China Sanctions Lithuanian Banks in Retaliation Over EU Measures

In a recent escalation of diplomatic tensions, China has imposed sanctions on two Lithuanian banks—UAB Urbo Bankas and AB Mano Bankas—prohibiting them from conducting transactions or cooperating with Chinese entities. This move, announced by China's Ministry of Commerce on August 13, 2025, comes in direct response to the European Union's sanctions against two Chinese financial institutions accused of facilitating transactions that support Russia's activities in Ukraine.

The EU's sanctions, effective August 9, 2025, targeted Heihe Rural Commercial Bank and Heilongjiang Suifenhe Rural Commercial Bank, alleging their involvement in supporting Russia's war efforts. China's Ministry of Commerce criticized the EU's actions as "groundless" and urged the bloc to avoid damaging longstanding economic and financial cooperation between China and the EU.

European Commission spokesperson Olof Gill defended the EU's sanctions, stating, "Our sanctions are the centerpiece of our efforts to minimize the effectiveness of the Russian war machine." He called on China to remove its countermeasures, describing them as lacking justification.

The Lithuanian banks affected by China's sanctions primarily operate within the local market. The Bank of Lithuania assessed that the sanctions would not significantly impact the country's financial system or the activities of the banks, as their business models are focused on the local market.

Diplomatic relations between China and Lithuania have been strained in recent years. In 2021, Lithuania allowed Taiwan to open a liaison office in Vilnius, leading to China's expulsion of Lithuania's ambassador. In 2024, Lithuania expelled Chinese diplomats amid suspicions involving a Chinese ship and the severing of undersea data cables.

The reciprocal sanctions underscore escalating tensions between the EU and China, particularly concerning China's support for Russia in the Ukraine conflict. These developments may further strain economic and diplomatic relations, with potential impacts on global trade and international alliances.

As the situation unfolds, both the EU and China face the challenge of balancing their respective foreign policy objectives with the need to maintain stable economic and diplomatic relations. The international community will be closely monitoring the repercussions of these sanctions and their broader implications for global diplomacy.