Russia turns to barter to escape sanctions

Signs are growing of strains on economy

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Old-fashioned barter is on the rise in Russia's foreign trade for the first time since the 1990s, as companies seeking to outfox Western sanctions swap wheat for Chinese cars and flax seeds for building materials.

Even as Russia builds warm ties with China and India, the return of barter shows just how far the war in Ukraine has distorted trading relationships for the world's biggest producer of natural resources, three decades after the 1991 collapse of the Soviet Union ushered in Russian economic integration with the West.

The United States, Europe and allies have imposed more than 25,000 different sanctions on Russia over the 2022 war in Ukraine and the 2014 annexation of Crimea in a bid to sink Russia's $2.2 trillion economy and undermine support for President Vladimir Putin.

Washington has also hit India with tariffs in response to New Delhi's oil trade with Russia. Putin says Russia's economy has outperformed expectations. It grew faster over the past two years than G7 countries, despite Western predictions of a crash. He has ordered businesses and officials to defy sanctions in every way they can.

However, there are growing signs of strain on the economy, which the central bank now shows to be technically in recession, and which suffers high inflation.

Some punitive measures - particularly the disconnection of Russian banks from the Swift payments system in 2022 and Washington's warnings to Chinese banks last year against supporting Russia's war effort - have stoked fears of secondary sanctions.

"Chinese banks are afraid of being placed on sanctions lists, under secondary sanctions, so they do not accept money from Russia," a source in the payment market told Reuters.