Recently, Alibaba’s AliExpress, commonly referred to as the international Taobao, has further tightened its business conditions in Russia: it has stopped accepting ruble payments and does not allow shipments to Russia. AliExpress continues to accept payments from bank cards in other countries, and a complex “transit plan” has been devised to circumvent the new regulations. However, such plans will undoubtedly lead to a significant increase in transportation costs. As Alibaba’s market spans Europe and the United States, complying with U.S. laws is its only option for continued operation.
On May 29, Kommersant reported that the Chinese company Alibaba, which owns the global AliExpress market, has recently further tightened the conditions for its Russian business: it has stopped accepting ruble payments and does not allow shipments to Russia.
Market expert Artem Bobtsov, in an interview with a Kommersant reporter, stated, “Except for a few banks, payments with Russian cards are no longer processed. Alibaba has also promised that payments made by Russian buyers will be refunded within a few days.”
Bobtsov believes that Alibaba’s stringent restrictions may affect a large number of suppliers in Russia: “Alibaba is a favorite source for many so-called buyback goods. These are wholesalers, shops, and market sellers. Obviously, for these participants, losing AliExpress is a catastrophic blow.”
Now, small and medium-sized enterprises must come up with solutions.
For Russia’s large economic trading partners, they have been living under sanctions for more than two years and are learning to circumvent sanctions in various possible ways.
Now Russian buyers will have to use bank cards from Kazakhstan, Kyrgyzstan, and Armenia to purchase goods on AliExpress. However, due to changes in AliExpress’s shipping policy, strictly prohibiting shipments to Russia, it is unclear how Russian buyers can actually receive goods even if they can continue to make payments using bank cards from other countries.
Bobtsov pointed out that buyers may design a complex “transit plan” to deliver physical goods to Russia, but such a plan will undoubtedly lead to a significant increase in transportation costs and make the purchased goods lose their price competitiveness in the market.
Economic expert Semyon Novoprudsky stated that Alibaba’s tightening of sales policies to Russia is mainly due to the threat of secondary sanctions, which has led to a series of other problems with payments from Russia to China.
Since December 2023, the Chinese banking system has faced significant difficulties in making payments with Russia. These difficulties began with an executive order signed by Biden. According to this order, the U.S. Treasury can impose sanctions on foreign banks that cooperate with sanctioned Russian individuals or facilitate the supply of certain materials and equipment to Russia’s military-industrial complex (MIC).
For Alibaba, whose business spans European and American countries, complying with U.S. laws is a fundamental requirement for legal operation. Therefore, continuing to participate in Russian business, like small banks, is very difficult. Bank payments have more options than purchasing and delivering in specific markets.
After Russia invaded Ukraine in 2022, Alibaba began to stop investing in AliExpress’s Russian subsidiary. In 2023, the company’s revenue in Russia fell by 36%, approaching 10 billion rubles. It is expected that the revenue of AliExpress’s Russian subsidiary will fall by more than 80% to about 2 billion rubles in 2024.
According to Novoprudsky, a joint statement after Putin’s talks in Beijing said that both sides will strive to solve trade issues continuously, but the document did not specify the specific mechanisms for how to achieve this.
Novoprudsky stated, “As for payments, it is well known that they are trying to shift them from Russian counterparts to so-called small regional rural banks. Due to the large number of such transactions and the small scale of credit institutions, companies in the Russian Federation, according to their comments, sometimes have to wait nearly a month or longer for transfers.”