Russians turn to Chinese banks as Western sanctions cripple economy

As Western sanctions begin to hit the Russian economy, a source within the Moscow branch of a Chinese state bank has reported a growing surge in enquiries from Russian firms wanting to open new accounts.

"Over the past few days, 200-300 companies have approached us, wanting to open new accounts," the source, who asked to remain anonymous, told Reuters.

Although it remains unclear how many Russians have attempted to open Chinese bank accounts since the U.S. and its Western allies locked the Russian economy out of the global financial system, analysts believe that a surge in yuan transactions should be expected.

Another anonymous source revealed that many of the Russian companies he works with are planning to open yuan accounts at one of the several Chinese state banks that currently operate in Moscow, including Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank.

"It's pretty simple logic. If you cannot use U.S. dollars, or euros, and U.S. and Europe stop selling you many products, you have no other options but to turn to China. The trend is inevitable," the Chinese businessman told Reuters.

In recent days, the U.S. government led the free world in imposing sanctions on Russia over the Kremlin’s illegal invasion of Ukraine.

Russia’s Foreign Minister Sergey Lavrov responded on Wednesday saying that U.S. President Joe Biden knows that the only alternative to sanctions against his country is a Third World War, which would be "a devastating nuclear war."

China, however, has voiced stark opposition to any sanctions and promised to maintain normal economic and trade relations with Moscow – a move which could hurt the dollar’s global dominance in the long-run.  

FESCO Transportation Group – one of Russia’s most important transportation and logistics companies – is a clear example of this and recently announced that it will accept the Chinese currency from customers.

"It's natural for Russian companies to be willing to accept yuan," said Shen Muhui, head of a trade body that promotes links between Russia and China.

On Wednesday, the Russian ruble dived to a record low of, ultimately losing nearly 40% of its value against the yuan over the past week.

"Companies will be switching to yuan-ruble business but in any case things will become two, three or four times more expensive for Russians because the exchange rate between the yuan and rouble is also changing," said Konstantin Popov, a Russian entrepreneur in Shanghai.

Shen said Russian demand for Chinese goods will nevertheless grow in the long term. "The key is to solve trade settlement issues" in the face of sanctions, he said.