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Tuesday, April 23, 2024

Chinese Banks Respond to Western Sanctions on Russia

According to information from Russia’s Izvestia news outlet, three major state banks in China have stopped conducting transactions with Russian financial institutions under sanctions. Alexey Poroshin, the General Director of First Group JSC, informed Izvestia that the Industrial and Commercial Bank of China, China Construction Bank, and Bank of China have halted these transactions since the beginning of 2024.

While the official notification to Russian clients came in January, the roots of this decision can be traced back to December, following the European Union’s imposition of the 12th sanctions package against Russia. Additionally, in December, the United States implemented secondary sanctions targeting financial entities facilitating Russia’s evasion of sanctions.

The increased scrutiny and compliance measures by Chinese banks regarding dealings with Russian businesses are driven by concerns about getting involved in the growing sanctions imposed by the West on Russia due to its actions in Ukraine.

Also Read: Jaishankar: Europe, China Views Differ, Parallel to India-Russia Ties

Poroshin emphasized to Izvestia that Chinese banks are now cautious about engaging with sanctioned entities, pointing to the significant trade imbalance between the United States and China compared to that between China and Russia.

As Russia’s economy remains resilient two years after the Ukraine invasion, Western nations have intensified sanctions, particularly with Russia’s shift towards Eastern markets, notably China and India.

It is noteworthy that Russian international trade entities have become more dependent on Chinese institutions and the Chinese yuan, especially after the withdrawal of some Russian banks from the SWIFT global financial messaging system.

In response, the West is employing strategies to weaken Russia’s economy by targeting international entities still conducting business with the country. Kremlin spokesperson Dmitry Peskov addressed the challenges with Chinese bank transactions, stating earlier this month that authorities are actively addressing these issues with Beijing.

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