The U.S. sanctioned Russia’s VTB Bank over its work with Iran. A former Treasury official says the move is also meant to pressure Chinese banks.

The U.S. Treasury Department has sanctioned Russia’s VTB Bank for taking part in efforts to evade sanctions on Iran.

A Treasury Department press release says VTB opened representative offices in Iran, processed transactions with sanctioned Iranian banks, and helped “move billions of frozen Iranian assets.”

Miad Maleki, an analyst and former official in the U.S. Treasury unit that oversees sanctions, said the measures against VTB should be seen as part of U.S. pressure on China, where a significant share of Iran’s oil revenue is held.

According to Maleki, VTB is the only Russian bank with a branch in mainland China and access to the country’s domestic payment system. Chinese banks continued doing business with VTB even though it has long been under U.S. sanctions related to Russia. But being placed on the Iran sanctions list is far more “toxic.” Maleki believes the Treasury Department expects Chinese banks to begin cutting ties with VTB for fear of secondary sanctions under the Iran sanctions program.

VTB, Russia’s second-largest bank, is state-controlled. The United States first imposed restrictions on VTB in 2014 over Russia’s annexation of Crimea. In 2022, after Russia launched its full-scale invasion of Ukraine, the United States placed the bank under blocking sanctions.