Vedomosti learned about problems with payments through VTB Shanghai

Around June 20, payments from Russian entrepreneurs stopped reaching counterparties from China through VTB Shanghai Bank, Vedomosti writes, citing sources.

According to one of the publication’s interlocutors, payments are received by the financial institution, but do not reach Chinese suppliers. The problem is caused by updating the payment software; the deadline for completing this work has been repeatedly shifted; now the plan is July 15–17, another source told Vedomosti.

“Formally, VTB Shanghai remains the leader in payments to China , but the bank’s official position now differs from the actual situation. Pessimistic forecasts indicate the cessation of payments through the Chinese branch [VTB],” said the publication’s interlocutor. Another source admitted that transactions through this financial institution will not resume.

From June 21, VTB Shanghai also suspended the transfer of payments in yuan from the parent bank, said Svetlana Gromadskaya, a partner at ProLegals. At the same time, the Russian subsidiary of the Chinese Bank of China refused to process payments in yuan from sanctioned Russian banks.

VTB told RBC that it does not comment on the activities of its foreign structures.

At the end of 2023, US President Joe Biden authorized the introduction of secondary sanctions against foreign financial institutions for involvement in transactions related to supplies for the Russian defense industry. Violators risk being added to the SDN list or restrictions on correspondent accounts with American credit institutions. After this, several of the largest Chinese banks, including Chouzhou Commercial, Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China, stopped accepting payments from banks from Russia, which are subject to Western restrictions. The Kremlin ruled out the impact of restrictions on the “further development of trade and economic relations” between Moscow and Beijing.