China Stops Paying Russia for Cargo Train Shipments

Russian companies are increasingly unable to make payments for goods slated to be imported from China by rail as Chinese lenders take extra precautions to avoid running afoul of sanctions over Moscow's war against Ukraine.

Since May, payments for about half of these rail shipments are now being refused, Amsterdam-based news agency The Moscow Times wrote on Sunday, citing a Russian source working in logistics. This is reportedly five times the rejection rate of transactions for imports delivered via other modes of transportation.

This development comes as major Chinese banks scrutinize of Russian orders, recipients, and other details. This has resulted in transactions increasingly being put on hold for long periods of due diligence, and even rejected, as these banks seek to dodge the secondary sanctions Washington threatens against those facilitating trade that could support Russia's military base.

The reason cargo deliveries by train are being hit hardest by the rebuffed transactions is that a high number of firms involved in rail transportation are on the sanctions list, one Russian merchant was cited as saying.

"They request, among other things, data on the route of transportation—and often very detailed, up to the number of the container or railway platform on which the export cargo will be transported," an employee of one logistics firm told the outlet. The transaction will be rejected if a sanctioned entity is found to be involved, the source added.

China and Russia's foreign ministries did not immediately respond to written requests for comment.

Last month, the Russian division of the Bank of China, followed other "Big Four" Chinese international lenders in suspending payments in Chinese yuan. Financial sector analysts told local media this would push Russian firms toward non-banking actors handling transactions and raise the risk of fraud.

Chinese trade, including imports of Russian oil and natural gas, has supported Russia's isolated economy since war began, reaching a record trade turnover of $240 billion last year.

Yet, Chinese exports to Russia were down 15.7 percent in March year-on-year, according to Chinese customs data, marking the first decline since 2022. Exports fell again in April by 13.6 percent.

Russian financial expert Egor Susin cited the higher base reached in 2023 as a major reason for the slip. However, it "may indicate problems with payments for imports," he wrote in a Telegram post.

In June, Washington added 300 organizations and persons to its sanctions list, about 50 of which are in mainland China or Hong Kong, over their alleged role in exporting chips and other dual-use technology that could aid the Russian war machine.