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G7 to warn small Chinese banks about ties to Russia: sources
Washington –
U.S. officials expect wealthy Group of Seven (G7) democracies to send a tough new warning next week to small Chinese banks to stop helping Russia evade Western sanctions, according to two people familiar with the matter. .
Leaders gathered at the June 13-15 summit in Italy, hosted by Prime Minister Giorgia Meloni, are expected to focus heavily during their private meetings on the threat that growing Sino-Russian trade poses to the fighting in Ukraine and on what to do about it.
Those talks will likely result in public statements on the issue involving Chinese banks, according to a U.S. official involved in planning the event and another person briefed on the matter.
The United States and its G7 partners – Britain, Canada, France, Germany, Italy and Japan – are not expected to take any immediate punitive action against any banks during the summit, such as restricting their access to the SWIFT messaging system. or cut off access to the dollar. Its focus is said to be on smaller institutions rather than China’s biggest banks, one of the people said.
Negotiations were still ongoing over the exact format and content of the notice, according to the people, who declined to be identified discussing ongoing diplomatic engagements. Plans to address the topic at the G7 have not been previously disclosed.
The White House did not respond to a request for comment. The U.S. Treasury Department had no immediate comment, but Treasury officials have repeatedly warned financial institutions in Europe, China and elsewhere that they face sanctions for helping Russia evade Western sanctions.
Daleep Singh, deputy national security adviser for international economics, this week told the Center for a New American Security that he expected G7 leaders to target China’s support for a Russian economy now reoriented around war.
“Our concern is that China is increasingly the factory of the Russian war machine. You could call it the arsenal of the autocracy when you consider that Russia’s military ambitions obviously threaten the existence of Ukraine, but increasingly European security, NATO and transatlantic security,” he said. .
Singh and other senior Biden administration officials say Washington and its partners are prepared to use stricter sanctions and export controls to reduce Russia’s ability to circumvent Western sanctions, including secondary sanctions that could be used against banks and other institutions. financial.
Washington is poised to announce significant new sanctions next week against financial and non-financial targets, a source familiar with the plans said.
This year’s G7 summit is also expected to focus on leveraging profits generated by Russian assets frozen in the West for the benefit of Ukraine.
Russian businesses move to small banks in China
Washington has so far been reluctant to implement sanctions on major Chinese banks – long seen by analysts as a “nuclear” option – due to the enormous ripple effects they could inflict on the global economy and US-China relations.
Concern over the possibility of sanctions has already caused China’s big banks to limit payments for cross-border transactions involving Russians, or to withdraw from any involvement altogether, Reuters reported.
This has pushed Chinese companies into small border banks and fueled the use of underground financing channels or banned cryptocurrency. Western authorities are concerned that some Chinese financial institutions still facilitate trade in goods with dual civil and military applications.
Beijing accused Washington of making unfounded claims about what it considers to be normal trade exchanges with Moscow.
The Biden administration this year began investigating what sanctions tools might be available to thwart Chinese banks, a U.S. official previously told Reuters, but had no imminent plans to take such steps. In December, President Joe Biden signed an executive order threatening sanctions on financial institutions that helped Moscow circumvent Western sanctions.
The US has sanctioned smaller Chinese banks in the past, such as Bank of Kunlun, over a number of issues, including work with Iranian institutions.
China and Russia have promoted more trade in yuan rather than dollars in the wake of the war in Ukraine, potentially protecting their economies from possible US sanctions.