Ukraine war: Chinese banks limit financing for Russian purchases to avoid Western sanctions

WION Web Team
Beijing, China Updated: Feb 26, 2022, 05:55 PM(IST)

Russian President Vladimir Putin attends a meeting with Chinese President Xi Jinping in Beijing, China Photograph:( Reuters )

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At least two of China's largest state-owned banks, ICBC and Bank of China, are restricting funding for the purchase of Russian commodities

Chinese banks have limited financing to purchase raw materials from Russia in order to avoid Western sanctions as its troops continue to press on Kyiv.

Bloomberg news agency reported that at least two of China's largest state-owned banks, ICBC and Bank of China, are restricting funding for the purchase of Russian commodities.

ICBC is the world's largest bank by assets, while Bank of China is the country's largest commercial bank for currency trading. 

China is the only friend that might help Russia blunt the impact of economic sanctions over its invasion of Ukraine, but President Xi Jinping’s government is giving no sign it might be willing to risk its own access to US and European markets by doing too much.

Even if Beijing wanted to, its ability to support President Vladimir Putin by importing more Russian gas and other goods is limited.

Relations with Moscow have warmed since Xi took power in 2012, motivated by shared resentment of Washington, but their interests can conflict. 

While their militaries hold joint exercises, Putin is uneasy about the growing Chinese economic presence in Central Asia and Russia’s Far East.

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“China-Russia relations are at the highest level in history, but the two countries are not an alliance,” said Li Xin, an international relations expert at the Shanghai University of Political Science and Law.

Russian President Vladimir Putin's invasion of Ukraine on Thursday sparked a wave of international sanctions against Moscow, mainly from Western countries.

Washington has, among other things, imposed sanctions on energy giant Gazprom and other large Russian companies, which will no longer be able to raise money on Western financial markets.

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Xi’s government might support Putin within those limits, and Chinese companies might use the situation to pursue better deals, but will balk at openly violating sanctions and being targeted for penalties, experts said.

“China doesn’t want to get so involved that it ends up suffering as a result of its support for Russia,” said Mark Williams, chief Asia economist for Capital Economics.

Chinese trade with Russia rose to $146.9 billion last year, but that is less than one-tenth of China’s total $1.6 trillion in trade with the United States and EU.

“It all hinges on whether they’re willing to risk their access to Western markets to help Russia, and I don’t think they are,” said Williams. “It’s just not that big a market.”

Xi’s government has tried to distance itself from the attack by urging respect for national sovereignty, which Foreign Minister Wang Yi said last weekend includes Ukraine.

(With inputs from agencies)

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