EU sets sanction threat on Chinese banks for claimed aid to Russian war trade

EU sets sanction threat on Chinese banks for claimed aid to Russian war trade

The European Union is poised to slap sanctions on two Chinese banks that are accused of enabling banned trade with Russia, in what would be an escalation of the bloc's bid to shut down foreign financial support for Moscow's Ukrainian war, the Financial Times reported.

The sanctions, included in the European Commission's new package of measures, would be the first time the EU has imposed banks beyond its borders for allegedly facilitating Russia. The action, requiring unanimous support from EU member states, is designed to prevent Russia's military-industrial complex from bypassing current trade sanctions.

Four officials who are privy to the plans informed The Financial Times that the two small regional Chinese banks being considered had utilized cryptocurrency transactions to facilitate the importation of EU sanction-covered goods. The package is still under negotiation among EU states and may still be modified.

A response to attempts at evading sanctions

The proposed steps follow growing alarm in Brussels about the role of third parties in allowing Russia to circumvent sanctions aimed at crippling its war effort. The action is taken diplomatically sensitive timing, with the EU set to host Chinese President Xi Jinping at a summit in Beijing next month.

European Commission spokesperson Paula Pinho stated the purpose of the sanctions was "to prevent circumvention by establishing alternative [financing] schemes." The Commission would not comment directly on the reported inclusion of Chinese banks, and the Chinese mission to the EU did not respond immediately to a request for comment.

Beijing has before criticized EU sanctions against Chinese firms that are accused of supporting Russia and has maintained that it does not supply lethal arms to Moscow. Chinese foreign ministry spokesman Mao Ning recently came to the defense of "normal exchanges and cooperation" between Russian and Chinese businesses.

Trade relationship strengthens between China and Russia

Economic trade between the two countries hit $245 billion in 2024, higher than twice its value in 2020. As Western financial systems become more cut off from access, Russia has relied heavily on the Chinese renminbi to settle international transactions.

The EU sanctions package is the latest move by the bloc to bolster controls on exports of military, dual-use, and sensitive goods to Russia and shut down transit points used to avoid curbs.

European Commission President Ursula von der Leyen emphasized the significance of such actions on Tuesday. "President Vladimir Putin's capacity to continue the war largely depends on the support he gets from third countries," she explained. "Those who back Russia's war and the attempt at conquering Ukraine have a big responsibility." Waiting for cues from the U.S.

The fate of the EU's new sanctions package is partly dependent on the United States, officials say. The attitude of U.S. President Donald Trump at next week's G7 meeting in Canada will determine how likely it is to win approval from the EU, they said. Washington has generally prompted Europe to go for tighter measures against Russia, but Trump's strategy on further sanctions is closely monitored in Brussels.

As the EU looks to maximise pressure on Moscow, the move to target Chinese banks—if adopted—would send a strong signal to third countries enabling Russia’s war economy. Yet it also risks complicating relations with Beijing, underscoring the geopolitical tightrope Brussels must now walk.