The United States is urging Ukraine’s allies and Western companies to cut off channels through which China supplies the Russian defense industry. China has been accused of playing a significant role in the war Russia has launched against Ukraine.
According to a report by the Financial Times of the United Kingdom, Wally Adeyemo, the Deputy Secretary of the U.S. Treasury, is set to deliver a speech in Berlin on Friday, urging Western companies to prevent Russia from importing crucial components from China or through China.
The United States has warned that Chinese companies found supplying the Russian defense industry will face secondary sanctions. Given that China’s four major state-owned banks – Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank – have significantly increased their business operations in Russia, this move by the U.S. could have an impact on these banks.
Recently, several U.S. officials have accused China of providing military assistance to Russia and have cautioned that Beijing may face further sanctions from the U.S. and other NATO countries.
In excerpts shared with the Financial Times, Adeyemo is expected to call on Friday for the U.S. and Europe to “force China (the Chinese Communist Party) to make a clear choice: Chinese companies either operate in our economy, or they provide military dual-use products for Russia’s war machine, they cannot do both.”
“The Kremlin knows that it can only achieve its military objectives with the help of China (the Chinese Communist Party),” Adeyemo will state, “Every country in our alliance and every member of NATO must consistently and clearly convey to Beijing that China’s assistance to Russia’s military-industrial base is unacceptable.”
The U.S. has stated that Russia’s imports of sensitive dual-use goods (civilian goods critical for Russia’s war effort that also have military applications) from Chinese suppliers increased by 40% last year.
Kurt Campbell, the U.S. Deputy Secretary of State, stated during a visit to Brussels on Monday that Europe and NATO countries urgently need to send “a collective message of concern to China’s behavior: we believe China’s behavior undermines the stability of central Europe.”
On Tuesday, Daleep Singh, the White House Deputy National Security Adviser for International Economics, said at an event hosted by the Brookings Institution in Washington, that the U.S. and its partners are prepared to use sanctions and export controls to prevent Chinese-Russian trade from threatening their security in the Ukraine conflict.
During his visit to Kyiv on Wednesday, Adeyemo stated at a roundtable with the media that the U.S. is seeking to ensure that American semiconductor manufacturers “take steps to audit the use of their chips” and prevent them from being rerouted through China and other third countries.
Adeyemo noted that Putin’s recent appointment of technocrat Andrei Belousov as Defense Minister illustrates the extent of the war’s toll on the Russian economy.
He added that as the U.S. increases its scrutiny on countries and companies transporting dual-use military products to Russia, more banks are being included in the sanctions list.
In December of last year, President Biden signed an executive order authorizing the U.S. Treasury to blacklist banks in China, Turkey, the United Arab Emirates, and other countries that may be aiding Russia, marking the first direct warning.
“Financial institutions can assist us in many ways with enforcing sanctions, conducting additional due diligence on companies attempting to finance goods entering Russia,” Adeyemo stated.
“We see what the Kremlin is doing, they are no longer using some of the largest banks in some countries, but turning to smaller institutions with less complex compliance departments, trying to circumvent our sanctions and export controls,” he added, noting that the U.S. now hopes to “pressure” banks to “enhance due diligence efforts, trying to prevent Russia from acquiring these goods.”
The European Central Bank recently warned eurozone banks operating in Russia to expedite their withdrawal, fearing that if they remain, they could suffer secondary sanctions from the U.S. for facilitating aid to Russia in the conflict between Russia and Ukraine.
Shortly before the European Central Bank issued its warning, Adeyemo told Austria’s Raiffeisen Bank, one of Russia’s most prominent European banks, that Washington may restrict its access to the U.S. financial system on national security grounds.