Chinese Banks Help Russia Fund War With Ukraine

The U.S. is drafting sanctions that threaten to cut some Chinese banks off from the global financial system, arming Washington’s top envoy with diplomatic leverage that officials hope will stop Beijing’s commercial support of Russia’s military production, according to people familiar with the matter.

The banks serve as key intermediaries for the commercial exports to Russia, handling payments and providing client companies credit for trade transactions.

U.S. officials say targeting banks with sanctions is an escalatory option in case the diplomatic overtures fail to persuade Beijing to curb its exports. U.S. officials have ramped up pressure on Beijing in recent weeks in private meetings and calls, warning that Washington is ready to take action against Chinese financial institutions handling trade in such dual-use goods.

“Any banks that facilitate significant transactions that channel military or dual-use goods to Russia’s defense industrial base expose themselves to the risk of U.S. sanctions,” said Treasury Secretary Janet Yellen earlier this month amid meetings with counterparts in Beijing.