Since the outbreak of the Russia-Ukraine war, Russia has become the most severely sanctioned country globally. However, it is leveraging loopholes in the sanctions to sustain its economic growth. The United States and its allies are preparing to address this issue by imposing more stringent sanctions and export controls.
The Biden administration announced on Tuesday that it would unveil a series of “more impactful” export control measures against Russia at the G7 summit in Italy this week.
White House National Security spokesperson John Kirby stated that “we will continue to increase the cost of Russia’s war machine.”
According to the Financial Times, the U.S. Treasury Department is expected to significantly expand its secondary sanctions program targeting Russian banks and other financial institutions this week, considering any financial entity doing business with sanctioned Russian entities as directly cooperating with Russian defense enterprises.
This move will broaden the scope of the sanctions outlined in an executive order issued by the White House in December, authorizing the Treasury to impose secondary sanctions on any foreign financial institution found to be associated with or acting on behalf of any entity on a list of about 1,200 sanctioned Russian entities.
This week, the sanction list is expected to increase to over 4,500 entities, including Russia’s largest banks such as Sberbank and VTB.
Bloomberg reports that the Biden administration is planning to announce an expansion of sanctions against Russia on Wednesday, restricting Moscow’s access to chips and other components necessary for military production, targeting third-party sellers like China, including entities in Hong Kong.
The Wall Street Journal revealed last month that the U.S. government is drafting plans to impose financial sanctions on Chinese banks to pressure the Chinese government to cease military support to Russia.
Hong Kong veteran media personality and former chief editor of Sing Tao Daily, Chen Jingxiang, stated in an article in Ming Pao last month that the U.S. strategy against China includes imposing the strongest sanctions known as “financial nuclear weapons,” which would involve kicking Chinese banks out of the SWIFT system.
Additionally, the U.S. has another ace up its sleeve, targeting linked exchange rates by excluding Hong Kong from SWIFT, restricting the use of the U.S. dollar, and prohibiting participation in dollar-based international settlement systems.
Following Russia’s invasion of Ukraine and the implementation of economic sanctions by Western nations in 2022, the Russian economy contracted by 1.2%. In 2023, Russia’s economy saw a growth rate of 3.6% for the year. Russian authorities claim that in the first quarter of this year, the country’s GDP grew by 5.4% year-on-year, marking the fourth consecutive quarter of growth.
In January, confidential data from the Russian customs revealed by Bloomberg showed that more than half of the chips and integrated circuits imported by Russia in the first nine months of 2023 were produced by European and American companies.
These companies include Intel, AMD, Analog Devices, as well as European brands Infineon, STMicroelectronics, and NXP Semiconductors.
From semiconductors to aircraft components, even closely scrutinized military products, Moscow is importing any necessary goods from third countries like China, Turkey, the United Arab Emirates, and Central Asian countries.
Robin Brooks, a senior researcher at the Brookings Institution, has been monitoring the effectiveness of export controls. In a webinar on evading sanctions in Russia, he mentioned how the European Union has inadvertently aided the war effort.
For instance, since the war began, car exports from Germany to Kyrgyzstan have surged by 5100%. “These cars are all destined for Russia. Most of them didn’t even make it to Kyrgyzstan. Kyrgyzstan was just written on the invoice.”
Export data shows that every European country has exhibited this trend, roughly offsetting half of the direct export decline to Russia.
He remarked, “If Europe is willing to take decisive action, we will witness a financial crisis in Russia.”
In December 2022, the UK, along with the G7, Australia, and the EU, set a price cap of $60 per barrel on Russian oil exports and prohibited Western companies from providing insurance, financing, or transportation for Russian oil, aiming to restrict Russia’s oil trade revenue.
As the world’s second-largest oil exporter, Russia is utilizing a “shadow fleet” of old tankers with unclear ownership to transport crude oil abroad, earning much-needed foreign exchange.
Greek shipping giants, playing a crucial role in global oil trade, have joined in by selling hundreds of old ships to Russia. As reported by TradeWinds, Greek shipowners have sold at least 125 petroleum and tanker vessels worth over $4 billion.