Russia’s economy and trade have appeared resilient despite sweeping Western sanctions over its invasion of Ukraine.
However, it looks like Russia hasn’t been able to repatriate a lot of money back home. Foreign financial assets — including accounts receivables — increased nearly $45 billion in the first seven months of this year., according to a Tuesday report from the Central Bank of Russia.
The data only shows the increase in assets stuck overseas, not the total amount.
Russia’s foreign financial assets rose $44.6 billion from January to July — more than double the increase of $21.4 billion over the same period a year ago, according to the central bank’s report.
It didn’t provide a breakdown of the assets but said the increase was due to longer lag times and “increasing complexity” required for foreign settlements. There was also an increase in unspecified other investments.
This money being stuck overseas has a knock-on impact on the liquidity of firms, said Alex Isakov, a Russia economist at Bloomberg Economics.
It’s not the first time Russia — a commodity giant — is having issues with trade proceeds stuck overseas.
Last year, Russia acknowledged there were problems with billions of Indian rupees it had made from exports to India. The amount has fallen since as Russian firms have managed to use the money to pay Indian exporters, Reuters reported on Wednesday, citing an unnamed Indian government source.
Spooked by US secondary sanctions, even China banks don’t want to deal with Russia
Even though Russia’s economy has chugged along in the 29 months since it invaded Ukraine, it’s mostly been driven by wartime state spending on military activities and subsidies.
Recently, Russia’s central bank flagged “considerable” overheating in the country’s economy.
However, pressure from Western sanctions is mounting quickly, as international banks hold back from processing transactions with Russia due to fears of US secondary sanctions that were approved in December.
Now, nearly all Chinese banks — even small regional ones — are refusing to accept direct Chinese payment transfers from Russia, the pro-Kremlin media outlet Izvestia reported on Monday.
Other than the issues with Chinese banks, Russian firms are also facing a shortage of Chinese yuan that the country is now relying on for trade.
Russia plays down economic and financial risks
Moscow is playing down the impact of Western sanctions.
On Wednesday, Russian finance minister Anton Siluanov said his country has a strong “shield” against external pressure, TASS state news agency reported.
“We created the strong, sustainable financial base; we created financial infrastructure,” said Siluanov.
Russia is now rushing to set up alternative payment systems, including crypto, to facilitate trade.
Reuters reported last Thursday that Russia and China were even planning to revive the age-old practice of barter trade to get around Western sanctions.
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