G7 leaders gathering for their upcoming summit in Italy are expected to focus heavily on the threat posed by burgeoning China-Russia trade to the conflict in Ukraine. At the June 13-15 summit, the G7 leaders plan to issue a tough warning to smaller Chinese banks over their role in assisting Russia to evade Western sanctions imposed over the Russo-Ukrainian war, Reuters says, referring to “two people familiar with the matter.”
While no immediate punitive actions like restricting access to SWIFT or cutting off dollar transactions are planned against any banks during the summit, the G7 aims to send a stern message. Their focus will be on smaller institutions rather than China’s largest banks, according to Reuters. The report doesn’t mention any particular banks.
US officials involved in the planning revealed that public statements addressing Chinese banks’ enabling of sanction evasion by Russia are likely outcomes of the private meetings. However, negotiations on the exact format and content are still ongoing.
Previously, the US Treasury repeatedly cautioned financial institutions against helping Russia circumvent sanctions, risking potential penalties.
Top Biden administration officials have voiced concerns over China becoming “the arsenal of autocracy” by supporting Russia’s reoriented war economy. They are prepared to use new sanctions and tighter export controls to reduce Russia’s ability to bypass Western restrictions, including possible secondary sanctions on banks and other entities.
As major Chinese banks have stepped back from Russia-related transactions fearing US sanctions, the business has shifted to smaller banks along the border and underground financing channels. Western officials worry some Chinese institutions may be facilitating trade in dual-use goods aiding Russia’s military.
While Beijing has accused Washington of making baseless claims about legitimate trade, the Biden administration is examining potential sanctions tools to counter Chinese banks assisting sanction evasion, though it has no imminent plans currently.
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