The chairman of VTB, Andrei Kostin, told the congress of the Russian Banking Association that banks in friendly countries began declining transactions with Russian entities more frequently after the tightening of secondary sanctions at the end of 2023.
According to Kostin, the trend has persisted, and the pool of foreign banks willing to work with Russian organizations continues to shrink day by day. Meanwhile, more than 40 domestic banks remain under sanctions, accounting for nearly 90 percent of bank capital.
“The number of counterparties denying payment after eligibility checks without explanation has risen sharply, especially among banks in friendly jurisdictions,” Kostin said.
Payment terms and fees have grown, and banks are demanding additional supporting documentation, particularly for critical product groups such as electronics, computers, high-precision machines, and related equipment.
Kostin noted that a year ago it sufficed for Russians not to transfer money through sanctioned banks and to avoid SWIFT. Today, if the payer is Russia, problems arise regardless of a bank’s loyalty, jurisdiction, or the sanctions status of the Russian participant in the deal.
“As soon as goods are sent to Russia or from us, a notice light switches on, even if the bank or jurisdiction appears loyal,” the head of VTB commented.
How can the problem be addressed?
Kostin outlined three main areas where state bodies, banks, and businesses should act together.
First, there is a push to develop Russia’s payment infrastructure abroad, leveraging agency programs and affiliated banks. The aim is to enable payments in both traditional currencies and digital assets. Yet agency models are not always fully transparent in line with Russian law.
“Today two main approaches dominate the market. Large exporters usually rely on a network of trusted traders, while the largest banks sometimes turn to independent service providers and brokers,” he noted.
Second, the speaker proposed building a domestic platform for currency exchange among friendly countries, potentially within the BRICS framework. This option is viewed as most viable, though it will take time to implement.
“The complexity of implementing a multilateral financial platform involves a heavy political component and external pressure on partners. They are examining the issue, but progress will be gradual,” Kostin explained.
Third, Kostin recommended using digital assets. He believes this option could become workable quickly, provided it receives multilateral political agreement. The State Duma has already approved legislation permitting the use of digital assets for international payments.
Commenting on Kostin’s proposals, Elvira Nabiullina, head of the Central Bank, stated that the banking issue is a priority and that the central bank is ready to seek solutions.
In 2022, Russia’s largest banks faced broad anti-Russian sanctions, including disconnections from the international SWIFT network, which facilitates cross-border transfers. The situation intensified when the United States imposed secondary sanctions in 2023. Since then, foreign entities can face restrictions when dealing with Russian counterparts.
Russian media reported that Chinese and Turkish banks, which had previously cooperated with Russia, began refusing payments. Even banks participating in the Mir payment system halted operations. Mir has ceased in Armenia and Kyrgyzstan since the end of March; NSPK had previously partnered with local operators. The National Bank of Kazakhstan has not publicly announced bans, but almost all banks in the country stopped servicing Mir.
Overall, the landscape shows a tightening of cross-border financial flows and a growing emphasis on alternative payment infrastructures, domestic platforms, and the use of digital assets under careful multilateral coordination. [Attribution: Russian Banking Association; Central Bank of Russia; accompanying reports]