The United States expanded its sanctions against Russia on Wednesday, as G7 leaders prepare to meet in Italy for a summit whose top priorities will be boosting support for Ukraine and destroying the Russian war machine .
Wednesday’s plan targets Chinese companies that are helping Russia pursue its war in Ukraine and raises stakes for foreign financial institutions that work with sanctioned Russian entities.
The United States has sanctioned more than 4,000 Russian companies and individuals since the war began, in an effort to choke off the flow of money and weapons to Moscow, whose superior firepower has given it an edge on the battlefield in recent months. Still, new companies are continually emerging as Russia tries to rethink its supply chains.
“We have to be very honest with ourselves: Putin is a very capable adversary, willing to adapt and find willing collaborators,” Aaron Forsberg, director of policy and implementation, told the Associated Press. implements economic sanctions at the State Department.
Sanctions against Russia, he said, are therefore a “dynamic matter.”
Although the sanctions have not stopped the flow of illicit goods, the aim is to make it more difficult for Russia to obtain crucial technologies and to increase the added value of the goods. Wednesday’s plan targets more than 100 million in trade between Russia and its war suppliers.
More than 300 new sanctions are largely aimed at deterring individuals and companies from countries including China, the United Arab Emirates and Turkey from helping Moscow circumvent Western blockades to obtain key technologies. They also threaten sanctions against foreign financial institutions if they do business with almost any sanctioned Russian entity, underscoring the American view that the Kremlin has put the Russian economy on a war footing.
The Russian military is “desperate to gain access to the outside world,” U.S. Treasury Secretary Janet Yellen said.
The announcement came shortly before President Joe Biden arrived in Italy, where he and other G7 leaders are urgently considering helping Ukraine, including turning frozen Russian assets into billions of dollars support in Kyiv.
Seven Chinese and Hong Kong-based companies were targeted Wednesday for shipping millions of dollars of equipment to Russia, including items that could be used in Russian weapons systems.
U.S. officials say China is Russia’s main supplier of critical components, supplying both Chinese and Western technology.
The move sends a message that the United States is “ready to venture into more dangerous territory” by increasing pressure on the Chinese government, said Benjamin Hilgenstock, a senior economist at the Kyiv School of Economics.
“We will address (China’s) support for Russia’s defense industrial base. And we will confront China’s non-market policies that lead to harmful global spillovers,” White House national security spokesman John Kirby told reporters Tuesday.
China did not sanction Russia after President Vladimir Putin’s invasion of Ukraine, and Mr. Putin ended his visit to China in May emphasizing the two countries’ burgeoning strategic ties.
“Chinese leaders do not want these sanctions to be a success,” said Janis Kluge, an expert on Russia sanctions at the German Institute for International and Security Affairs in Berlin.
Beijing, Mr. Kluge said, is reluctant to end valuable trade worth large sums of money and does not want to “add to the pressure on Putin in this war.”
Imports from China are vital for Russia, as China is a major producer of essential components, especially for Western companies. Chinese companies also serve as intermediaries for the sale and shipping of Western components to Russia.
But even though Chinese technology has been discovered on the battlefield in Ukraine, most components still come from Western countries, including those “overwhelmingly” found in high-tech drones and missiles ballistics, Hilgenstock said.
In addition to China, the United States targeted companies in Turkey and the United Arab Emirates that authorities said were sending high-priority items to companies in Russia, including companies already sanctioned.
In December, the White House said foreign financial institutions could be sanctioned if they collaborate with Russian defense sector entities. The sanctions expansion announced Wednesday now means these institutions could face sanctions if they work with almost any sanctioned Russian entity.
The fear of triggering secondary sanctions is an effective threat, analysts say.
Although President Xi Jinping may not want to facilitate Western sanctions against Russia, “Chinese banks have always been very careful not to become targets of secondary sanctions because that would cost them dearly,” Mr. . Kluge, highlighting cases where Chinese banks have terminated relationships with Russian clients.
Wednesday’s plan targeted Russia’s financial infrastructure, including the Moscow Stock Exchange, in an effort to limit the flow of money into and out of Russia.
It also aims to hinder the development of Russia’s energy sector and future sources of financing, including liquefied natural gas (LNG) projects in the Arctic, for which a Chinese company has shipped critical LNG technology.
Additionally, the program targeted those involved in the forced transfer and deportation of Ukrainian children to Russia. Five people in Russia and Russian-occupied Ukraine were sanctioned for participating in the forced militarization and re-education of children, and for providing them with Russian passports.
