Three of China's largest banks have stopped accepting payments from sanctioned Russian financial institutions, a Russian newspaper reported on Wednesday, dealing a blow to relations between the two nations.
The decision was made by Chinese banks Industrial and Commercial Bank of China, China Construction Bank and Bank of China due to the "risks of secondary sanctions" from the United States, Izvestia reported. These banks rank first, second and fourth in terms of assets in China, respectively.
Transactions with non-sanctioned banks are still ongoing, the newspaper said.
In December, Washington threatened to block foreign banks that conduct business with firms that support Russia's defense industry from its financial system.
Beijing and Moscow have maintained close ties throughout Russia's full-scale invasion of Ukraine, and declared a "no limits" partnership in February 2022, days before the war began. China has not publicly criticized President Vladimir Putin's decision to invade Ukraine nearly two years ago.
Russia's economy took a hit in February 2022 after the invasion began, when it was subject to more than 13,000 restrictions and became the world's most-sanctioned country, according to the Carnegie Endowment for International Peace. Foreign exchange reserves were frozen and Russia was cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system.
Alexey Poroshin, the general director of investment and consulting firm First Group, told Izvestia that the banks notified their Russian clients that they would stop accepting payments at the beginning of January.
Newsweek reached out to Russia's Foreign Ministry for comment by email.
It comes after Zhejiang Chouzhou Commercial Bank, the leading Chinese bank used by Russian importers, halted operations in Russia earlier this month, Russian business newspaper Vedomosti reported.
An expert previously told Newsweek that the move showed how much Chinese firms fear breaking U.S.-led sanctions.
"Chinese banks strive to comply with U.S. sanctions, therefore, to reduce their own risks, settlements in U.S. dollars in trade with Russia have practically ceased and have been replaced by Chinese yuan settlements," said Pavel Bazhanov, a Russian lawyer who provides legal support for Russian businesses in China and the wider region.
Bazhanov said that U.S. President Joe Biden's Executive Order 14114, issued on December 22, 2023, "creates a new risk of secondary sanctions" for financial institutions in China.
Chinese banks are suspending operations to assess the new risks and update their compliance requirements," he said.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Isabel van Brugen is a Newsweek Reporter based in Kuala Lumpur. Her focus is reporting on the Russia-Ukraine war. Isabel ... Read more
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