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As the G7 summit approaches, world leaders are gearing up to address the economic implications of China-Russia trade.
According to an exclusive report from Reuters, the wealthy democracies are expected to issue a stern warning to smaller Chinese banks, urging them to stop assisting Russia in evading Western sanctions.
The move comes as burgeoning Chinese-Russian trade threatens to undermine the fight in Ukraine. Leaders gathering at the June 13-15 summit in Italy, hosted by Prime Minister Giorgia Meloni, are set to focus heavily on this issue during their private meetings.
Notably, while the world does not anticipate immediate punitive action against the banks, the G7’s message is clear. The United States and its partners aim to curb Russia’s ability to circumvent sanctions, even if it means targeting China’s financial institutions.
“Our concern is that China is increasingly the factory of the Russian war machine,” said Daleep Singh, deputy national security adviser for international economics at the Center for a New American Security.
Source: Reuters
Economic consequences of the G7 targeting small Chinese banks
The economic consequences of this crackdown could be far-reaching. Russia’s business has already shifted to China’s small banks, as major Chinese banks throttle payments for cross-border transactions involving Russians, fearing potential sanctions.
Moreover, the G7 summit is expected to discuss leveraging profits from frozen Russian assets to benefit Ukraine. This move could further strain the economic ties between Russia and the West.
The impact of sanctions on Russia’s economy has been mixed. While the economy shrank by 2.1% in 2022, it is estimated to have grown by 2.2% in 2023, with a projected growth of 1.1% in 2024, according to the International Monetary Fund.
However, the U.S. Treasury claims that sanctions have cut 5% from Russia’s potential economic growth over the past two years. Additionally, more than a million people, many of them young and highly educated, have left Russia due to the war and sanctions.
Global economic sanctions against Russia
Since Russia’s invasion of Ukraine in February 2022, the US, UK, and EU have imposed more than 16,500 sanctions on Russia, according to a BBC editorial. These measures have targeted Russia’s money, oil industry, and wealthy oligarchs, among others.
Despite these efforts, Russia has managed to evade some sanctions.
“China sells its chips and other components it needs to keep its military production going,” said Dr. Maria Snegovaya from the Center for Strategic and International Studies. “Russia wouldn’t be able to pull that off without China’s help.”
Source: BBC
As the G7 summit approaches, the world watches closely to see how the economic pressure on China and Russia will unfold. The warning to small Chinese banks is just one piece of the complex puzzle that global leaders must navigate in their fight against Russia’s aggression in Ukraine.
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