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Leading Chinese bank halts operations in Russia, Belarus

by Nate Ostiller and The Kyiv Independent news desk February 7, 2024 10:52 AM 2 min read
Russian President Vladimir Putin (C) walks with Chinese President Xi Jinping (L) in Beijing, China, on June 8, 2018. Photo for illustrative purposes. (Greg Baker/Pool/AFP via Getty Images)
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China's Chouzhou Commercial Bank has notified its clients in Russia and Belarus that it is ending all of its operations there due to payment issues associated with Western sanctions, the Russian state-controlled media outlet Vedomosti reported on Feb. 7, citing sources.

The news appears to be related to enhanced restrictions the U.S. announced in December 2023 to target financial institutions that help support Russia's war effort. The measures expanded sanctions authority over any financial institutions "determined to have conducted or facilitated any significant transactions...or provided any services" for already sanctioned individuals or companies involved in Russia's military-industrial complex.

Sources told Vedomosti that all payments have been impacted, not just those that use SWIFT.

Russian and Chinese payment systems still produce records viewable by Western regulators regardless of their SWIFT usage. Western sanctions enforcers have been putting increased pressure on Chinese banks to access transactions associated with Russia.

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Major Chinese banks have reportedly strengthened their compliance with Western sanctions after the new U.S. restrictions were announced in December 2023.

Deputy Treasury Secretary Wally Adeyemo said at the time that the measures would apply even to unwitting financial partners, putting the onus on financial institutions and exporters in third-party countries to preemptively prevent any potential collaboration with Russia's military-industrial complex.

A Russian financial analyst told Vedomosti that so far, not all transactions with Chinese banks have been halted, and payments using Chinese yuan may still be possible, albeit at a slower pace.

Most of the top Chinese banks have branches in the U.S., making them vulnerable to sanctions enforcement.

"China’s political will is not used at the expense of its own interests, and the Chinese logically want to avoid their banks being subjected to Western sanctions," the analyst told Vedomosti.

Biden administration strengthens sanctions on Russia, target financial backers of war effort
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