At least two major Chinese banks to limit work with Russia after threat of US sanctions

China's state-owned banks have decided to tighten control over transactions with Russia after the United States threatened to punish sanctions violators with secondary measures, Bloomberg reports, citing sources familiar with the situation.

According to the agency's sources, at least two major Chinese banks have launched a review of their business with Russia in recent weeks, primarily cross-border transactions and financing of Russian clients. The banks will stop servicing companies on the sanctions lists and will stop providing financial services to the Russian military-industrial complex, regardless of the currency and jurisdiction of the transactions.

According to them, Chinese bankers are expanding their customer due diligence and looking for those whose beneficiaries or controlling persons are in Russia. The checks will also affect non-Russian companies that do business with Russia or supply goods to Russia through third countries.

In the past, China's largest state-owned banks have complied with US restrictive measures against Iran and the DPRK for fear of being subject to secondary sanctions and losing access to dollar-denominated transactions.

And this time, the scenario may repeat itself: the intensification of inspections began after the US Treasury Department announced in December that it would punish financial organizations that work with Russia to circumvent sanctions.

The deputy head of the department, Wally Adayemo, who is responsible for sanctions control, bluntly warned: either banks take risks and work with Russia, or they retain access to the global financial system.

All companies that supply Russia with sanctioned goods, such as chips that are then used in missiles, "are still using our financial system," Adayemo said, adding that credit institutions that "intentionally or unintentionally circumvent sanctions" could be targeted.

According to the Gaidar Institute, China has increased its purchases from Russia by 69%: fuel by 78%, coal by 93%, LNG by 87%, and petroleum products by 3-7 times compared to 2021. Deliveries of Chinese goods to Russia increased by 71%, and the yuan supplanted the dollar and became the most traded foreign currency on the Moscow Exchange with a 46% share. According to the Central Bank, it accounts for a third of all export transactions by Russian companies.

Background. The United States believes that China is using artificial intelligence for large-scale hacking operations.