China prepares a new wave of financing from Russian Energy Companies

China paves the way for fundraising in Renminbi by Russian energy giants; Sales of Russian panda titles would be the first since 2017 and reflect the deepening of ties between Moscow and Beijing

China has taken an important step to reinforce its strategic partnership with Russia by signaling that it will allow large Moscow energy companies to raise funds in the Chinese domestic financial market again. The measure, which should occur by issuing “Panda titles” in Renminbi, represents not only a relevant change in Beijing’s policy, but also a milestone in deepening economic cooperation between the two countries.

According to people close to negotiations, Chinese regulators communicated to executives from the Russian energy sector, at a meeting held in late August in Guangzhou, in the south of the country, that would support plans for these companies to raise funds in the Chinese market.

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If it is realized, this will be the first Russian corporate debt operation in mainland China since the beginning of the Ukraine invasion in 2022 – and also the first Issue of Public Debt onShore since 2017, when Russian Russian state producer raised 1.5 billion Renminbi (about $ 210 million) in Panda titles.

Strategic approach at “unprecedented level”

The reopening of this market happens in parallel to a phase of diplomatic strengthening between the two countries. Last Tuesday, Russian President Vladimir Putin was in Beijing and met with Chinese leader Xi Jinping. After the meeting, Putin pointed out that the strategic relationship between Moscow and Beijing reached an “unprecedented level”.

The practical result of the meeting was the announcement of an agreement for the construction of the Power of Siberia 2 pipeline, a project conducted by Russian state Gazprom. According to experts, the work can redesign the global flow of energy, increasing China’s dependence on Russian gas and offering Moscow a robust alternative to the markets it has lost in the West.

Sanctions and alternatives

Since 2022, heavy sanctions imposed by the United States and the European Union have blocked access to Russian companies and banks to major international capital markets. This exclusion forced Moscow to seek alternatives, intensifying cooperation with China.

Until then, even the Chinese banks were cautious about funding Russian companies, afraid of suffering reprisals and secondary sanctions of Washington and Brussels. Now, however, the strengthening of the political and energy alliance between the two countries has reduced this resistance.

In addition, Renminbi has been gaining protagonism in Russian foreign trade. Given the restrictions imposed on the use of the dollar and euro, the Chinese currency has become increasingly important for the Russian economy, which attempts to rearrange its funding base and international transactions.

A movement that echoes in the global scenario

The resumption of Panda titles emissions by Russian companies is seen by analysts as a symbolic and at the same time practical gesture. Symbolic because it demonstrates the weight that the Sino-Russian alliance has gained since the beginning of the war in Ukraine. Practical because it offers Moscow companies a new source of capture amid the isolation imposed by the West.

For Beijing, in addition to ensuring cheaper and more diverse energy, the movement consolidates Renminbi as an international relevance coin. For Moscow, it means a financial breath in times of suffocating sanctions.

What seems certain is that, with the resumption of Russian titles in China, the global economic axis reconfigures itself a little more around the partnership between Putin and XI – and its effects should be felt far beyond the borders of both countries.

Russia advances in plans to resume Panda titles in China, but obstacles persist

The financial approach between Moscow and Beijing can gain new chapters in the coming months. After 2022, when Russian companies began to issue securities called Renminbi on their own domestic market, this practice is expected to advance to mainland China through so -called “panda titles”.

Sources linked to negotiations state that the resumption should be gradual and restricted, at least initially. Only two or three Russian companies would be able to access the world’s second largest title market in this first stage. Among them, the Nuclear State Rosatom and some of its subsidiaries, which remain out of reach of the most severe sanctions imposed by the United States and the European Union.

Sanctions risks still worry

Despite the enthusiasm in Moscow, financial law lawyers warn that the risks have not disappeared. Since Chinese banks are the main brokers and buyers of Panda securities, they still fear secondary sanctions from the US Treasury Foreign Asset Control Office (OFAC) that monitors global transactions.

“The broker would still face the risk of secondary sanctions from the US foreign asset control office,” explained Allen Wong, a partner at the Beijing Jincheng Tongda & Neal law firm. He stressed that, because it is a public market, it would be virtually impossible for banks to hide their involvement.

An alternative considered to be the issuance of securities through Russian entities that have not yet been the subject of sanctions. But this solution also brings risks, as the simple fundraising could put the company under a new round of international restrictions. “The idea is attractive,” said Wong. “But to work, more studies and approvals are needed from top to bottom.”

Strategies to improve credit

Efforts to enable emissions have been coordinated on multiple fronts. In July, more than 40 Russian entrepreneurs and Chinese financial experts gathered at the Russian embassy in Beijing to discuss how to reinforce Moscow companies’ capacity and increase their attractiveness to local investors.

Gazprom, a Russian Natural Gas state-owned company, took an important step in this regard last Friday. The company obtained AAA classification, with a stable perspective, granted by the Chinese risk agency CSCI Pengyuan, based in Shenzhen.

GAZPROM Strategic Strength

According to CSCI Pengyuan, the maximum grade was granted based on the strategic importance of GAZPROM for Russia’s energy policy and its dominant position in the sector, as well as a solid financial profile. The agency, however, recognized the “high geopolitical risks and oil price volatility” as factors that follow the company.

Even under US sanctions since 2022, Gazprom remains one of the pillars of the Russian economy and may be the initial showcase of the resumption of Panda titles. An eventual successful issuance of the company in Chinese territory would function as a thermometer to measure to which point Beijing is willing to challenge Washington’s pressure and open even more financial space for Moscow.

Russian companies advance in Chinese ratings and challenge western pressure

The movement to reopen the Panda title market is not limited to gazprom. A growing number of Russian energy giants has also been obtaining credit ratings in China, preparing land for future emissions. These include atomenergrom, subsidiary of the Rosatom Nuclear State; Novatek, the main liquefied natural gas supplier of the country, whose arctic plant was recently sanctioned but still managed to send a load to China in August; and Zarubezhneft, responsible for Russian energy projects abroad.

These classifications, albeit local, signal Moscow’s willingness to use the Chinese financial system as an alternative to Western block. Sought by the press, Banco Popular da China, the Securities Regulatory Committee, the National Association of Institutional Investors of the Beijing Financial Market, as well as Rosatom and Gazprom, did not officially comment on issuing plans.

Contrast between East and West

The difference in perception between Western and Chinese risk agencies is stark. By 2022, Fitch Ratings downgraded to Gazprom to double C – level that indicates high probability of default – and soon after removed all classifications from Russian companies to comply with sanctions imposed by the European Union.

At the time, Fitch warned that an increasingly severe sanction regime could create “insurmountable” barriers for Russia companies to honor foreign currency or even rubles with international creditors.

On the other side, in Beijing, the tone is different. A project manager from one of the leading Chinese classification agencies, heard on a condition of anonymity, summarized with a provocative metaphor: “one person’s garbage” can be “the other’s treasure”.

He explained that if Fitch’s customers the risks of investing in Russian assets are prohibitive for Chinese – and even Indians – these roles can be seen as rare opportunities. “If they are completed, these Russian agreements will offer the most reliable assets they can find in the market,” he added.

A new global board

The advance of negotiations for the resumption of Russian Panda titles opens a structural change in the world geopolitical and financial board. For Russia, pressured by the West and thirsty for financing, China appears as a vital survival route. For Beijing, it is about reinforcing Renminbi as an international currency and consolidating its power position capable of rivalry with traditional financial centers.

Although doubts persist about the risks of secondary sanctions and the real disposition of Chinese banks to assume this protagonism, the message has already been given: Moscow and Beijing are willing to strengthen ties at unprecedented levels, even if it means directly challenging the economic order established by the West.

And if it depends on the pragmatic view of some Asian investors, what the European and American Financial System considers “trash” to soon become one of Asia’s most disputed assets.

With information from Financial Times*