Western sanctions are pushing Russia to explore deeper financial links
with China, according to Moscow's deputy finance minister, according to the
Financial Times.
Speaking to the FT during a trip to
Beijing, Alexei Moiseev said Russia expected to sign a deal this year that
would link China's national electronic payment network into its own
soon-to-be-launched credit card system as part of measures aimed at reducing
reliance on the west.
The move is just one of a series of new measures aimed at integrating
Chinese and Russian financial markets under discussion by Moscow and Beijing.
Mr. Moiseev candidly said these were being made more urgent by
western sanctions on Russia.
"The motivation has increased significantly," Mr. Moiseev said of
the closer ties. "We are driven by outside [events] to develop bilateral
financial links."
But the deputy finance minister declined to comment on whether Russia was
in talks to issue sovereign debt in renminbi, as some bankers have said.
The agreement with Unionpay, which is usable in 141 countries according to
its website, would ease the way for international acceptance of the
"Mir" credit card that Russia plans to issue in 2016, said Mr.
Moiseev. "Clearly we would like our national plastic card system to be as
internationally accepted as possible," he said.
Russia has sought to increase its exposure to China after U.S. and EU
sanctions over the Ukraine conflict largely cut the country off from western
markets. The finance ministry has struggled to find western banks willing to
underwrite a planned $3 billion Eurobond after the U.S. Treasury warned them
off the deal.
While both Visa and MasterCard continue to operate in Russia, they are
banned from doing business with two Russian banks accused by the U.S. of close
links to the Kremlin. "The very possibility that Russian banks can be
switched off from plastic cards have of course pushed us to make steps,"
Mr. Moiseev said.
Amid several rounds of negotiations over financial
integration, many see Russia's primary aim as access to China's debt markets.
Western sanctions mean many of Russia's largest banks and corporations are
unable to raise finance in dollars. Historically low oil prices have also hurt
Russia's economy and led to an increase in financing needs.
Meanwhile, China is easing international access to its onshore bond market,
estimated at some $6 trillion — the third largest in the world. Several western
banks and corporates, including HSBC and Daimler, as well as South Korea, have
over the past year issued so-called "panda bonds."
Bankers have told the FT that talks between Russia and China to issue a
renminbi-denominated panda bond are under way, but Mr. Moiseev declined to
discuss the matter.
"I am deliberately not talking specifically about the Russian
Federation borrowing in China or Chinese buying Russian government bonds in
Russia," he said.
He said his trip to Beijing had the broader aim of promoting the integration
of financial infrastructure. "I want to make it much more convenient for
investors on both sides to invest," he added.
He pointed to other recent examples of integration including a
dual-taxation treaty which would unlock cross-border investment by lifting
taxation on capital gains and coupons. He said topics for discussion also
included mutual recognition of credit ratings and auditing standards.
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