© Reuters. FILE PHOTO: A Chinese flag flutters outside the Chinese foreign ministry in Beijing, China February 24, 2022. REUTERS/Carlos Garcia Rawlins
By David Lawder
WASHINGTON (Reuters) – China so far does not appear to be helping Russia evade Western financial sanctions on Moscow over its invasion of Ukraine, but doing so would “do profound damage” to China’s reputation, a senior Biden Administration official said on Saturday.
“The latest signs suggest that China’s not coming to the rescue,” the official told reporters after announcing that the United States and its allies agreed to impose sanctions against Russia’s central bank and disconnect key Russian banks from the SWIFT international financial transaction network.
The official said that recent reports that some Chinese banks have stopped issuing letters of credit for purchases of physical commodities from Russia were a positive sign.
This “suggests that, much like has been the pattern for years and years, China has tended to respect the force of U.S. sanctions,” the official added.
China is Russia’s biggest trade partner for both exports and imports, buying a third of Russia’s crude oil exports in 2020 and supplying it with manufactured products from cell phones and computers to toys and clothing.
The China-Russia trade relationship has grown significantly since 2014, when the West first imposed sanctions against Russian entities over Moscow’s annexation of Crimea.
Graphic – Russia’s biggest oil customer: China by far: https://graphics.reuters.com/UKRAINE-CRISIS/SANCTIONS/dwpkrldklvm/chart.png
Some of that trade is conducted in China’s yuan currency, which could technically fall outside of sanctions aimed at cutting Russia off from transactions in U.S. dollars, euros, sterling and other major currencies.
But Chinese banks that do business with Russian banks and other entities hit with full blocking sanctions and put on the Treasury’s “specially designated nationals” list could face sanctions themselves and loss of access to the U.S. financial system.
The official said that if China were to help Russia evade U.S. sanctions, “it really would be an unfortunate signal for China’s vision of the world,” and give “tacit or explicit accommodation to Russia’s invasion of a sovereign country in the heart of Europe.”
“It would do profound damage to its reputation in Europe, but really across the world,” the official said of China.