Reports from the Russian Vedomosti newspaper have revealed that Chouzhou Commercial Bank, a significant financial institution for Russian importers, has halted its operations with Russian and Belarusian companies. This development comes amidst tightening regulations among Chinese and Hong Kong banks regarding transactions with Russia, in a bid to align with Western sanctions. The Kremlin has acknowledged the precariousness of relations between Russian firms and Chinese banks.
Kremlin spokesperson Dmitry Peskov has stated that the Russian government is actively engaging with its Chinese counterpart to address the commercial challenges between the two nations. Since the initial imposition of sanctions on Russia by the West in February 2022 following its invasion of Ukraine, Chinese banks have emerged as crucial commercial partners for Russian enterprises, facilitating an upsurge in Sino-Russian trade.
Vedomosti’s report suggests that Chouzhou’s decision may be linked to U.S. President Joe Biden’s executive order on December 22, which bolstered sanctions on financial institutions aiding the Russian military. Ali Wyne, a senior research and advocacy adviser at the International Crisis Group, views this move as indicative of the efficacy of sanctions, with the United States intensifying efforts to deter financial institutions from supporting Russia’s evasion of sanctions.
The timing of Chouzhou’s decision, coinciding with the Lunar New Year holiday season in China, is poised to result in short-term logistical disruptions. Maxim Blunt, a Russian freelance economic journalist, predicts that these disruptions will compound existing challenges in logistics chains between Russia and China, potentially leading to shortages or inflation for Russian consumers.
However, Russian Sinologist Aleksei Chigadaev of Leipzig University downplays the impact, noting that while Chouzhou primarily serves small and medium-sized businesses, its cessation of operations is unlikely to cripple the Russian economy. Nonetheless, the move underscores China’s prioritisation of its relationship with the United States over Russia.
Despite these tensions, Wyne argues that Chouzhou’s decision does not signify a deterioration in Sino-Russian relations. He emphasises the enduring closeness between Beijing and Moscow, citing their frequent high-level interactions, deepening military cooperation, and record trade levels. China, Wyne suggests, believes it can strengthen ties with Russia while maintaining a thaw in relations with the United States.
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