How US sanctions could push China and Russia closer together
- Washington is increasing economic pressure on Moscow over its invasion of Ukraine but is growing frustrated as sanctions are circumvented
- The scrutiny Chinese firms face over ties to Russia’s military-industrial base risks a backlash from a Beijing already annoyed at what it sees as Western bullying
The intensifying sanctions have arisen amid a rebound in the Russian economy. The International Monetary Fund projects growth of 2.6 per cent in 2024 after a higher-than-expected 3 per cent estimated expansion for 2023.
The new rules appear to have extraterritorial reach, not requiring that any such financial transactions have a nexus with US legal jurisdiction. US Treasury Secretary Janet Yellen announced that the agency “will not hesitate to use the new tools provided by this authority to take decisive and surgical action against financial institutions that facilitate the supply of Russia’s war machine”.
Since the new rule was introduced, the US Treasury Department has held a meeting with leading Chinese state banks, including the Bank of China, ICBC and Bank of Communications, as well as Hong Kong financial players such as CMB Wing Lung Bank.
This came after the Atlantic Council published a report last November describing how China has enabled Russia to circumvent US sanctions.
It stated: “Open-source trade data suggests that a surge in imports of Chinese-manufactured goods with important military uses played a key role in Russia’s ability to shore up its defences on Ukrainian territory … Even as weapons and ammunition pour into Ukraine from Nato countries, they are being counterbalanced by Chinese imports – not of weapons, but of materials vital for Russia’s ability to sustain its continued stubborn efforts to hold onto Ukrainian territory.”
The report pointed to the expansion in Russian acquisitions of key strategic equipment from China such as integrated circuits, large excavation vehicles and ball bearings, which can have direct military applications.
According to Chinese state media, Xi did not respond directly to the proposed sanctions discussed with the EU leaders, only stating that the two sides should not “engage in confrontation because there are disagreements”.
During the call, on January 31, Dong said, “We have supported you on the Ukrainian issue, despite the fact that the United States and Europe continue to put pressure on the Chinese side.”
Even so, as the West increasingly grows frustrated with China and the poor effectiveness of its measures against Russia, the steady increase of sanctions could at some point be conflated with heightened security tensions around Taiwan and the wider Asia-Pacific. That could push China into further deepening its economic relations with Russia as well as its military cooperation.
Bob Savic is a senior research fellow at the Global Policy Institute in London, UK, and a visiting professor with the University of Nottingham’s Faculty of International Relations