The Bank of China, one of the world’s largest financial institutions, is reportedly blocking yuan-denominated transfers from countries believed to be exporting to Russia in a setback to Russian importers attempting to bypass U.S. sanctions.
Early this year, Russian traders expressed mounting frustrations over Chinese banks delaying and even rejecting cross-border transactions in yuan, wary of violating secondary sanctions imposed by the Biden administration over Russian President Vladimir Putin‘s invasion of Ukraine. The sanctions target goods, such as electronics, deemed capable of supporting Russia’s war machine.
As a workaround, some Chinese exporters are believed to have been shipping products through third countries friendly to Russia, including Kazakhstan and the United Arab Emirates.
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However, payments from these countries are now subject to closer scrutiny, reported Russian news outlet RBC, citing business representatives and attorneys.
Newsweek reached out to the Chinese and Russian foreign ministries with written requests for comment.
Vladislav Donchenko, deputy chairman of the Legal Committee of the Association of Exporters and Importers, referenced one recent transaction that involved a company in the UAE attempting a yuan transfer from Kazakhstan’s Bank CenterCredit to China’s Zhejiang Chouzhou Commercial Bank.
The transfer was blocked by the Bank of China, which serves as the intermediary for Bank CenterCredit. “Neither the director nor the founder of the company had formal ties with Russia,” Donchenko said.
He noted that Zhejiang Chouzhou Commercial Bank requires transfers from Kazakhstan to come exclusively through banks with which it already enjoys correspondent ties.
Among major Chinese banks, the Bank of China, ranked fourth globally by total assets, maintains particularly stringent compliance measures to avoid potential penalties, according to Maxim Spassky, secretary of the general council of the Russian-Asian Union of Industrialists and Entrepreneurs.
“Even a slight suspicion of danger and they immediately refuse to process the payment,” Spassky said. He added that payments for non-critical goods are often routed through smaller Chinese banks, while transactions more likely to draw unwanted attention from Washington are increasingly frustrated.
Sofia Bespalova, a specialist on international projects with the Russian law firm CLS, confirmed that Zhejiang Chouzhou Commercial Bank had rejected cross-border yuan payments for several months.
She noted that Harbin Bank, based in northern Heilongjiang Province, has similarly restricted transfers from third countries.
Aram Grigoryan, a partner at another Russian law firm, NSP, said Chinese banks now often require additional permits for payments even between foreign and domestic accounts belonging to the same client.
This development adds another hurdle for Russian importers attempting to circumvent sanctions.
In August, Russian media reported that 98 percent of Chinese banks were refusing to process yuan-denominated transactions involving Russia.
Initially, this trend was observed primarily among major banks, but an increasing number of regional institutions have since tightened their compliance with U.S. sanctions.
