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The US will urge Ukraine’s allies and western businesses to choke off supplies for Russia’s defence industry through China, a vital route to sustain President Vladimir Putin’s war machine.
In a speech to German business leaders in Berlin on Friday, US deputy Treasury secretary Wally Adeyemo will urge western companies to stop Russia importing critical components from or via China.
The US has threatened secondary sanctions against Chinese companies found to have supplied Russia’s defence industry.
According to excerpts shared with the Financial Times, Adeyemo will say the US and Europe “must make the choice stark for China: Chinese firms can either do business in our economies or they can equip Russia’s war machine with dual-use goods. They cannot do both.”
“The Kremlin knows it can only meet its military goals with China’s assistance,” Adeyemo will say.
“Every country in our coalition and every member of Nato must also consistently and clearly communicate to Beijing that it is unacceptable for the Chinese to abet the Russian military-industrial base.”
Moscow increased its imports of sensitive, dual-use goods — civilian goods that also have military applications crucial to the Russian war effort — from China-based suppliers by 40 per cent last year, according to the US.
While China accounts for almost two-thirds of Russia’s imports of dual-use high-technology goods, as defined by the EU’s trade regulations, almost all of the imported components used in Russian weaponry are of western origin, according to a study by the Kyiv School of Economics.
The European Central Bank earlier this month told Eurozone lenders with Russian operations to speed up their exits, fearful they could be hit with US secondary sanctions for enabling Moscow’s war effort if they stay.
The ECB’s warnings came shortly after Adeyemo told Austria’s Raiffeisen Bank, the most prominent European bank in Russia, that Washington could restrict its access to the US financial system on national security grounds.
In a roundtable with news outlets during a visit to Kyiv on Wednesday, Adeyemo said the US was seeking to ensure that US microchip manufacturers were “taking steps to look at how their chips are being used” and preventing transshipment through third countries such as China.
Putin’s recent appointment of statist technocrat Andrei Belousov as defence minister indicates the extent to which the war is consuming Russia’s economy, Adeyemo said.
The US has increasingly put banks in its crosshairs as it broadens its focus on countries and companies shipping dual-use goods to Russia, he added.
“Financial institutions, in lots of ways, can help us enforce our sanctions by doing additional due diligence on the companies that are trying to use them to finance goods that are going into Russia,” Adeyemo said.
“What we’ve seen the Kremlin do is, instead of using the biggest banks in some of these countries they’re now going to smaller institutions that have less sophisticated compliance departments to try and get around our sanctions and export controls,” he added.
The US now wants to “force” banks to “enhance their due diligence, to try and stop Russia from being able to get access to these goods”, he added.
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