(Reuters) - Payment issues between Russia and China, caused by U.S. sanctions, pose serious issues for Russian imports of Chinese cars that have supplied the domestic market over the last two years, the head of Russia's car dealers' association told Reuters.

Moscow and Beijing have resorted to complex steps to try to avoid payment delays, including a workaround using small, regional Chinese banks, as the threat of secondary U.S. sanctions on Chinese banks that facilitate trade with Russia deters larger lenders.

Alexei Podshchekoldin, president of the Association of Russian Automobile Dealers, said the problem was particularly serious for smaller importers, who had seen payments bounce.

The upshot is fewer exports for China, while Russian importers lose business and possibly face added costs.

"Even if a Russian bank is (in China) and it services rouble accounts, transactions with China can no longer be done," Podshchekoldin said. "It sits in the bank and does not go further to execution.

"Previously, there were only the big banks, Russia and Chinese, but they were gradually blocked, added to the sanctions list and everything was pumped over to second and third-hand banks."

Chinese carmakers have already seized more than half of Russia's car market since Western competitors pulled out, taking their technology and know-how with them, after Moscow invaded Ukraine in February 2022.

China's car exports to Russia were up 36% year-on-year in money terms to $4.86 billion in January-May, according to Chinese customs statistics.

"The problem is huge, even our largest domestic producers who buy spare parts, for example, have already faced this problem," Podshchekoldin said of payments, hoping for a joint bank or some kind of electronic remedy to provide a solution.

He also floated the idea of barter trading, but said it was not practical for authorities to agree a price on cars and spare parts as opposed to basic raw materials.

"This is possible for commodities such as oil, wheat, sugar and gas. But how can you do it with cars? It's very difficult, it's hardly possible." he said.