of pressure should see an even bigger impact on the Russian economy," it added.
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