Putin Wants Chinese Banks to Help Military Parts Trade

Russian President Vladimir Putin made “three main requests” to his Chinese counterpart Xi Jinping on his visit to Beijing last month, according to a report on Monday by the Financial Times, which said he only had partial success.

Putin allegedly asked for China to snub Ukraine’s peace conference in Switzerland this month. That request appeared to be successful, as Beijing said on Friday it would not attend.

A second request, for a more convenient way to pay for Chinese parts bought by the Russian military, is allegedly under consideration.

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Two sources reportedly told the FT: “Beijing and Moscow were discussing ring-fencing one or more banks that would finance trade in components for Russia’s defence industry — all but certainly incurring US sanctions that would cut any such bank out of the broader global financial system.”

That would appear to be a risky – and tricky – thing to try to achieve, not least because the White House appears to be well aware of this, as the US has given repeated warnings that it would sanction Chinese banks.

US Deputy Secretary of State Kurt Campbell reiterated the threat of possible sanctions on Chinese firms and banks on a visit to NATO late last week over their support for Russia’s war in Ukraine.

Campbell told reporters in Brussels there was an urgent need for European and NATO countries “to send a collective message of concern to China about its actions – which we view are destabilizing in the heart of Europe.”

He said Chinese support was helping Moscow reconstitute elements of its military, including long-range missile, artillery and drone capabilities, and its ability to track battlefield movements.

“Where we are primarily focused are on Chinese companies that have been involved in a systematic way in supporting Russia,” he said when asked if the Chinese leadership and banks could be targeted.

“We’ve also looked closely at financial institutions.”

Pipeline deal hits a snag

Meanwhile, a third goal – to get China to sign an agreement on its Power of Siberia-2 pipeline – hit a wall because of demands on price and supply that Moscow felt were unreasonable, the FT said, citing several sources.

That was a “hefty blow” to Putin, analysts believe, because despite reports that Russia’s GDP is growing, some experts say the economic cost of his war in Ukraine has been enormous, halving the country’s national wealth fund and crushing its top source of revenue: Gazprom.

State oil giant Gazprom, which was a vast money-spinner for Moscow for many years, reported a loss of 629 billion roubles ($6.9 billion) last year – its biggest slump in a quarter of a century, after its exports to Europe plunged to less than a tenth of what they were in the decade before the war.

Gazprom has been in talks for years about building the Power of Siberia-2 pipeline to carry 50 billion cubic metres of natural gas a year from the Yamal region in northern Russia to China via Mongolia, Reuters said.

But China asked to pay close to Russia’s heavily subsidised domestic prices and would only commit to buying a small fraction of the pipeline’s planned annual capacity of 50 billion cubic metres of gas, it said.

Russian Deputy Prime Minister Alexander Novak said last month that Russia and China expect to a sign a contract “in the near future” on the Power of Siberia-2 pipeline.

But analysts said the fact Gazprom CEO Alexei Miller did not accompany Putin on his recent short visit to Beijing was a sign that the pipeline proposal was unlikely.