China’s top banks have complied with US sanctions and are no longer issuing letters of credit to Russia after Ukraine invasion.
No less than two of China’s largest state-owned banks have restricted financing meant for the purchase of Russian goods.
Industrial & Commercial Bank of China Ltd.’s offshore units stopped issuing U.S. dollar-denominated letters of credit for purchases of physical Russian commodities ready for export, Bloomberg reports.
This act will consequently weaken the economic power of Moscow.
A source told the publication that Bank of China Ltd has also curbed financing for Russian commodities based on its own risk assessment.
The boycott has highlighted China’s close relation with Russia as they are their main supply of energy. However Russia’s economic weight pales in comparison to Western nations that buy many of China’s exports and control its access to the dollar-dominated international financial system.
ICBC’s Moscow branch alone had close to $1 billion of assets by the end of 2020 and offered an extensive range of yuan-denominated services, including deposits, lending, cross-border settlement and trade finance.
Bank of China, Agricultural Bank of China Ltd and China Construction Bank Corp all have operations in Russia.