China State Banks Restrict Financing for Russian Commodities

ICBC stops issuing letters of credit after Ukraine invasion

China’s top banks have complied with previous U.S. sanctions

At least two of China’s largest state-owned banks are restricting financing for purchases of Russian commodities, underscoring the limits of Beijing’s pledge to maintain economic ties with one of its most important strategic partners in the face of sanctions by the U.S. and its allies.

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, two people familiar with the matter said. Yuan-denominated letters of credit are still available for some clients, subject to approvals from senior executives, the people said, asking not to be identified discussing private information.

The move followed Russia’s invasion of Ukraine, which triggered a wave of sanctions from countries including the U.S., the U.K. and Japan and stoked speculation that more may follow. Because commodity-linked letters of credit are issued so frequently, they would be among the first transactions impacted by the threat of sanctions.

Bank of China Ltd. has also curbed financing for Russian commodities based on its own risk assessment, another person said. The lender has yet to receive explicit guidance on Russia from Chinese regulators, two people said.

The Chinese banks’ response could be temporary, especially given that Western sanctions have so far spared Russia’s energy sector. It’s unclear whether Chinese banks have pulled back from other forms of financing for Russian companies and individuals, and their policies could change.

The curbs highlight the difficult balancing act facing China’s biggest financial institutions and the nation’s president, Xi Jinping. While Russia is a major energy supplier to China and the countries often find themselves aligned in geopolitical disputes with the U.S., 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.

China’s four largest banks have complied with previous U.S. sanctions against Iran, North Korea and even top officials in Hong Kong because they need access to the U.S. dollar clearing system, a person familiar with the matter said. In a phone call with Vladimir Putin on Friday, Xi urged the Russian leader to negotiate with Ukraine to defuse tensions.

“Chinese financial institutions take sanctions compliance seriously,” said Ben Kostrzewa, foreign legal consultant at Hogan Lovells in Hong Kong, who formerly handled U.S.-China disputes and negotiations at the Office of the U.S. Trade Representative. “They don’t want to be sanctioned themselves, they can’t lose access to U.S. dollar transactions, so they are going to have to think about it very seriously -- whatever the geopolitical impact might be.”

ICBC, Bank of China and the China Banking and Insurance Regulatory Commission didn’t immediately respond to requests for comment.

With international lenders including ING Groep NV and Rabobank also imposing restrictions on commodity-trade finance linked to Russia, demand for the nation’s resource exports could dwindle. Chinese state-owned coal importers are unable to get credit lines from banks in Singapore for shipments from Russia, people familiar with the matter said.

U.S. sanctions put China’s state-owned financial institutions in a tough spot because many have established close ties with Russia over the past decade.

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.

China’s largest policy banks -- China Development Bank and Export-Import Bank of China -- have provided tens of billions of dollars of credit to Russia as part of Xi’s Belt-and-Road Initiative, funding everything from infrastructure to oil and gas.

FreeStuffsNG:
It is all over for President Putin.
President Ping of China just threw him under a moving bus.

colorsofrainbow:
Is Putin now alone?
Has China betrayed?

ivolt:

Was China consulted before the invasion?

ivolt:
The truth is that China values economy more than any alliance.
China will take decisions that is best for its economy regardless of which side benefits or loses.

FERNANDEZISBACK:

Nice question ivolt..
These people take the Chinese for Dumbos..I don't think Russia allies will come to their aid on this..who wants to risk it's economy being toyed with all in the name of a bloody selfish dictator..

History555:


For the past 3 days u hve been running amock over this Russia and Ukraine crisis. Are u sure u are ok, are u this jobless, are u from Ukraine. U did not vex over the state of Nigeria u live in, it is Ukraine u have neva been to u dey vex. Haba

Mooh247:



The wise Chinese doesn't want to gamble their funds in a warzone

Chinese, Arabs and Jews never joke or play with their money

Russia and Ukraine are on their own


Well Russia has $650, billion USD in foreign reserves, they have 2300 tonnes of Gold reserves as well, so they are prepared



.

richiemcgold:
one of Russia's closest allies is already chickening out.

FERNANDEZISBACK:

Your Putin is going down the drain..did you just realize I am always on here..your cold tears won't stop me from spewing my facts..

History555:


Which my putin. Am i from Russia. U are acting as if you are from Ukraine. Since u care so much why don't you move to Ukraine to fight

FERNANDEZISBACK:

Haha if you ain't from Russia them don't quote me like a kid..

History555:


If like shout from today to tomorrow, nobody will notice ur impact. If u want to make an impact. Go to Ukraine and fight. Stop fighting behind ur keyboard. Ur situation in Nigeria is akin to war without weapons

princemillla:



Whatever that is ongoing was well thought out. But these sanctions will crumble Russia sooner or later

FreeStuffsNG:
China State Banks Restrict Financing for Russian Commodities

ICBC stops issuing letters of credit after Ukraine invasion

China’s top banks have complied with previous U.S. sanctions
7

Bloomberg News
25 February 2022, 15:43 GMT+1
Updated on25 February 2022, 16:07 GMT+1

At least two of China’s largest state-owned banks are restricting financing for purchases of Russian commodities, underscoring the limits of Beijing’s pledge to maintain economic ties with one of its most important strategic partners in the face of sanctions by the U.S. and its allies.

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, two people familiar with the matter said. Yuan-denominated letters of credit are still available for some clients, subject to approvals from senior executives, the people said, asking not to be identified discussing private information.

The move followed Russia’s invasion of Ukraine, which triggered a wave of sanctions from countries including the U.S., the U.K. and Japan and stoked speculation that more may follow. Because commodity-linked letters of credit are issued so frequently, they would be among the first transactions impacted by the threat of sanctions.


Bank of China Ltd. has also curbed financing for Russian commodities based on its own risk assessment, another person said. The lender has yet to receive explicit guidance on Russia from Chinese regulators, two people said.

The Chinese banks’ response could be temporary, especially given that Western sanctions have so far spared Russia’s energy sector. It’s unclear whether Chinese banks have pulled back from other forms of financing for Russian companies and individuals, and their policies could change.

The curbs highlight the difficult balancing act facing China’s biggest financial institutions and the nation’s president, Xi Jinping. While Russia is a major energy supplier to China and the countries often find themselves aligned in geopolitical disputes with the U.S., 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.

China’s four largest banks have complied with previous U.S. sanctions against Iran, North Korea and even top officials in Hong Kong because they need access to the U.S. dollar clearing system, a person familiar with the matter said. In a phone call with Vladimir Putin on Friday, Xi urged the Russian leader to negotiate with Ukraine to defuse tensions.

“Chinese financial institutions take sanctions compliance seriously,” said Ben Kostrzewa, foreign legal consultant at Hogan Lovells in Hong Kong, who formerly handled U.S.-China disputes and negotiations at the Office of the U.S. Trade Representative. “They don’t want to be sanctioned themselves, they can’t lose access to U.S. dollar transactions, so they are going to have to think about it very seriously -- whatever the geopolitical impact might be.”


ICBC, Bank of China and the China Banking and Insurance Regulatory Commission didn’t immediately respond to requests for comment.

With international lenders including ING Groep NV and Rabobank also imposing restrictions on commodity-trade finance linked to Russia, demand for the nation’s resource exports could dwindle. Chinese state-owned coal importers are unable to get credit lines from banks in Singapore for shipments from Russia, people familiar with the matter said.

U.S. sanctions put China’s state-owned financial institutions in a tough spot because many have established close ties with Russia over the past decade.

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.

China’s largest policy banks -- China Development Bank and Export-Import Bank of China -- have provided tens of billions of dollars of credit to Russia as part of Xi’s Belt-and-Road Initiative, funding everything from infrastructure to oil and gas.

— With assistance by Alfred Cang, Serene Cheong, Lisa Du, Qian Chen, and Evelyn Yu

(Adds additional details in 5th paragraph)
https://www.bloomberg.com/news/articles/2022-02-25/chinese-state-banks-restrict-financing-for-russian-commodities?srnd=premium

Cc Seun Mynd44 Lalasticlala

ivolt:

Was China consulted before the invasion?

History555:


Which my putin. Am i from Russia. U are acting as if you are from Ukraine. Since u care so much why don't you move to Ukraine to fight. U leave the problems u are facing in Nigeria and carry Ukraine matter on ur head. Am sure u don't have 24hrs light, free quality education and health care. Yet u did not run amock.

ifadiuyu:
China don't want anything that would affect their economy

a4cube:
They stopped US dollar denominated letter of credit. Which is normal as China don't have control over dollars. The article also stated that Yuan letter of credit is still available for some clients.

Let their be peace. No good war and no bad peace.