Asian Powers Split On Sanctions, SWIFT Ban On Russian Banks

China’s Foreign Ministry on Monday reiterated its opposition to the use of what it calls illegal and unilateral sanctions, after western countries moved to block some Russian banks from the SWIFT international payments system.

However, other Asian nations – such as Japan, South Korea and Singapore – appear to have greater concerns about the conflict in Ukraine, and have said they support sanctions or bans on Russian goods and banks.

China’s opposition to Western sanctions was expressed by Foreign Ministry spokesman Wang Wenbin at a regular daily news briefing.

Wang also brushed off a call from the White House on Sunday for China to condemn Russia’s invasion of Ukraine, saying that China always stands on the side of peace and justice and decides its position on the merits.

China has refused to condemn Russia’s attack on Ukraine or call it an invasion, and has repeatedly called for negotiations while acknowledging what it describes as Russia’s legitimate security concerns.

Western countries have been ratcheting up sanctions that are intensifying pressure on Russian President Vladimir Putin.

“We are against using sanctions to resolve problems, even more so against unilateral sanctions without international mandate. China and Russia will continue regular trade cooperation based on the spirit of mutual respect and equality, equality and mutual benefit,” Wang said.

Wang did not directly address questions on how the SWIFT sanctions would have an impact on bilateral trade with Russia, or whether China would ramp up purchases of Russian commodities including energy to help its giant neighbour.

China is Russia’s biggest trading partner, and Putin and his Chinese counterpart Xi Jinping have grown increasingly close over the years. Earlier this month the countries signed a wide-ranging strategic partnership aimed at countering US influence and said they would have “no ‘forbidden’ areas of cooperation”.

Wang said all sides should remain calm and avoid further escalation, after Putin put his country’s nuclear deterrent on high alert.

Tokyo Seeking Effective Sanctions

Japan, meanwhile, has been working closely with G7 nations to ensure effective economic sanctions against Russia and its central bank, its top currency diplomat said after a meeting of government and central bank executives to debate the fallout from the Ukraine crisis.

“We will respond, working closely with the international community including the G7 nations, so that we exert maximum cost to Russia” for invading Ukraine, Masato Kanda, vice-finance minister for international affairs, told reporters on Monday.

Kanda, who oversees Japan‘s currency policy at the Ministry of Finance, made the remarks after the meeting with his counterparts at the Bank of Japan and the Financial Services Agency – the first such gathering in roughly a year.

Japanese shares fell and the yen drew demand as a safe haven currency on Monday, after Western nations imposed new sanctions on Russia for its invasion of Ukraine including blocking some banks from the SWIFT international payments system.

“We are adjusting [with Western economies] to ensure the sanctions are effective,” Kanda said.

“Market stability is extremely important,” he said, adding the government was closely watching market developments.

The trilateral meeting is typically held in times of market stress to communicate policymakers’ views or concern over stock market or exchange rate volatility. The meeting was last held in January last year.

Japan said it was also considering imposing sanctions against some individuals in Belarus, a key staging area for the Russian invasion.

Seoul Back Swift Ban But Seeks Chips Exemption

South Korea said they would join in the action to block some banks from SWIFT. Seoul is a major exporter of semiconductors, but said it would also ban exports of strategic items to Russia.

South Korea will tighten export controls against Russia by banning shipments of strategic items and join Western countries’ moves to block some Russian banks from the SWIFT international payments system, Seoul’s foreign ministry said on Monday.

“The Korean government condemned Russia’s armed invasion of Ukraine and, as a responsible member of the international community, decided to actively participate in the international community’s efforts, including economic sanctions, for a peaceful resolution of the situation,” the ministry said in a statement.

Among the strategic items that will be controlled are supplies of electronics, semiconductors, computers, information and communications, sensors and lasers, navigation and avionics, and marine and aerospace equipment.

But South Korea plans to seek a partial exemption from US sanctions against Russia as measures to block Russia’s access to high-tech products could affect exporters such as Samsung Electronics and SK Hynix, local news agency Yonhap reported, citing the trade ministry.

Meanwhile, two leading banks in South Korea confirmed on Monday that while they haven’t yet received specific guidelines from SWIFT, or the member-owned cooperative for interbank payment system, they stopped trade financing with at least seven Russian banks.

South Korea’s Shinhan Bank and one other leading lender said that they stopped issuing letters of credit and other trade financing to PSB, VEB, VTB, Bank Otkritie, Novikombank, Sovcombank, and Sberbank SBER.MM.

“Blocking SWIFT will adversely affect trade financing although South Korea’s overall imports of natural gas and oil from Russia isn’t that huge, at about 5-10%” of the total, said Jeong Min-hyeon, an economist with expertise in Russia and Europe at the Korea Institute for International Economic Policy.

“The difficulties South Korean buyers of Russian commodities and other exporters go through with payment difficulties could lead to supply disruption and price increases.”

Singapore, a financial and shipping hub, has also said it intends to impose sanctions and restrictions on Russia, the Straits Times newspaper reported.

• Reuters with additional editing by Jim Pollard