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Russia – China. They lend heavily to Russians. Growth by leaps and bounds

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In the 14 months after the Russian attack on Ukraine, Chinese banks quadrupled the amount of loans granted to Russian banks, largely replacing Western banks in this role, the Financial Times reported on Monday.

According to central bank data cited by the British daily Russiathe total amount of loans granted to Russian banks by Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China increased from USD 2.2 billion to USD 9.7 billion in the 14 months to March this year, with the first two accounting for USD 8.8 billion.

The increasing importance of the yuan

As “FT” writes, Chinese banks are taking the place of Western banks after the Russian attack Ukraine have come under intense pressure from regulators and politicians in their home countries to leave Russia, and international sanctions make it difficult to continue operating.

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The newspaper notes that the increased involvement of Chinese banks is in the interest of both China, as well as Russia. China aims to make the yuan an alternative to the US dollar in global trade, while Russia is gradually adopting the yuan as a reserve currency instead of the dollar or euro. It is also a reflection of growing trade between the two countries, which reached a record level of USD 185 billion in 2022.

“FT” indicates that before the attack on Ukraine, over 60 percent Russian export payments were made in currencies that the country’s authorities now call “toxic currencies”, such as the dollar and euro, and payments in yuan accounted for less than 1 percent. But according to data from the Russian central bank, the share of “toxic” currencies has fallen to less than half, while the Chinese yuan already accounts for 16 percent.

Western banks

One of the few Western banks that has maintained a significant presence in Russia is the Austrian Raiffeisen Bank.

According to “FT”, during the same 14 months his assets in Russia increased by over 40%, from USD 20.5 billion to USD 29.2 billion, although – as he explains – he is looking for ways to withdraw from this country and as of March reduced its assets to USD 25.5 billion. Profits of Raiffeisen’s Russian branch increased by 9.6% to EUR 867 million in the first six months of this year, and the bank increased salaries for its employees in Russia by EUR 200 million.

The Reuters news agency also previously reported about the presence of Raiffeisen Bank in Russia. According to agency reports based on three sources related to the matter, Raiffeisen Bank International is delaying plans to leave Russia. The Russian authorities also allegedly made it clear to the RBI that its operations in Russia enable international payments for thousands of companies and that the authorities are therefore very interested in its presence in the country.

Raiffeisen Bank International is also still included in the list of companies that still operate in Russia, compiled on an ongoing basis by employees of the American University of Yale.

Main photo source: PAVEL GOLOVKIN / POOL/PAP/EPA

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