Several public and private banks and financial institutions have imposed trade and commodity finance restrictions on Russia amid the escalating conflict in Ukraine.
The US further sanctioned Russia’s state development banks on Friday – including the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB.RF) and Promsvyazbank Public Joint Stock Company (PSB) – which would ordinarily provide infrastructure and export finance for Russian projects.
Beijing has also reacted. In an unusual move, China’s state bank Industrial and Commercial Bank of China (ICBC) has halted the issuance of confirmation letters of credit for the purchase of Russian commodities.
About 40% of Russia’s budget depends on oil and gas exports, with China being its biggest trading partner. An ally to Russia, China appears to be complying with US and European sanctions.
The restrictions of commodity financing lines come as Russia continues its attack on Kyiv, amid the widening impact of economic sanctions placed by US and the European Commission (EC).
The rouble has weakened 29% against the dollar since the invasion of Ukraine and the S&P has downgraded Russia to junk status, as a raft of economic sanctions continues to be placed.
Other measures have included banning Russia from SWIFT and imposing restrictions on over $600 billion of Russia’s central bank reserves.