Russia expects trade with China to reach $200 billion by 2024
Russia said on Saturday it expected commodity flows with China to grow and trade with Beijing to reach $200 billion by 2024, as Moscow faces mounting isolation from the West.
China has refused to condemn Russia’s actions in Ukraine and has criticised the unprecedented Western sanctions on Moscow. The two countries have bolstered ties in recent years, including announcing a “no limits” partnership in February.
“We are focused on achieving the goal set by the heads of state to bring bilateral trade turnover to $200 billion by 2024,” Georgiy Zinoviev, head of the Russian foreign ministry’s first Asia department, told the Interfax news agency.
“Moreover, we suggest that reaching this ambitious figure earlier than planned is quite possible.”
With Russian trade buffeted by sanctions, Zinoviev said time was needed to adapt. He said China’s struggle with COVID-19 in recent weeks was also a factor that could complicate efforts.
“Chinese business remains interested in expanding its presence in Russia, for whom additional opportunities are opening up given the departure of some Western companies,” Zinoviev said.
He acknowledged the risk of secondary action that Chinese companies could face if they help Russia circumvent sanctions, but said that a significant increase in cooperation was likely nonetheless.
“It is clear that in the current situation many Chinese economic operators have to exercise caution, given the likelihood of secondary sanctions,” said Zinoviev.
“I am convinced our partners and us will be able to use the current situation to our common interests and fully unlock the potential for a significant increase in cooperation in all areas.”
Separately, Russia made what appeared to be a late U-turn to avoid a default on Friday, as it made a number of overdue interest payments in dollars on its overseas bonds, despite previously vowing to pay only in roubles as long as its reserves remained frozen.
Russia’s $40 billion of international bonds have become the focus of a game of financial chicken amid sweeping Western sanctions - and speculation about a default is likely to revive in less than four weeks, when a U.S. license allowing Moscow to make payments is due to expire.
Russia’s finance ministry said it had managed to pay $564.8 million in interest on a 2022 Eurobond and $84.4 million on another 2042 bond in dollars - the currency specified on the bonds.
A senior U.S. official confirmed Moscow had made the payment without using reserves frozen in the United States, adding that the exact origin of the funds was unclear.
Deputy U.S. Treasury Secretary Wally Adeyemo told Reuters that the payments siphoned funds away from Russia’s Ukraine war effort and were a “sign of success” for U.S sanctions policy.
He declined to comment on the future of a Treasury general license due to expire on May 25 that allows banks to process Russian debt payments.
“Our overarching goal is to try to starve Russia of the resources that they’re using to both prop up their economy and finance their war effort, and to stop their invasion of Ukraine. So we’re going to keep making policy decisions with that in mind,” Adeyemo said.
Russia said it had channelled the required funds to the London branch of Citibank, one of the “paying agents” whose job it is to disburse them to the bondholders.
Citibank declined to comment.
“The payments were made in the currency of issue of the corresponding Eurobonds - in US dollars,” the Russian Finance Ministry said. “Thus, the obligations to service sovereign Eurobonds are fulfilled.” Two holders of the bonds said they had not yet received the funds, but the process can take days.
“I don’t see a reason why they (the paying agent) cannot make that payment,” said Kaan Nazli, porfolio manager for the Emerging Markets Debt team at Neuberger Berman, which holds Russian sovereign bonds.
Despite the payment announcements, preparations for an auction to settle credit default swaps - insurance against default, in this case Russian - were still being made.
The Credit Derivatives Determinations Commitee met on Friday and acknowledged the reports of Russia’s payments, but regardless prepared for a CDS auction next week “solely in order to prepare for the possibility of a Failure to Pay Credit Event.”
Russia’s Sberbank separately said it had paid coupons on two subordinated eurobond issues in roubles because sanctions by the United States and Britain prevented it from making payments to investors in line with its initial commitments.
Russia has not had a default of any kind since a financial crash in 1998 and has not seen a major international or ‘external’ market default since the atermath of the 1917 Bolshevik revolution.
Chinese business remains interested in expanding its presence in Russia, for whom additional opportunities are opening up given the departure of some Western companies, says Zinoviev