CHINESE public banks are limiting financing to purchase raw materials from Russia for fear of Western sanctions following the invasion of Ukraine, reported Bloomberg today.

China and Russia have considerably strengthened their ties since Moscow’s 2014 annexation of Crimea and subsequent Western sanctions.

To power its growth, the Asian giant has increased its purchases of Russian commodities, with about 30% of Russian oil and gas now sold to China.

With the Russian invasion of Ukraine, at least two of China’s largest state-owned banks – Bank of China and ICBC – are restricting funding for the purchase of Russian commodities, said the news agency.

The decision is taken for fear that allowing funding can be perceived as support for the invasion and risk sanctions from the United States (US) and its allies, it added, citing unidentified sources.

Bloomberg said the move may be temporary.

ICBC is the world’s largest bank by assets, while Bank of China is the country’s largest commercial bank for currency trading.

US sanctions can potentially deprive them of access to the dollar.

Russian President Vladimir Putin’s invasion of Ukraine on Thursday sparked a wave of international sanctions against Moscow, mainly from Western countries.

Washington has, among other things, imposed sanctions on energy giant Gazprom and other large Russian companies, which will no longer be able to raise money on Western financial markets.

China is walking a diplomatic tightrope over the Ukraine conflict. It does not want to directly oppose its ally Russia.

While visiting Beijing for the Winter Olympics earlier this month, Putin signed important agreements with his Chinese counterpart Xi Jinping.

The two countries notably agreed to strengthen cooperation in the financial sector and on the supply of gas.

But while Beijing has not condemned the invasion of Ukraine, it has also stopped short of outright support.

China abstained on the United Nations resolution condemning Russia’s “aggression” against Ukraine and demanding the immediate withdrawal of its troops, which Russia vetoed.

The Chinese embassy in Ukraine today advised its citizens to “refrain… from displaying signs of identification”, just days after telling those leaving Kyiv to clearly fix a Chinese flag to their vehicles. – AFP, February 26, 2022.