Since Russia's annexation of Crimea in 2014 and the Ukraine war in 2022, the United States, Europe, and their allies have imposed more than 25,000 different sanctions on Russia.

Specifically, some Russian banks have been excluded from the SWIFT payment system, making it more difficult for Russia to conduct foreign trade.

In this context, traditional barter trade has begun to increase in Russia's foreign trade as a means of circumventing Western sanctions.

For the first time since the 1990s, traditional barter trade has shown growth in Russia's foreign trade. In order to circumvent Western sanctions, Russian companies have started to exchange wheat for Chinese cars and flaxseed for construction materials.

Although Russia's relations with China and India are increasingly close, the Ukraine war has severely distorted the trade relationships of this world's largest natural resource producer. Thirty years ago, after the dissolution of the Soviet Union, Russia finally had the opportunity to integrate economically with Western countries.

Since Russia's annexation of Crimea in 2014 and the Ukraine war in 2022, the United States, Europe, and their allies have imposed more than 25,000 different sanctions on Russia, aiming to destroy Russia's $2.2 trillion national economy and weaken Putin's support at home.

Washington has also imposed tariffs on India to punish New Delhi's oil trade with Russia.

Reuters pointed out that there are increasing signs that the Russian economy is under pressure, and the Russian central bank currently shows that the Russian economy is technically in a recession, with high inflation rates.

Three years ago, Western countries including the United States issued a joint statement excluding certain Russian banks from the SWIFT payment system and imposing restrictions on the Russian central bank.

A source from the payments market told Reuters: "Chinese banks are afraid of being listed on the sanctions list and face secondary sanctions, so they do not accept funds from Russia."

These concerns seem to be the reason for the rise in barter transactions, which are much harder to track. In 2024, the Russian Ministry of Economic Development published a 14-page "Guide to Foreign Barter Transactions," offering businesses advice on how to use such transactions to circumvent sanctions. The guide even proposed creating a barter trading platform.

Previously, there was no evidence showing the extent of foreign commercial interest in such transactions. However, last month, Reuters reported that a company in Hainan, China, is seeking to exchange steel and aluminum alloys for ship engines.

The company did not respond to requests for comment. When writing this article, Reuters confirmed eight such physical transactions based on trade sources, public statements from customs authorities, and company statements. These transactions had never been reported before.

Due to the lack of transparency in the transactions, Reuters could not determine the overall value or scale of barter in the Russian economy. However, three trade sources said that this practice is becoming increasingly frequent.

Three analysts said that a possible benchmark for measuring the scale of barter is the growing gap between the Russian central bank's foreign trade statistics and those of the customs authority, which reached $7 billion this year alone.

In response to requests for comment, the Russian Customs Service confirmed that barter transactions have been conducted with different countries, involving "a wide range of goods." However, the agency also stated that the number of barter transactions is negligible compared to the total volume of foreign trade contracts.

According to data released by the Russian Customs Service, the foreign trade surplus for January-July decreased by 14%, reaching $77.2 billion. During the same period, exports fell by $11.5 billion, reaching $232.6 billion; imports increased by $1.2 billion, reaching $155.4 billion.

Car for Wheat

Reuters learned from two trade sources that in one transaction, China used cars to obtain Russian wheat. According to one of the sources, the Chinese partner required the Russian partner to pay with foodstuffs.

Reuters could not confirm the specific size of the transaction or the mechanism through which the value of wheat and cars was determined.

According to a statement from the Russian customs, in two other transactions, flaxseed was used to exchange for Chinese appliances and building materials. Experts familiar with Russian foreign trade said that one of the flaxseed transactions was registered by the Ural customs department in Russia in 2024, valued at approximately $100,000.

China is an important importer of Russian flaxseed, which is used for both industrial processing and as a nutritional food.

Such barter transactions also include Russian metals exchanged for Chinese machinery, Chinese services exchanged for Russian raw materials. One Russian importer paid for aluminum with a Chinese company. Additionally, there was a transaction with Pakistan.

Two sources familiar with the transactions said that despite the sanctions, some barter transactions have still allowed Western goods to be imported into Russia, but the sources did not reveal what specific goods they were.

At the Kazan World Expo business forum in August, Chinese companies pointed out that settlement issues are one of the problems hindering bilateral trade. The chairman of the Hainan-based company said that barter trade could be a solution.

He said at the meeting: "In the current conditions of restricted payments, barter offers new opportunities for Russian and Asian companies."

Barter Trade Caused Chaos

During the 1990s following the collapse of the Soviet Union, barter caused chaos in the Russian economy. At that time, a vast chain of transactions covered various goods such as electricity, oil, flour, sugar, and shoes. This practice led to price fraud, made it difficult to define the value of goods, and allowed some people to make big profits.

At that time, due to a lack of cash, severe inflation, and repeated currency depreciation, barter appeared very attractive. Now, with ample funds, the driving factor for barter has become the pressure of Western sanctions on Russia and China.

Russia calls Western sanctions illegal, while China criticizes these sanctions as discriminatory.

Barter trade is not the only workaround. Some traders use so-called "payment agents," who charge fees and assist with payments through various means, but such transactions carry higher risks.

Additionally, cryptocurrency tied to the US dollar is also used in foreign trade.

Pugachevsky, vice president of operations and information technology at leading Russian brokerage firm BCS, said: "There is still no ready-made technical solution. The economy is still functioning, and companies are using 10 to 15 different payment methods at the same time."

Sources: DW

Original: https://www.toutiao.com/article/7550384567757046282/

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