Wheat for Chinese cars? Russia turned to Barter to surround sanctions

Ancient Barter is increasing in Russia’s foreign trade for the first time since the 1990s, because companies that want to defeat Western sanctions exchange wheat for Chinese cars and flaxseeds for building materials.

Even when Russia built a warm relationship with China and India, the return of Barter showed how far the war in Ukraine had distorted trade relations for the largest natural resource producers in the world, three decades after the collapse of the Soviet Union in 1991 led to the integration of Russian economic to the West.

The United States, Europe and the Allies have dropped more than 25,000 different sanctions on Russia during the 2022 war in Ukraine and the 2014 Crimea anexation in an effort to sink the Russian economy worth $ 2.2 trillion and damage the support of President Vladimir Putin.

Washington also reached India at a rate in response to New Delhi oil trade with Russia.

Putin said the Russian economy had outperformed hope. It grew faster over the past two years than G7 countries, although there are western predictions about accidents. He has ordered business and officials to oppose sanctions in everything they can.

However, there are signs of tension that grows in the economy, which is now shown by the central bank technically in the recession and those suffering from high inflation.

Several Steps of Penalties – Especially Termination of Russian Banks from the Fast Payment System in 2022 and Washington’s Commemoration to China’s Bank last year against supporting Russian War efforts – has triggered fears of secondary sanctions.

“Chinese banks are afraid to be placed on a list of sanctions, under secondary sanctions, so they do not receive money from Russia,” the source in the payment market told Reuters.

That concern seems to be behind the emergence of Barter transactions, which is far more difficult to trace. In 2024, the Russian Ministry of Economy issued 14 pages “Guide to Foreign Barter Transactions,” advising business on how to use this method to surround sanctions. Even proposing the creation of a trading platform that will function as a Barter exchange.

“Foreign trade barter transactions allow the exchange of goods and services with foreign companies without the need for international transactions,” said ministry documents, quoting “provisions on sanctions restrictions.”

Until recently, there is a little evidence of commercial interests in the transaction. However, last month, Reuters reported that Hainan Longpan Oilfield Technology Co. China is trying to trade steel and aluminum alloys in return for marine machines.

The company did not respond to comment requests.

For this story, Reuters can identify eight goods transactions in the form of goods based on trade sources, public statements from customs services and company statements. Transactions have never been reported before.

While the news agency cannot determine the value or volume of barter as a whole in the Russian economy because of the transaction opacity, three sources of trade say the practice becomes more frequent.

“Barter’s growth is a symptom of de-dollarization, sanctions for pressure and liquidity problems among couples,” Maxim Spassky, Secretary of the Generalist Union and Russian-Asian entrepreneurs, told an Industrial Agency, to Reuters. Spassky says the volume of barter is likely to grow further.

One source of trade – which spoke on anonymous conditions due to information sensitivity – said the system helped avoid sanctions that released Russian banks from dollar and euro transactions.

Three analysts say the possibility of an indication of the Barter scale is the difference that widens between the Statistics of the Central Bank’s foreign trade and the Customs Service Data itself, which reached $ 7 billion in the first half of this year.

Responding to requests for comments, Russian Customs Services confirmed Barter was carried out with various countries “for various items.” It is said, however, the number of barter transactions is not significant compared to the overall volume of foreign trade contracts.

Russia’s foreign trade surplus in January – July declined 14% compared to the previous year, to $ 77.2 billion, according to data published from the Federal Customs Services. Exports during this period declined $ 11.5 billion to $ 232.6 billion, while imports increased $ 1.2 billion to $ 155.4 billion.

The government and the central bank refused to discuss Barter with Reuters outside said that there was no data available about such transactions because they would be included in the overall numbers if reported legally. One source close to the government says that data divergent can be caused by differences in methodology.

Car for wheat
In one transaction identified by Reuters from two trading sources, Chinese cars are traded for Russian wheat. According to one source, the Chinese partner in the agreement asked their Russian colleagues to pay with seeds.

Chinese partners bought cars in China for Yuan. Russian partners buy seeds with rubles. Then the wheat was exchanged in a car.
Reuters cannot determine the volume traded, or the mechanism with which traders decide the value of wheat or car.

In two other transactions, flaxseeds are exchanged for goods including household appliances and building materials from China, customs statements show. Experts with knowledge of Russian external trade said that one of the flax agreements was registered in the 2024 statement by the Russian Customs service in the Ural region, estimated to be valued in the $ 100,000 region.

China is the main importer of Russian flax seeds, which are used in industrial processes and as nutritional products.

In other transactions, metals were sent to China in return for machinery, Chinese services were exchanged for raw materials, and a Russian importer bought aluminum to pay for Chinese companies. One agreement is with Pakistan.

Some Barter transactions have allowed imports of West goods to Russia despite sanctions, two sources with knowledge about the transaction say, without giving details of which items.

At the Kazan Expo Business Forum in August, Chinese companies quote the problem of resolution among problems that hamper the development of bilateral trade. Xu Xinjing, Chair of Hainan Longpan Oilfield Technology Co., Ltd., said Barter’s trade could be a solution.

Speaking at the conference, Xu said that “in the current conditions payment is limited,” Barter provides new opportunities for companies in Russian and Asian countries.

Barter sowed chaos in the 1990s
After the collapse of the Soviet in the 1990s, Barter sowed chaos through the economy because the large chain from the contingent agreement was set for everything, ranging from electricity and oil to flour, sugar and boots, allowing price frauds that made values ​​difficult to determine and get good luck for some people.

At that time, the lack of money was ready, large inflation and repeated devaluation made Barter interesting. Now, there is a lot of money but Barter is driven by the stress that continues to change from the threat of western sanctions against Russia and China.

Russia said illegal and Chinese western sanctions have criticized them as discriminatory.

Barter is not the only solution. Some traders have used the so -called “payment agent”, which at the cost of facilitating payments through various schemes, but such transactions can be risky.

Another way to carry out payments is through Russian state -owned bank VTB which has a branch in Shanghai. Others use cryptocurrency pegged into US dollars.

“Small businesses actively use Crypto. Some transportation cash, some work through offset, some accounts of accounts with different banks,” said Sergey Putiyatinsky, Vice President for Operations and at BCS, a leading Russian financial company.

“There is no answer to the ready-to-use technology. The economy survives, and the business simultaneously applies 10-15 different payment methods,” he said.
Source: Reuters