China Deals Major Blow to Russia with Payments Ban

Russia’s President Vladimir Putin (R) and China’s President Xi Jinping heading to a group photo session during the third Belt and Road Forum for International Cooperation at the Great Hall of the People in Beijing on October 18, 2023. Russians have reported issues using China’s payment system UnionPay.

Russians have reported issues using China’s payment system UnionPay, which was widely touted in Russia as an alternative to Visa and Mastercard after the card payment companies pulled out over the war in Ukraine.

UnionPay cards linked to the Huawei Pay service have stopped working in Russia, local news portal 66.ru reported on Tuesday, citing users who say they have been unable to make payments. The Moscow Times said that the restrictions may be the result of U.S. sanctions against Russia’s National Payment Card System (NSPK), which processes all UnionPay card transactions in the country.

Beijing and Moscow have maintained close ties throughout Russia’s full-scale invasion of Ukraine, and declared a “no limits” partnership in February 2022, days before the war began. China has not publicly criticized President Vladimir Putin’s decision to invade Ukraine.

Russia’s economy took a hit in February 2022 after the invasion began, when it was subject to more than 13,000 restrictions and became the world’s most-sanctioned country, according to the Carnegie Endowment for International Peace. Foreign exchange reserves were frozen and Russia was cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system.

UnionPay was widely touted as China’s rescue operation to Russia after Visa, Mastercard and American Express suspended operations in Russia over the war in Ukraine and SWIFT was blocked. It became one of the only methods Russians could use to make payments abroad.

News portal 66.ru reported that while payment by physical UnionPay cards appears to work as usual, the same cards linked to the Huawei Pay service are refused in Russia.

Russia Telegram channel Market Overview reported that Huawei support said that Huawei Pay is currently unavailable for use in Russia due to changes in the operation of the payment service provider.

Newsweek has contacted Russia’s foreign ministry, UnionPay and Huawei via email for comment.

The development comes days after three of China’s largest banks were reported to have stopped accepting payments from sanctioned Russian financial institutions.

The decision was made by Chinese banks Industrial and Commercial Bank of China, China Construction Bank and Bank of China due to the “risks of secondary sanctions” from the United States, Izvestia reported. These banks rank first, second and fourth in terms of assets in China, respectively. Transactions with non-sanctioned banks are still ongoing, the newspaper said.

In December, Washington threatened to block foreign banks that conduct business with firms that support Russia’s defense industry from its financial system.

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