Russia Suffers a Major Blow from China’s Payments Ban

Russians have been facing roadblocks with UnionPay, China’s payment system that was supposed to be the go-to alternative for Visa and Mastercard after the two giants exited Russia due to the Ukraine conflict. 

UnionPay’s Unexpected Halt

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Users have been left in the lurch as UnionPay cards, especially those paired with Huawei Pay, have suddenly stopped working, as reported by the local site on Tuesday. 

The Sanctions Impact

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They’re pointing fingers at possible U.S. sanctions against Russia’s National Payment Card System (NSPK), which handles all UnionPay transactions in the country, as the culprit. 

A ‘No Limits’ Friendship Tested

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Despite the friction, Beijing and Moscow have stuck together like glue since Russia’s major move into Ukraine, even pledging a “no limits” friendship just before the conflict kicked off. 

And through it all, China has kept its lips sealed on Putin’s bold play in Ukraine.

Economic Turmoil Post-Invasion

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In the aftermath of the invasion in February 2022, Russia’s economy was thrust into turmoil, becoming the target of numerous sanctions and earning the title of the most sanctioned country globally from the Carnegie Endowment for International Peace. 

Its access to foreign exchange reserves was cut off, and it was disconnected from the crucial SWIFT banking system.

Putin’s Economic Dismay

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Russian President Vladimir Putin expressed his astonishment twice last year at the economic hardships plaguing his citizens, amidst the backdrop of Russia becoming the most sanctioned country in the world following its full-scale invasion of Ukraine in February 2022. 

The Toll of 13,000 Restrictions

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The Carnegie Endowment for International Peace points out that the nation is grappling with over 13,000 restrictions, leading to a tangible decline in public support for the war as Russians endure the economic squeeze from these sanctions. 

Interest Rate Hikes 

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The financial strain has also prompted the Central Bank of Russia to aggressively adjust interest rates, with a significant jump from 8.5 percent to 12 percent during an emergency meeting in August, followed by another increase to 15 percent. 

Measures Against Inflation

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Putin has acknowledged these challenges, urging the government to implement measures to curb rising prices, as reported by

Filling the Financial Void

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Amidst this turmoil, UnionPay emerged as China’s lifeline to Russia, filling the void left by Visa, Mastercard, and American Express’s exit and the blockage of SWIFT, turning it into one of the few avenues left for Russians to conduct international transactions.

China’s Major Banks Respond

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The banking scenario took a significant turn following reports that China’s largest banks—the Industrial and Commercial Bank of China, China Construction Bank, and Bank of China—decided to halt payments from Russian financial institutions under sanctions. 

A Global Banking Fear

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Citing the “risks of secondary sanctions” by the U.S., these leading banks, positioned at the top in China based on assets, have made a cautious move. Yet,  they continue to conduct transactions with banks that are not sanctioned. 

U.S. Threatens Banks

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This move comes on the heels of Washington’s December warning, threatening to cut off any foreign bank from its financial system if they engage with companies aiding Russia’s defense sector.

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