The EU urges China to lift 'unjustified' sanctions on Lithuanian banks

Key Points

• The European Union has urged China to lift sanctions imposed on two Lithuanian banks, claiming they are unjustified.
• These sanctions by China are viewed as a symbolic response to EU penalties on Chinese lenders, reflecting rising tensions linked to Beijing's support for Russia amid the Ukraine conflict.
• Lithuanian officials believe the impact of the sanctions on their banking system will be minimal, as the targeted banks do not have business operations in China.
• The tensions date back to Lithuania's strong relations with Taiwan, leading to a series of diplomatic disputes, including the expulsion of Lithuania's ambassador from China in 2021.

VILNIUS, Lithuania (AP) — The European Union on Thursday called on China to revoke sanctions imposed on two Lithuanian banks, arguing there is no justification for them.

Beijing announced the measures this week against Urbo Bank and Mano Bank in retaliation for EU penalties on two Chinese lenders.

The Lithuanian banks do not operate in China, giving Beijing’s move a largely symbolic character. Nonetheless, the tit-for-tat measures underscore deepening tensions between the EU and China over Beijing's support for Russia in its war on Ukraine.

In this case, China targeted banks from an EU member with whom diplomatic ties have been particularly strained due to Lithuania's relationship with Taiwan.

At EU headquarters in Brussels, European Commission spokesperson Olof Gill defended the bloc’s sanctions on Chinese banks.

China “must respect the problems we have identified,” Gill said. “Our sanctions are the centerpiece of our efforts to minimize the effectiveness of the Russian war machine.”

He said the Commission does not believe that the Chinese countermeasures “have any justification or are evidence based, and therefore we call on China to remove them even now.”

The EU’s latest Russia sanctions package, adopted in July and effective August 9, included Heihe Rural Commercial Bank and Heilongjiang Suifenhe Rural Commercial Bank. The bloc accused them of providing crypto-asset services that help Moscow evade restrictions.

In explaining its sanctions on the Lithuanian banks, the Chinese Ministry said the EU sanctions on Chinese firms had "a serious negative impact on China-EU economic and trade relations and financial cooperation.”

The banks and the government in Lithuania said the sanctions were not expected but would likely have little practical impact.

“According to the preliminary assessment, this decision will not have a significant impact on either the country’s financial system or the activities of the banks themselves, since the business models of the mentioned banks are focused on the local market,” the Bank of Lithuania said on Wednesday in a statement.

Marius Arlauskas, the head of administration of Urbo Bank, said: “Since we do not have any business partnerships with Chinese individuals or legal entities, the sanctions will have no impact on the activities of Urbo Bank and the implementation of prudential regulations."

The Baltic nation has drawn China’s ire for years.

Beijing expelled Lithuania’s ambassador in 2021 in response to Lithuania allowing Taiwan to open a liaison office in Vilnius, the Lithuanian capital. China regards Taiwan as a breakaway province and prohibits other countries from having formal ties with Taipei.

Taiwan has long sought closer relations with the Baltic states, citing their past experiences under authoritarian rule and embrace of multiparty democracy and liberal values.

In 2024 Lithuania expelled Chinese diplomats after a Chinese ship came under suspicion during an investigation into the severing of two undersea data cables. One runs under the Baltic Sea between Lithuania and Sweden.

___

McNeil reported from Brussels.