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US expands sanctions on Russia to discourage countries like China from doing business with Moscow
The United States expanded its sanctions against Russia on Wednesday as G7 leaders prepared to meet in Italy for a summit where the main priorities will be to increase support for Ukraine and crush Russia’s war machine.
Wednesday’s package targeted Chinese companies that help Russia pursue its war in Ukraine and raised the stakes for foreign financial institutions that work with sanctioned Russian entities.
The US has sanctioned more than 4,000 Russian companies and individuals since the start of the war in an effort to choke off the flow of money and weapons to Moscow, whose superior firepower has given it an advantage. advantage on the battlefield in recent months. However, new companies continually emerge as Russia attempts to rework 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 Economic Sanctions Policy and Implementation at the State Department, told the Associated Press.
Sanctions against Russia, he said, are therefore a “dynamic issue.”
While the sanctions have not stopped the flow of illicit goods, the aim is to make it more difficult for Russia to obtain crucial technology, as well as increase the profit margin on the goods. Wednesday’s package targets more than $100 million in trade between Russia and suppliers for its war.
More than 300 new sanctions are largely aimed at deterring individuals and companies in countries such as China, the United Arab Emirates and Turkey from helping Moscow bypass Western blockades in obtaining essential technology. They also threaten foreign financial institutions with sanctions if they do business with almost any sanctioned Russian entity, underscoring the US view that the Kremlin has steered the Russian economy into crisis. War base.
The Russian military is “desperate for access to the outside world,” Treasury Secretary Janet Yellen said.
The announcement came shortly before President Joe Biden arrived in Italy, where he and other G7 leaders are urgently seeking to help Ukraine, including transforming frozen Russian assets in billions of dollars of support for Kiev.
Seven Chinese and Hong Kong-based companies were targeted on Wednesday for sending millions of dollars worth of material 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.
On Wednesday, the US sanctioned a Chinese state-owned defense company that officials said sent military equipment for use in the Russian defense sector.
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The move sends the message that the US is “willing to enter more treacherous territory,” increasing pressure on the Chinese government, said Benjamin Hilgenstock, a senior economist at the Kiev School of Economics.
“We will address (China’s) support for the Russian defense industrial base. And we will confront China’s non-market policies that are leading to harmful global repercussions,” White House national security spokesman John Kirby told reporters on Tuesday.
China did not sanction Russia after President Vladimir Putin invaded Ukraine and Putin ended a visit to China in May emphasizing the two countries’ growing strategic ties.
“The Chinese leadership is not interested in making these sanctions a success,” said Janis Kluge, an expert on Russian sanctions at the German Institute for International and Security Affairs in Berlin (SWP).
Beijing, Kluge said, is reluctant to disrupt valuable trade worth large amounts of money and does not want to “increase pressure on Putin in this war.”
Imports from China are vital for Russia because China is a major producer of critical components, including for Western companies. Chinese companies also act as intermediaries in the sale and shipment of Western components to Russia.
But while Chinese technology has been found on the battlefield in Ukraine, most of the components still come from Western countries, including those that are “overwhelmingly” found in high-tech drones and ballistic missiles, Hilgenstock said.
In addition to China, the U.S. targeted companies in Turkey and the United Arab Emirates, which authorities say sent high-priority items to companies in Russia, including companies that have already been sanctioned.
In December, the White House said that foreign financial institutions could be sanctioned if they worked with Russian defense sector entities. Wednesday’s sanctions expansion now means that 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.
While President Xi Jinping may not want to ease Western sanctions on Russia, “Chinese banks have always been very careful not to become targets of secondary sanctions because they would be very costly,” Kluge said, pointing to cases in which Chinese banks have ended relationships . with Russian customers.
Wednesday’s package targeted Russia’s financial infrastructure, including the Moscow Stock Exchange, in an attempt to limit the amount of money moving in and out of Russia.
It also aims to halt the development of Russia’s energy sector and future sources of moneyincluding liquefied natural gas projects in the Arctic that have been awarded critical LNG technology by a Chinese company.
Furthermore, the package targeted people involved in forced transfer and deportation of Ukrainian children to Russia. Five people in Russia and Russian-occupied Ukraine were sanctioned after participating in the forced militarization and re-education of children and providing them with Russian passports.