Sanctions are slowly destroying Russian businesses with payment issues.

New US restrictions imposed in June have put local banks in countries that trade with Russia at a higher risk of so-called secondary penalties, which is delaying or disrupting payments to and from countries like China and Turkey. That’s making it difficult, and sometimes impossible, to execute transactions, particularly with China, arguably Russia’s most important economic partner since the start of the 2022 war.

The difficulties threaten to disrupt Russia’s trade with economic partners it has relied on since the EU and the US imposed unprecedented sanctions that has significantly diminished Russia’s trade network following its invasion of Ukraine.

In June, the US widened the parameters used to determine whether secondary sanctions should be imposed by broadening the definition of Russia’s military-industrial base. However, imports into Russia from China started growing again after volumes collapsed in response to the US threatening overseas banks with penalties in December.

Still, the latest move complicates the situation significantly. In many cases, transactions with China are only possible through agents in former Soviet republics such as Kazakhstan, Uzbekistan, and a few other Central Asian countries.