Chinese Banks Under EU Sanctions

On July 18, the EU Council adopted another sanctions package, the 18th one, involving unilateral economic restrictions in respect to Russia and Belarus. On Saturday, July 19, the relevant EU legislative acts, including European Parliament and EU Council Regulation No.2025/1494 which amends one of the two main anti-Russian sanctions acts, the Regulation No.2014/833. The published text states that two Chinese mainland banks were subjected to the sanctions: Heihe Rural Commercial Bank and Heilongjiang Suifenhe Rural Commercial Bank.

The official reason for including these banks into the sanctions list is their participation in cryptocurrency transfers tied to supplying Russia with dual-use goods (i.e. goods that can be used both for peaceful, as well as military industry purposes) and circumventing other EU sanctions measures. Starting from the time Regulation No.2025/1494 takes effect (the day following its publication), EU member states are not allowed to conduct any transactions, directly or indirectly, with these banks and legal entities acting on their behalf, or at their instruction. That is, companies registered in EU member states, their subsidiaries and branches, as well as EU citizens, irrespective of their location and place of business, cannot send or receive money transfers that somehow involve the sanctioned banks.

The bans imposed do not affect operations required to supply pharmaceutical, medical or food products, grain or fertilizer, if such supply is not banned by Regulation No.2014/833, or operations for humanitarian purposes or tied to court, arbitration or enforcement proceedings.

Including Heihe and Heilongjiang banks in the sanctions list is EU's fist restrictive measure against Chinese banks. Earlier, EU's restrictions against the PRC banking sector affected only the Shanghai branch of VTB bank. At the same time, several Chinese financial institutions, including Bank of Kunlun, are under US sanctions.

Sanctions restrictions should be kept in mind when planning foreign trade operations and structuring international settlements. For more details, please contact Anton Nakou, head of international desk (anakou@cls.ru).

Additional information

Should any questions arise in connection with the above or if you need any additional materials, please contact the CLS office in St. Petersburg or Moscow.

This information letter keeps clients of CLS and other interested parties abreast of information that may, to some extent, affect their activity or cater to their interests. The opinions and commentaries expressed in this information letter shall not be deemed legal advice and do not cancel the need to obtain legal advice or legal opinion on separate issues.

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