China has dealt a significant blow to Russia by reportedly halting transactions through its payment system UnionPay, a move that disrupts a major alternative for Russians after Visa and Mastercard withdrew from the country due to the conflict in Ukraine.
Issues with UnionPay
Users in Russia have reported difficulties using UnionPay cards linked to the Huawei Pay service, with transactions being declined.
Linked to U.S. Sanctions
The restrictions are believed to be linked to U.S. sanctions against Russia’s National Payment Card System, which processes UnionPay transactions in the country.
Close China-Russia Ties
Despite Russia’s invasion of Ukraine, China has maintained strong ties with Moscow and has refrained from publicly criticizing President Vladimir Putin’s actions.
Impact of Sanctions on Russia
Russia’s economy has been heavily sanctioned since the beginning of the conflict in Ukraine, facing over 13,000 restrictions and becoming the most-sanctioned country globally.
The country has been cut off from the SWIFT banking system, impacting its financial transactions.
UnionPay as an Alternative
UnionPay emerged as a crucial alternative for Russians after major international payment companies suspended operations in Russia.
It provided a way for Russians to conduct transactions abroad when other options were limited.
Issues with Huawei Pay
While physical UnionPay cards continue to function normally in Russia, those linked to the Huawei Pay service are reportedly being rejected.
Huawei Pay has cited changes in the operation of the payment service provider for the disruption.
Impact on Russian Financial Institutions
In addition to UnionPay issues, Chinese banks, including Industrial and Commercial Bank of China, China Construction Bank, and Bank of China, have stopped accepting payments from sanctioned Russian financial institutions due to concerns about secondary sanctions from the United States.
Threat of Further Sanctions
The move by Chinese banks follows warnings from the United States in December, threatening to block foreign banks conducting business with firms supporting Russia’s defense industry from accessing its financial system.
Ongoing Transactions
Despite the restrictions, transactions with non-sanctioned banks are reported to be continuing in China, suggesting a selective approach to financial interactions amidst the ongoing geopolitical tensions.
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