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Alert | Although the Russian market is good, these sanctions-related issues must be noticed!
Sep 15,2023
On August 11, the US Treasury Department announced a new round of sanctions against Russia.
Since the conflict between Russia and Ukraine began in February last year, Russian enterprises have fewer and fewer import partners to choose from. Europe and the United States have withdrawn from Russia and banned exports to it. Russia has also launched a counter-system and increased taxes on some products from unfriendly countries.
Therefore, there is a vacuum in the Russian market.
Trade opportunities
For more than a year, it has been found that the Russian economy is more adaptable than the West.
The Russian news portal "Russian Business Consulting", citing the "show" of the Russian Ministry of Economic Development, reported that the share of imports from "unfriendly" countries (countries that impose sanctions on Russia or impose punitive measures together) fell to 35% last year. At the beginning of 2022, the proportion was 58%. On the other hand, the proportion of imports from neutral and "friendly" countries such as India, Turkey and China rose from 42 per cent to 65 per cent.
China has become Russia's largest trading partner. China supplies Russia with electronic products, equipment, household appliances, automobiles and a range of consumer goods.
At present, the most popular products imported from Russia include:
India, Turkey, Greece and other countries are also strongly exporting goods to Russia. In 2022, India's trade with Russia surged nearly 250 percent year-on-year, Greece's trade with Russia rose 100 percent year-on-year, and Turkey's trade with Russia rose 93 percent year-on-year.
In addition, in terms of payment methods, RMB has become the foreign currency most used by Russian businessmen this year.
TASS reported that in the first five months of this year, 70% of the foreign currency remittances paid by Russian entrepreneurs were RMB. From June 2022 to June 2023, the amount of payments made by Russian entrepreneurs in RMB was increasing every month.The Turkish lira is the second most used foreign currency by Russian entrepreneurs, and it is used for settlement with Turkey.
Trade risk
1. Product export control
On July 31, the Ministry of Commerce of China, in conjunction with relevant departments, issued two announcements on the export control of UAVs, implementing export controls on some special engines, important payloads, radio communication equipment and civil anti-UAV systems, and implementing temporary export controls on some consumer UAVs for a period of two years. At the same time, all other civilian UAVs not included in the control are prohibited from being exported for military purposes.
The above policy will be formally implemented on September 1.
2. Collection risk
Although we can currently use cross-border RMB to collect payments from Russian buyers, if the payment bank involves the sanctioned bank, there is a high probability that the payment will be returned. After all, China's banks do not want overseas branches to be affected, resulting in damage to their own interests.
Therefore, when we take orders from Russia, if we encounter a Russian buyer paying for the goods in RMB for the first time, we suggest:
The exporter first asked the customer to contact his payment bank to check whether it was on the sanctions list in Europe and the United States;
Not on the sanctions list, then ask the customer if they support RMB payment;
On the other hand, please contact your bank to confirm whether you can accept RMB payment from Russia (specifically to which bank).
3. Sanctions risk
If Chinese companies trade with Russian sanctioned companies, will they be affected?
First of all, if Russian companies are on the SDN list, they must be very careful.
The suggestion from CCPIT is that if Russian enterprises are involved in relevant sanctions, it is necessary to confirm whether the list has the effect of secondary sanctions (the list is marked with subject to secondary sanctions). If there is the effect of secondary sanctions, the relevant companies will be taken corresponding measures due to their transactions with the sanctioned companies, sanctions, including being included in the SDN list, denying executives access to the United States, banning import and export privileges, and banning the use of the U.S. financial system or specific services, may also be imposed if Chinese companies deal with Russian companies.
In addition, companies involved in semiconductors, engineering services, aerospace, quantum technology, advanced computing, energy and chemicals, and minerals, if there is Russian-related export trade, should continue to pay attention to the Russian-related sanctions measures of major overseas economies, and comprehensively analyze and evaluate Russian-related trade risks.
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