Russia and China To Conduct First Barter Trade Deals In September / October

Moscow and Beijing are looking to a barter trade system to overcome the hesitancy of Chinese banks to run foul of US sanctions in conducting cross-border financial transactions with Russia. The moves, which are expected to be temporary, come as the two sides are trying to limit the transactional use of the SWIFT banking system. An initial two deals, both related to agriculture are scheduled to take place in September.

International barter is difficult to conduct due to the procedural complexities concerning customs value assessments. Russian industrial companies have acknowledged they are discussing the export of metals from Russia in exchange for equipment from China, while China has previously concluded barter deals. In 2019, Beijing agreed to exchange Malaysian palm oil valued at about US$150 million for construction services, civil and defence equipment. In 2021, a Chinese company sent US$2 million worth of auto parts to Iran in exchange for pistachios. Barter transactions between Moscow and Beijing took place during the existence of the USSR, and continued into the early 1990s.

The deals currently under discussion will be the first bilateral barters between Russia and China in about 30 years. Anticipating this, in November last year, Lilia Shchur-Trukhanovich, Director of the Department for Development and Regulation of Foreign Economic Activity of the Russian Ministry of Economic Development, announced that the department, together with the Russian Export Centre (REC), had developed a navigator for concluding barter transactions.

It is necessary to conclude not only closed, but also open barter transactions, in which it will be possible to combine goods into a basket so that it satisfies all parties to the contract. In February this year, Russia’s Ministry of Economic Development announced that it had developed step-by-step instructions for handling foreign trade barter transactions. Pakistan and India have also expressed interest in such schemes, which as they do not involve the transferring of any capital are a partial solution. We can expect the process to become more refined over time, with the possibility of a standard Eurasian barter exchange also a future direction.