Russia has been hit with a package of severe economic punishments by the West in the wake of its invasion of Ukraine. The punitive measures have targeted various sectors of the economy, in particular finance and major Russian banks. The Central Bank of Russia (CBR) has seen its assets frozen in the US, UK, Canada and EU, as the West tries to stop it using its $630bn (£470bn) of foreign currency reserves.

Sberbank and Alfabank, two of Russia’s largest banks, have also been targeted and have had full-blocking sanctions imposed on them by the US in recent weeks.

Many Western financial institutions have fled Russia as a result of the economic restrictions brought against the Kremlin.

Visa and Mastercard (MC) suspended operations in Russia last month, leaving Russians unable to make any payments outside of their country using cards issued by the two companies.

The Kremlin had hoped to strike a deal with China’s UnionPay system as an alternative to Visa and MC and to get around the ban.

However, UnionPay yesterday unexpectedly pulled out of talks with Sberbank and other Russian financial institutions on the West’s economic black list.

It is believed that the Chinese company is afraid that western countries will impose secondary sanctions on the firm if they cooperate with Moscow.

A banking source told the Russian media website RBC.ru: “The project [to issue UnionPay cards] is temporarily on hold.

“They don’t officially confirm that it’s tied to sanctions, saying it’s on pause until further instructions.”

UnionPay was founded in March 2002 and provides bank card services similar to those of Visa and MC.

In 2015 it overtook Visa and MC in total value of payments made by customers and became the largest card payment processing organisation in the world.

The company accounted for one percent of Russian bank cards in 2020, according to Retail Banking Research.

The EU, though, remains Russia’s biggest overall commercial partner. Total trade between the two last year was worth almost twice as much as China’s trade with Russia.

It comes as Shell continues efforts to sell off its stake in a major Russian gas project.

The company has said it will cut ties with Russia to comply with sanctions.

The energy giant is reported to be in talks with Chinese state-run firms Cnooc, CNPC and Sinopec over its 27.5 percent holding in the Sakhalin-2 liquefied natural gas venture.

Shell warned that its decision would effect its profitability, saying the move would cost it up to $5bn (£3.8bn).

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