China's banks are limiting financing to Russia, which is a setback for Moscow.

Two Chinese state-owned banks will limit funding for Russian commodities purchases, implying that Beijing's support for Moscow is limited as the Kremlin faces severe economic penalties for its invasion on Ukraine. According to Bloomberg News, which cited people familiar with the matter, offshore units of the Industrial & Commercial Bank of China have stopped issuing US dollar-denominated letters of credit for purchases of physical Russian commodities ready for export, while the Bank of China has also limited funding.

Some clients can still get yuan-denominated letters of credit, pending clearance from top management. The decision comes after Russia launched a large-scale assault into Ukraine, shattering three decades of European peace and prompting a flurry of condemnations and financial penalties from the United States, the European Union, and other countries.

It was a surprise turn of events, and it suggests that the relationship between Moscow and Beijing may be fraying. The two countries are frequently geopolitical allies who have banded together in the past to oppose the United States; they have grown closer in recent years, with Russia serving as China's primary energy source.