Bob Savic

Opinion | 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

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Bob Savic

Published: 9:30am, 20 Feb 2024Updated: 9:58am, 20 Feb 2024

Following Ukraine’s inconclusive counteroffensive last year to push Russian forces out of the southern part of the country, the US government has launched a series of measures ramping up pressure largely on non-Western business interests, including some in mainland China and Hong Kong, for circumventing economic sanctions over Russia’s invasion of Ukraine.

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 wave of sanctions began in December when the White House imposed restrictions on Chinese and other non-US financial institutions providing support for Russia’s expanding war economy. The new regulation applies sanctions on international financial institutions which enable significant transactions for organisations and individuals having business ties with the Russian military-industrial complex.

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”.

The key industries for which international financial support is being targeted involve technology, aerospace, defence and related materials, in addition to broader manufacturing and construction sectors. Where transactions breach the regulations, US authorities can impose full sanctions to block any financial institution from engaging in services with a US organisation or individual.

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.