US sanctions test China’s friendship with Russia

Chinese banks are tightening scrutiny over trade with Russia for fear of incurring strict new US sanctions over the Ukraine war, testing the “no limits” friendship between the two countries.

China’s trade with Russia has hit record highs in recent years, drawing accusations that it is helping buoy its long-time ally’s economy, with Russian President Vladimir Putin due to visit Beijing in May.

But Washington’s recent vow to go after financial institutions that help Moscow fund the conflict has tested the boundaries of

Beijing’s bonhomie, and left its banks fearful of getting cut off themselves.

An executive order by US President Joe Biden in December permits secondary sanctions on foreign banks that deal with Russia’s war machine, allowing the US Treasury to cut them out of the US dollar-led global financial system.

Since then, several Chinese banks have halted or slowed transactions with Russian clients, according to eight people from both countries involved in cross-border trade.

“At the moment, it’s tough to get money in from Russia,” said one Chinese clothing wholesaler.

“The banks don’t give a reason... but it’s probably due to the threat (of sanctions) from America,” he said.

Traders said banks are imposing extra checks on cross-border settlements to rule out any risk of exposure to sanctions — screening that can take months and has jacked up costs.

Another business owner said they had been forced to close their China operations and return to Russia as they “cannot get any money from customers”.