Russia rebirths barter trade with China, avoiding Western sanctions by exchanging wheat for cars, flax for materials, and showing secret economic actions.
A redefinition of an ancient tool of trade has allowed Russia to bypass the crippling Western sanctions. Barter has reappeared in the foreign trade of Russia since the 1990s. Businesses are replacing wheat with Chinese vehicles and flax with construction material.
This is an unorthodox practice that underlines the changes in trade as a consequence of sanctions on the largest natural resource producer globally, according to a Reuters report.
The Embargo Pressure Forces Barter Awakening
The allies, the U.S., and Europe have imposed more than 25,000 sanctions on Russia in response to its activities in Ukraine and Crimea. The goal of these measures is to cripple the economy of Russia, which is valued at 2.2 trillion, and undermine the support for President Vladimir Putin.
Although it has been argued that the economy has passed the test, it has been revealed that there are some indicators of strains in the form of recession and inflation.
The most important one is finance: in 2022, Russian banks lost the ability to connect to the international payments system SWIFT. Chinese banks are afraid of secondary sanctions and restrict the conduct of transactions with Russia. To avoid these limitations, a less traceable alternative trade known as barter has been developed.
In 2024, even the Ministry of Economy in Russia released a 14-page guide to foreign barter transactions. The guide informs companies on how to trade goods and services without making money transfers, which demonstrates how sanctions limit normal trade.
Wheat for Cars and Seeds for Materials: Curious Deals
In 2024, Reuters found at least eight Russian barter deals. Chinese cars in one were traded for Russian wheat.
Chinese farmers purchased cars in Chinese yuan; Russians used to purchase wheat in Russian rubles. Then, cars were exchanged for wheat. The volumes and ways of valuation are not explicit.
Chinese household appliances and building materials were exchanged for flax seeds. According to records in customs, one flax deal was worth about $100,000. China has been an important importer of Russian flax seeds that have industrial and nutritional purposes.
There were other transactions whereby metals were shipped to China in exchange for machinery, Chinese services were exchanged for raw material, and a Russian importer bought aluminum to pay a Chinese company. One of these dealings was with Pakistan.
Imports of Western goods into Russia, against sanctions, were made easier by barter arrangements. This non-transparent system aids in avoiding financial limitations and even continuing business in a challenging economic period.
Barter revival is an indication of broader economic developments. It is a sign of de-dollarization and liquidity problems in Russia because of sanctions.
Different payment platforms are used concurrently by businesses, such as cryptocurrencies, which are pegged to the U.S. dollar, payment agents, and barter trade, to remain afloat.
