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Russia’s top financial watchdog has offered a rare glimpse into how the country’s businesses are sidestepping sweeping Western sanctions.
Yury Chikhanchin, the head of Russia’s Federal Service for Financial Monitoring, told Russian President Vladimir Putin on Tuesday that companies are turning to gold, cryptocurrencies, and creative accounting tricks, according to a Kremlin transcript.
These approaches add to other unconventional tactics — like barter trade — that Russia is using to skirt sanctions.
“Alternative payment mechanisms are being actively employed, including gold, cryptocurrencies, and, more recently, netting arrangements: clearing operations, which we are currently implementing,” said Chikhanchin.
Chikhanchin’s mention of “netting arrangements” refers to a workaround in which exporters and importers offset what they owe each other. Banks balance the export and import payments of different companies at a central location. This process minimizes the need to move money across borders, avoiding a key chokepoint for international sanctions enforcement.
Russia’s shifting focus
Chikhanchin’s unusually public disclosure of how Russia is circumventing sanctions comes over 40 months after Moscow’s full-scale invasion of Ukraine triggered an unprecedented wave of Western sanctions. Despite 17 rounds of penalties from the European Union — once Russia’s largest trading partner — the country’s economy continues to hum along.
Chikhanchin said Russia’s cross-border payments are now flowing more through the Middle East, Southeast Asia, and Central Asia.
“This shift aligns with the development of a unified fast payment system that serves as an alternative to SWIFT, primarily involving CIS countries,” he added, referring to the Commonwealth of Independent States, a group of former Soviet republics.
At the meeting, Chikhanchin also revealed that the share of the ruble, cryptocurrencies, and gold in trade settlements has increased.
Meanwhile, the share of payments in dollars, euros, and pounds has “dropped significantly,” he said.
Sanctions are starting to bite
While Russia’s economy has appeared to be resilient to sanctions, there are signs it’s losing momentum.
An S&P Global survey found that manufacturing activity contracted sharply in June.
Just last month, Russia’s economy minister, Maxim Reshetnikov, warned that the country was “on the brink” of a recession.
Russia’s GDP grew 1.4% in the first quarter of the year from a year ago, according to Rosstat, the country’s official statistics service. This is a sharp slowdown from the 4.5% growth it posted in the fourth quarter of last year. In 2024, Russia’s economy grew 4.3% for the full year.
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