Malaysian companies cannot do business with Russia even though Malaysia has not imposed any sanctions on Russia. The reason is that the majority of Malaysian banks will reject most or all payments from Russia.
Bank Negara Malaysia (BNM) leaves individual banks’ internal policy to accept or reject payments from Russia. Malaysian companies report that most Malaysian banks will reject most or all payments from Russia. By market capitalization and total assets, Malaysia's largest bank has automatically rejected incoming funds from Russian companies without informing the customers. The payments were received from the same Russian companies in the past, before the ongoing conflict, without any difficulties.
The Malaysian company approached all the banks in Malaysia and learned almost all had the same policy, except two banks, that said they would review all incoming funds on a case-to-case basis.
The one Malaysian bank that does not officially outright reject payments from Russia makes the approval apparently impossible to obtain. It holds the received funds and requires Malaysian companies to provide one set of documents after another, to justify the business dealing with the Russian company. The bank, the fifth-largest in Malaysia by assets and fourth by market cap, said the documents would be subject to a three-level review by its top management board. The board will only approve the transaction if it finds no violation of international sanctions. Including that not a single shareholder or director of a Russian company making a transfer is under sanctions from the United States.
Malaysian company views this as a significant loss in Malaysia's inability to expand its Russian market presence during a window of opportunity created by the vacuum left by Western companies.
According to international trade data from the UN COMTRADE, Malaysia’s exports to Russia stood at $959 million in 2020 and fell to $930.37 million in 2021. Meanwhile, Russia’s exports to Malaysia rose from $1.13 billion to $1.43 over the same period. Malaysia’s main exports to Russia include electrical and electronic equipment, rubbers, machinery, animal and vegetable fats, and oil. Meanwhile, Russia’s main exports to Malaysia include mineral fuels, fertilizer, and aluminum.
Bank Negara Malaysia (BNM) has not implemented or announced any sanctions or limitations against receiving or sending funds to Russia and Ukraine. The move came as Malaysia has ruled out imposing unilateral sanctions against Russia following its military campaign in Ukraine. In a written reply to the Dewan Rakyat (the House of Representatives) in July 2022, Foreign Affairs Minister stated that as a sovereign nation, Malaysia would remain committed to a policy of neutrality in the ongoing Russia-Ukrainian war as the country does not wish to be drawn into any political disputes or conflicts. Along with that, Malaysia will continue to work with the international community to find a peaceful solution to the current crisis in Ukraine, and Malaysia does not support either side of the conflict.
Earlier in the year, Foreign Minister Datuk Seri Saifuddin Abdullah said in Parliament on Tuesday (March 8) that Malaysia has no intention of imposing sanctions against Russia. In May 2022, the foreign minister told the media in a special interview at his office in Putrajaya that Malaysia does not recognize sanctions on Russia or any country, unless it is a resolution adopted by the United Nations General Assembly.
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