Decision of Seven Industrialized Countries to Send 'Strong Warning' to Chinese Banks

The summit of leaders from seven industrialized nations, set to take place next week in Italy, will focus on China-Russia relations. Reuters reported on Sunday, June 9, citing informed sources, that the meeting will be hosted by Giorgia Meloni, the Prime Minister of Italy, from June 13 to 15, and is expected to concentrate on the threat posed by the growing trade between China and Russia in relation to the Ukraine war and how to address it. According to an American official, the outcome of the G7 meeting is likely to result in the issuance of a 'public' statement regarding Chinese banks linked to Russia. The United States and other G7 members, including the UK, Canada, France, Germany, Italy, and Japan, do not intend to implement immediate punitive measures, such as cutting off Chinese banks from the international SWIFT financial transfer system or the US dollar, but have decided to send a 'strong warning' to them. Reuters notes that discussions about the precise form and content of the warning are ongoing. The seven industrialized nations had previously imposed strict sanctions on Russia due to its military invasion of Ukraine, and the United States has warned against any violations of these sanctions. Daleep Singh, Deputy National Security Advisor for Economic Affairs at the White House, stated this week that he expects G7 leaders to target China's support for the Russian economy, which is now centered around the war. He said, 'Our concern is that China is increasingly becoming the factory of Russia's war machine. Russia's military ambitions clearly threaten Ukraine's existence, but at the same time pose a danger to the security of Europe and NATO.' Singh and other senior Biden administration officials say Washington and its partners are prepared to use sanctions and tighter controls to reduce Russia's ability to circumvent Western sanctions, including secondary sanctions that could be applied against banks and other international financial institutions. An informed source told Reuters that Washington is on the verge of announcing 'significant new' sanctions on financial and non-financial targets in this regard next week. The report adds that major Chinese banks are avoiding interactions with Russia, but smaller banks continue to facilitate financial transactions. On the other hand, China is focusing on using its national currency, the yuan, instead of the US dollar in trade with Russia to avoid Western sanctions and restrictions, and is also utilizing cryptocurrencies. The US had previously blacklisted China's Kunlun Bank for violating Iran sanctions, but Reuters reports that Washington does not want to risk the global financial system by imposing sanctions on major Chinese banks. This could also provoke a strong reaction from China. The G7 summit this year is also expected to focus on how to use the profits from Russian assets frozen in the West for the benefit of Ukraine. Western countries have frozen about $300 billion of Russian assets due to the invasion of Ukraine.