When Russia’s invasion of Ukraine prompted payments giants Visa and Mastercard to suspend services in the country, Moscow expected it could lean on the Chinese alternative, UnionPay, to plug the holes torn out of its domestic banking system. But that plan appears to have fallen flat, as UnionPay has reportedly decided not to expand its presence in the country, fearing it could become the next target of devastating sanctions.
On Wednesday, Russian newspaper RBC reported that UnionPay, the Chinese state–led financial services network, had suspended negotiations with Russian banks on issuing new bank cards for their customers, now unable to make purchases outside Russia as a result of Visa’s and Mastercard’s withdrawal. (Russians could still use the cards to make domestic purchases, owing to Russia’s local Mir payment system.)
The payment processor is reportedly worried about being the target of sanctions from the U.S. and other countries if it works with sanctioned Russian banks. These sanctions might include being barred from doing business with an American individual or company, or importing goods to or exporting goods from the U.S. Effectively, the sanctions could sever UnionPay from the global financial system—which is a lot more lucrative than Russia’s domestic scene.
UnionPay did not immediately respond to a request for comment.
UnionPay, launched in 2002, is a state-led financial services network operated by China’s central bank, the People’s Bank of China, and is the world’s second largest card brand with a 32% market share, according to 2020 data from the Nilson Report.
UnionPay’s hesitance to enter the Russian market is the latest example of large Chinese companies growing wary of doing business in Russia, despite the fact that China has not officially joined Western leaders in piling sanctions on Russia.
China’s three major state-owned oil companies have reportedly been warned by Beijing to avoid making new investments in Russia, and last month, state-owned oil producer Sinopec suspended talks on a major joint venture in Russia with Sibur, the country’s largest petrochemical company.
Both the Bank of China and the Industrial and Commercial Bank of China, two of China’s largest lending banks, have also stopped offering clients finance options for purchases of Russian commodities, reports Bloomberg.
And Huawei Technologies—one of the few remaining suppliers of 5G technology in Russia after Nokia and Ericsson pulled out of the country in February—has suspended new orders of network equipment for Russian customers, notes Russian outlet Izvestia.
Officially, China has refused to join Western sanctions on Russia, deeming them counterproductive to the peace process. Chinese officials have also blamed the U.S. and Western organizations like NATO for escalating tensions between Russia and Ukraine.
However, in practice, China may be trying to balance continued economic links with Russia while preserving its relationship with the West. China doesn’t want to give “Western countries any excuses for sanctions, bans, or boycotts,” Bruce Pang, head of macro and strategy research at China Renaissance Securities, told Fortune last month.
This story was originally featured on Fortune.com