The Russian economy is being hammered by sanctions, asset freezes and withdrawals of international companies, leaving Moscow with only one ally powerful enough to rely on as a source of support: China.
Russian Finance Minister Anton Siluanov said Sunday that his country's partnership with China will allow them to maintain their cooperation and increase it in an environment where Western markets are closing.
Jake Sullivan, the U.S. national security advisor, said there would be consequences for large-scale sanctions evasion efforts or support to Russia.
Siluanov made reference to the US-led asset freezes on nearly half of Russia's central bank reserves, which had been accumulated since a previous wave of Western sanctions.
China Moscow's main source of foreign exchange is in gold and the Chinese currency, the renminbi.
China is not a party to the crisis nor does it want the sanctions to affect it, Wang Yi said during a call with a European counterpart.
When contacted by CNBC, representatives for the China, Abu Dhabi, and South African embassies were not available for comment.
How much of a help could China be to Russia? It's quite a lot.
If China decided to open a full swap line with Russia, it would accept rubles as payment for anything it needed to buy, including technology parts and semiconductors that Moscow has been cut off from in the latest rounds of sanctions.
It is not clear whether Beijing is interested in doing so and how much it will backfire.
China could help Russia a lot, according to a Central Asia fellow at the Foreign Policy Research Institute.
It might not be the best time to invest in Chinese markets, given the uncertain state of Chinese markets over the last few weeks.
Beijing can benefit from its alliance with Russia.
Beijing and Moscow announced a strategic partnership to counter U.S. influence before the invasion. China's position has been to blame the U.S. and NATO for the conflict, and on March 7 its foreign minister called Russia his country's most important strategic partner.
Even though the international landscape is perilous, we will maintain our strategic focus and promote the development of a comprehensive China-Russia partnership in the new era, Wang said from Beijing.
(China would) be taking all the liabilities and risks of the Russian economy onto their own balance sheet at a time when the Russian economy is at its weakest in decades
While China's government has expressed concern over the conflict in Ukraine, it has not condemned Russia or called it an invasion.
Holger Schmieding, chief economist at Berenberg Bank, wrote in an early March research note that China and Putin have a clear interest in working together more closely.
China is happy to cause problems for the West and would not mind turning Russia into its junior partner.
The future of Russia's economy will be influenced by China's leadership steps in to support Moscow. China is Russia's top export market after the European Union, and trade between China and Russia reached a record high in 2011. Russian exports to China were worth $78.6 billion in 2021, with oil and gas accounting for over half of that. China imported more from Russia than it exported last year.
Russia can use China as a bigger alternative market for its raw material exports and a conduit to circumvent Western sanctions over time, according to Schmieding.
It could be an uneasy and fragile alliance that may not survive Putin.
The G-7 economies can impose sanctions on any entity that supports Moscow. China's economy is the second largest in the world and is a key part of global supply chains. It has a bigger impact on global markets than Russia does. Any move to sanction China would have a bigger effect on the world and the West in particular.
Analysts at New York-based research firm Rhodium Group wrote in a note in early March that Beijing likely seeks a third way between supporting Russia or not. Maintaining existing channels of economic engagement with Russia is part of the middle path.
In early March, the chairman of China's banking regulators said that China would continue normal trade relations with the affected parties.
Rhodium's analysts wrote that it will be hard to hide that kind of economic engagement with Russia.
Beijing has around $90 billion in the Chinese currency, or about 14 percent of Russia's foreign exchange reserves. Yes. If Beijing allowed Russia's central bank to sell dollars or euros, what would it be like? That would expose it to sanctions.
The Russian banks that haven't been hit with sanctions can still be used to trade with China. Despite many years of working to increase bilateral trade in their own currencies, the vast majority of that trade is still invoiced in dollars or euros.
China could be catching a falling knife by taking on the credit and sanctions risks of Russia.
The vast majority of the pain could be alleviated by China.
That may not be the wisest move economically.
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