The Biden administration on Wednesday announced a series of new financial sanctions aimed at disrupting fast-growing technological ties between China and Russia that American officials believe is a broad effort to rebuild and modernize Russia’s military during its war in Ukraine.
The actions were announced as President Biden left the country for a meeting in Italy of the Group of 7 industrialized economies, where a renewed push to undercut Russia’s economy is at the top of his agenda.
The measures were coordinated by the Treasury, State and Commerce Departments and aim to further isolate Russia from the global financial system and cut off its ability to gain access to the technology that powers its military arsenal.
The effort has become more complicated in the past six or eight months after China, previously sitting on the sidelines, increased its shipments of microchips, machine tools, optical systems for drones and components for advanced weapons, US officials said. But so far Beijing appears to have heeded Mr. Biden’s warning against sending arms to Russia, even as the United States and NATO continue to arm Ukraine.
While the measures expand the reach of the US sanctions program, the Biden administration has so far refrained from imposing sanctions on Chinese or European banks it believes are helping Russia. The new measures do not restrict banks from facilitating transactions related to Russian energy exports, which the Biden administration has allowed to continue out of concern that restricting them could inflation fuel.
Announcing the sanctions, Treasury Secretary Janet L. Yellen said in a statement that “Russia’s war economy is deeply isolated from the international financial system, leaving the Kremlin’s military desperate for access outside the world.”
Among the measures is an expansion of “secondary” sanctions that give the United States the power to blacklist any bank worldwide that does business with Russian financial institutions already facing sanctions. It aims to prevent smaller banks, especially in places like China, from helping Russia finance its war effort.
The Treasury Department also imposed restrictions on the stock exchange in Moscow in hopes of preventing foreign investors from supporting Russian defense companies. The sanctions hit several Chinese companies accused of helping Russia gain access to critical military equipment such as electronics, lasers and drone parts.
In addition to the Treasury Department’s measures, the State Department imposed sanctions on approximately 100 entities, including companies “engaged in the development of future energy, metals, and mining production and export capacity of Russia.” And the Commerce Department has announced its own set of restrictions, banning American exports to certain Hong Kong addresses that the United States says are being used to set up shell companies. to funnel illicit goods into Russia.
Mr. Biden had previously tried to choke off supplies and financing to Russia, and magnified the effects of that move. In March 2022, shortly after the war began, he announced an initial phase of monetary actions and declared, “As a result of these unprecedented sanctions, the ruble was almost immediately reduced to rubble. ” Nope. After a brief dip, it recovered, and while it is now not as strong as last year, Russia’s economy is expanding on the strength of war-related growth.
Much of that is thanks to China’s efforts. It buys Russian oil, often at a discount to world prices. And it has increased the sale of dual-use goods, especially the microelectronics and software needed to make weapons, drone and air defense systems.
The result is the rise of a relatively parallel war economy involving Russia, China, Iran and North Korea. Many of the companies subject to sanctions are in Hong Kong or just border Shenzhen, China’s technology manufacturing hub. But administration officials insist that this time, they may be able to sever the deepening commercial relationship.
In announcing new restrictions on Chinese companies, the Biden administration also hopes to prompt European governments and possible Asian allies to take similar steps.
Secretary of State Antony J. Blinken discussed the issue with European counterparts at a North Atlantic Treaty Organization meeting in Prague last month, and US officials intend to put it on the agenda of a leaders’ summit in Washington in July.
Mr. Blinken also warned the Chinese government that it could not hope to have a peaceful relationship with European powers if it supported the Russian defense industry.
At a news conference in Prague on May 31, Mr. Blinken said that 70 percent of the mechanical equipment Russia imports comes from China, as well as 90 percent of microelectronics.
“China cannot expect on the one hand to improve relations with European countries while on the other hand it is strengthening the biggest threat to European security since the end of the Cold War,” he said.
