China’s Banks Tighten the Noose on Russian Funding in the Wake of US Sanctions

China’s state-controlled banks are escalating their clampdown on financing Russian entities in response to the US secondary sanctions on global financial institutions supporting military actions taken by Moscow in Ukraine, according to sources familiar with the situation.

At least two Chinese banks have initiated comprehensive reviews on their operations with Russian entities, focusing sharply on international transactions. These institutions are poised to cut off clients included in the sanctions list and halt all financial services to Russia’s military sector, irrespective of transaction currency or geography.

This move follows the US contentious decision to enforce secondary sanctions, a step fraught with unpredictable outcomes and the danger of collateral damage. Banks, anxious to remain compliant, are considering abandoning entire business segments, even those not explicitly targeted by sanctions.

Notably, leading Chinese banks such as Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. had already begun reducing finance options for Russian commodities as early as February 2022, signaling a significant shift in their approach to Russian dealings.

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