US Warns Chinese Banks: Restrict Transactions with Iran or Face Consequences

The US Treasury has threatened Chinese banks with restrictions over their transactions with Iran, citing potential money laundering and sanctions evasion. US Treasury Secretary Scott Bessent warned that companies and banks facilitating such activities could face limitations on access to the US financial system.

China responded by stating it would take 'all necessary measures' to protect its interests, reiterating its stance against unilateral sanctions without UN approval. The country's Foreign Ministry spokesperson emphasized Beijing's position on the unacceptability of these sanctions in international law.

With China being Tehran's largest trading partner and accounting for about 90% of Iran's oil exports before the war, Chinese banks have a significant role to play. Analysts point out that disconnecting a major Chinese bank from the SWIFT system would put immense pressure on the yuan, making it unacceptable for Beijing.

However, China is developing its own Cross-Border Interbank Payment System (CIPS) as a diversification tool, aiming to reduce its dependence on dollar-centered financial infrastructure. CIPS currently has 210 direct participants from various countries, mostly entities of Chinese state-owned banks.