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PLAN B

Russian banks are seeking refuge in a Chinese payment system

China's UnionPay
Reuters/Barry Huang
All roads lead through UnionPay.
Published

As western companies continue to suspend operations or withdraw from Russia due to its invasion of Ukraine, China has become a possible Plan B.

Russian banks that include Sberbank, the country’s largest bank by assets, and Alfa Bank said on Sunday (March 6) that they are exploring the possibility of issuing “co-badged” cards powered by payment systems like Chinese state-owned  UnionPay and Russia’s Mir for international payments, according to Russian state news agency TASS. Sberbank said it will soon reveal a launch date for such cards, while Alfa bank said it is already “at work” on launching cards based on UnionPay. Russian lender Tinkoff Bank also has similar plans, TASS reported.

The banks’ announcement came after Visa, Mastercard, and American Express said they are suspending operations in Russia, which has been put under sweeping financial sanctions from countries including the US and UK. Within Russia, cards issued by Visa, Mastercard, and American Express can still be used until they expire, but the same cards will no longer work for payments outside the country. Nor will credit cards issued outside of Russia be usable at the country’s stores or ATMs.

Where China fits in the Russia-Ukraine conflict

Russian banks’ eagerness to seek refuge in China’s UnionPay, which is used in 180 countries, presents Beijing with yet another dilemma in the Ukraine conflict. Despite China’s refusal to call Russia’s military assault on Ukraine an “invasion,” and its censorship of antiwar voices, the country has thus far refrained from offering Russia practical aid, potentially for fear of jeopardizing its own access to the US-dollar-denominated international financial system. China’s top banking regulator, Guo Shuqing, said last week that the country won’t participate in financial sanctions against Russia, but some major Chinese state-owned banks have reportedly limited financing for purchases of Russian commodities amid sanctions.

Still, in a sign of the strength of China’s Russia relationship, foreign minister Wang Yi said at a March 7 press conference that the two countries will keep deepening their “comprehensive strategic partnership of coordination for a new era,” and emphasized that China is willing to play a mediation role between Russia and Ukraine.

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