Even Chinese Bank Created To Work With Iran Refuses Russian Money

It considers Russian clients toxic.

Russian business is unable to break through the isolation that arose after the United States threatened foreign banks with secondary sanctions for working with Russia. Many had high hopes for the Chinese bank, created to work with sanctioned Iran, but it also refused to accept money from Russia.

Kunlyn Bank, controlled by the China National Petroleum Corporation (CNPC), has notified its clients that it will completely stop processing payments from Russia as of March 29, four Russian importers who turned to its services after the March 29 crisis told The Moscow Times. Russian businesses are having big problems transferring money to large Chinese banks. Money in dollars, yuan, and even rubles was stuck in banks, including the state-owned Bank of China, for weeks; credit institutions requested additional documents and data, including guarantees that the purchased products would not go to the military complex and sanctioned faces, and still many eventually refused. According to statistics from a large customs broker, in general, from mid-February to March, only about 25% of payments from its clients went to China.

Most importers have been “running around the banks” for the last month in search of those who quickly send and receive money. Kunlyn Bank (formerly Karamay City Commercial Bank) seemed promising because it was created in 2006 by Chinese government agencies for settlements with Iranian counterparties under sanctions, primarily for oil purchases. In 2009, the bank came under the control of CNPC and had extensive experience working with sanctioned money, says one of the importers. It seemed that a solution had been found, because Kunlyn Bank had nothing to fear from secondary sanctions: since 2012, it itself has been included in the US sanctions list for cooperation with Iran and is cut off from the dollar system.

“On the advice of our Chinese suppliers, from the beginning of March we began paying them to this bank and, despite the fact that all our colleagues suffered from problems with transferring money, our payments went through perfectly. But last week, the supplier reported that Kunlyn notified clients that it would stop accepting new payments from March 21 and that it would completely stop working with Russia from March 29,” says the publication’s interlocutor.

“A couple of weeks ago, we rushed to open an account in this bank for our Chinese legal entity, and there were a lot of people like us — because after problems arose with other Chinese banks, many recommended this particular one as being accustomed to sanctions and fearless,” — says the purchasing manager of a Russian production holding. As a result, the company’s application was being considered all this time, and a few days ago they reported that the bank would not open accounts for new clients at all and would stop working with Russian money, the manager continues.

You might think they worked a lot before, another importer sneers. The bank didn’t have many Russian clients due to its small size and high transaction fees, he explains. According to him, from old clients at the beginning of the year the bank charged a commission of 1.2% for depositing funds and 0.3% for outgoing payments, and several tens of dollars more for each payment, and for new clients the commissions reached 2%, which is already close to the commissions of payment agents who transfer money from Russia to China through third countries, with a guarantee of crediting. So Russian business turned their attention to the bank out of desperation, and its categorical refusal to work especially illustrates the “friendliness” of Chinese business, the entrepreneur notes.

True, Kunlun already had a similar episode in history related to sanctions and Iran. After the United States threatened China with further sanctions in 2018 for cooperation with this state, the bank announced to customers that it would stop accepting money from Iran and would return all payments. “As far as I remember, the pause lasted several months, then operations resumed. Maybe the same will happen with Russia,” hopes one of the publication’s interlocutors.