By Two Chinese state-owned banks are reportedly cutting off relations with Russian clients to comply with sanctions imposed by Western nations in response to the conflict in Ukraine, according to a report by Bloomberg.
Compliance with Western Sanctions
Sources, who chose to remain anonymous, informed Bloomberg that the banks initiated a review of their business connections with Russia following the United States’ announcement in December regarding penalties for financial institutions aiding entities or individuals in evading sanctions.
The banks are conducting audits of their clients’ business registrations, authorized beneficiaries, and ultimate controllers to assess any potential links to Russia’s defense sector and involvement in the conflict in Ukraine.
Sanctions Evasion Concerns
Previous reports by Business Insider have highlighted Russia’s use of shell companies to circumvent sanctions and its reliance on banks with lenient regulatory oversight to process transactions.
Bloomberg notes that the Chinese banks have previously adhered to US sanctions targeting Iran and North Korea.
China-Russia Relations
While Chinese President Xi Jinping has expressed unwavering support for Russia amid the Ukraine crisis, emphasizing an expansive partnership, recent actions suggest a degree of caution from China. China has ramped up exports to Russia to mitigate the impact of Western sanctions but remains reliant on Western markets to sustain its economic growth.
Analysts at The Institute for the Study of War believe that China’s response to US sanctions hints at reservations regarding Russia’s aspirations for an unrestricted partnership between the two countries.
Impact of Sanctions
The sanctions imposed by the US and its allies aim to pressure Russia economically in response to its military intervention in Ukraine. However, Russia has sought to offset these measures by strengthening trade ties with China and diversifying its energy exports.
Chinese banks have reportedly extended billions of dollars in credit to Russia since the onset of the conflict nearly two years ago.
Future Implications
As the US continues to implement sanctions to close loopholes and penalize entities conducting business with sanctioned Russian entities, the dynamics of China-Russia relations and their response to Western pressure remain subjects of scrutiny.
Kremlin spokesperson Dmitry Peskov declined to provide comment on the Bloomberg report when approached by Reuters.