With the G7 summit on the horizon, global leaders are preparing to tackle the economic impact of China-Russia trade. An exclusive report from Reuters reveals that the wealthy democracies are likely to issue a strong warning to smaller Chinese banks, urging them to cease aiding Russia in circumventing Western sanctions. This move is in response to the growing Chinese-Russian trade that poses a threat to the situation in Ukraine. Prime Minister Giorgia Meloni will host the summit in Italy from June 13-15, where leaders will focus extensively on this issue during their private discussions.
Although immediate punitive actions against the banks are not expected, the G7’s message is clear – the United States and its allies are determined to limit Russia’s ability to evade sanctions, even if it means targeting China’s financial institutions. Daleep Singh, deputy national security adviser for international economics at the Center for a New American Security, expressed concern that China is becoming a key supplier for the Russian military.
The economic repercussions of cracking down on small Chinese banks could be significant. Major Chinese banks have already restricted cross-border transactions involving Russians, leading Russia’s business to shift to smaller Chinese banks. The G7 summit is also anticipated to explore ways to utilize profits from frozen Russian assets to support Ukraine, potentially straining economic relations between Russia and the West further.
While the impact of sanctions on Russia’s economy has been a mixed bag, with a slight growth in recent years, the U.S. Treasury asserts that sanctions have hindered Russia’s economic growth by 5% over the past two years. Moreover, over a million individuals, particularly young and highly educated individuals, have left Russia due to the effects of the war and sanctions.
Since Russia’s invasion of Ukraine in 2022, the U.S., UK, and EU have implemented more than 16,500 sanctions on Russia, targeting various sectors such as finance, oil, and wealthy oligarchs. Despite these efforts, Russia has managed to evade some sanctions, with China playing a crucial role in providing necessary components for Russia’s military production.
As the G7 summit draws near, the world observes closely the unfolding economic pressure on China and Russia. The warning to small Chinese banks is just one piece of the intricate puzzle that global leaders must navigate in their efforts to counter Russia’s aggression in Ukraine.
