Russia on creating payment system with China amid cold relations with West

Russia expects to sign a deal in 2016 to link China`s national electronic payment network into its own soon-to-be-launched credit card system as part of measures aimed at reducing reliance on the West, ft.com reports. The deputy finance minister declined to comment on whether Russia was in talks to issue sovereign debt in CNY, as some bankers have said.

The agreement with Unionpay, usable in 141 countries, would ease the way for international acceptance of the `Mir` credit card that Russia plans to issue in 2016. Visa and MasterCard still continue to operate in Russia, but are banned from doing business with two Russian banks accused by the US of close links to the Kremlin.

Russia`s primary aim is to access China`s debt markets. Currently, Russia`s largest banks and corporations are unable to raise finance in USD. Moreover, Russia was unable to find Western banks willing to underwrite a planned USD 3 billion Eurobond.

China is easing international access to its onshore bond market (USD 6 trillion, the third largest in the world). Several Western banks and corporates, including HSBC and Daimler, as well as South Korea, have issued so-called `panda bonds` in 2015 and talks between Russia and China to issue a CNY-denominated `panda bond` are underway.