Russia’s Only Financial Partner Is China

February 28, 2022 Updated: March 1, 2022


It’s clear that a new economic and political partnership has formed between Russia and China.

While Russia’s tiny economic footprint is a little threat to the United States, Russian President Vladimir Putin’s ambitions are fueled by China’s support, both financially and politically.

According to official data from the World Bank, the gross domestic product (GDP) in Russia was worth 1483.50 billion (1.4 trillion) U.S. dollars in 2020, and the GDP value of Russia represents 1.3 percent of the world economy. That is roughly the size of the Netherlands and Belgium combined.

Russia is in the midst of suffering serious financial ramifications from the international financial world. On Feb. 24, the U.S. Treasury took unprecedented actions against two prominent Russian financial institutions, Sberbank of Russia and VTB Bank, “drastically altering their fundamental ability to operate. On a daily basis, Russian financial institutions conduct about $46 billion worth of foreign exchange transactions globally, 80 percent of which are in U.S. dollars. The vast majority of those transactions will now be disrupted. By cutting off Russia’s two largest banks—which combined make up more than half of the total banking system in Russia by asset value—from processing payments through the U.S. financial system.”

Additional sanctions by the G-7 countries (the United States, the United Kingdom, Canada, France, Italy, Japan, and Germany) include banning certain Russian banks from using the SWIFT financial network. Banning Russian banks and Russian affiliates from using SWIFT is a major inconvenience. Commodities from oil to grain will be severely disrupted. SWIFT’s service is international in nature and allows global banks and governments to communicate with each other (and transfer funds) with ease. The ripple effect from the G-7 sanctions will last for years.

Russia has built up one of the world’s largest stockpiles of cash and gold, estimated to be over $600 billion. The SWIFT sanctions will severely limit Russia’s ability to utilize their stockpile internationally.

While SWIFT is bipartisan, Russia was almost banned in 2014. According to the BBC, “Russia was threatened with a SWIFT expulsion before—when it annexed Crimea. Russia said the move would be tantamount to a declaration of war. Western allies did not go ahead, but the threat did prompt Russia to develop its own, very fledgling, cross-border transfer system. To prepare for such a sanction, the Russian government created a National Payment Card System, known as Mir, to process card payments. However, few foreign countries currently use it.”

China has felt similar interbank pressures in years past and, in 2015, the People’s Bank of China (China’s central bank) debuted the Cross-Border Interbank Payment System (CIPS) to sidestep any future payment embargoes.

However, much like Russia’s Mir, the CIPS platform has not been widely accepted. A report from the Bank of Finland Institute for Emerging Economies stated, “As of end-May [2021] 1,189 banks representing roughly 100 countries used CIPS. Of these banks, 569 operated in mainland China, 355 elsewhere in Asia. Many of the foreign bank branches are subsidiaries of Chinese banks.”

There is also growing evidence that the Chinese Communist Party (CCP) shared intelligence from the United States with Russia, intelligence that supported U.S. claims Russia was planning to invade Ukraine.

The CCP has been exposed as the only global power supporting Russia and the only superpower against sanctioning Russia.

It will be impossible for the Kremlin to continue a state of normalcy without China’s economic support going forward. Without the CCP’s support it would be completely unaffordable for Putin to mount such an attack on Ukraine and to risk financial alienation from Western markets.

The CCP is supporting the Kremlin to create a brutal axis of power in Eurasia, the Middle East, and throughout Asia. But the support is also to further the CCP’s own aggressive territorial ambitions of seizing Taiwan and extending its reach throughout the Middle East with the Belt and Road Initiative (BRI, also known as “One Belt, One Road”) infrastructure juggernaut.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Chadwick Hagan is a financier, entrepreneur, author and columnist. He has managed businesses and investments in global markets for over twenty years. In 2020 his macroeconomics blog was archived by the Library of Congress Archive. He is a fellow of the Royal Society of Arts and is based in Atlanta and London.