Sanctions | FT: US banking sanctions are biting – Russian money traffic has become significantly more difficult

of the United States The sanctions imposed on foreign banks at the end of last year have significantly complicated the flow of money in Russia, reports the economic newspaper Financial Times.

The so-called secondary sanctions imposed by the United States in December target banks that finance the purchase of equipment important to Russia’s warfare. Sanctions have been aimed at banks in countries whose trade with Russia has grown significantly since the war of aggression against Ukraine began.

In the first quarter of the current year, Russia’s trade with such countries has indeed collapsed, when banks have, for example, cut off their financial relations, FT says.

For example Turkey’s exports to Russia have decreased by a third from a year ago to 2.1 billion dollars.

According to FT, the value of exports of so-called high-priority products from Turkey to Russia and its neighboring countries fell by 40 percent to 93 million dollars from the previous quarter. High-priority products mainly mean goods intended for civilian use but critical in terms of warfare, such as microchips.

In 2023, the value of exports of high-priority products from Turkey to Russia and neighboring countries was 586 million dollars, or five times more than before the war of aggression.

According to experts and officials interviewed by FT, the sharp drop in war-related exports is due to banks’ fear of possible sanctions following the sanctions. The U.S. can track dollar-denominated transactions and, for example, lock banks out of the dollar-based international financial system if they work with companies involved in warfare.

Russian companies have resorted to smaller banks and alternative currencies, when large banks avoid doing business with them.

Russian importers and exporters, for example, make payments in rubles more often than before.

According to the Central Bank of Russia, before the start of the war of aggression in 2022, less than 15 percent of the country’s exports were paid in rubles, but in February of this year, the share rose to 40 percent. In imports, ruble payments have risen to about 40 percent from the 30 percent before the war, FT says.

Correction 6.5. 5:21 p.m.: The article previously incorrectly stated that the value of exports of so-called high-priority products from Turkey to Russia and its neighboring countries would have decreased by 40 percent to 93 billion dollars from the previous quarter. It fell to $93 million.