United States officials, lawmakers and non-profit organizations have called for sanctioning Hong Kong firms and banks after NATO on July 11 condemned Beijing’s support of the Russian defense sector.
US Secretary of State Antony Blinken plans to make a complaint, during a meeting in Laos with his Chinese counterpart Wang Yi, over Russian shipments. He said last week that Russia is importing 70% of its machine tools and 90% of its microelectronics from China.
Separately, Republican US Senator Marco Rubio proposed an amendment to the National Defense Authorization Act that will grant power to the president to sanction financial institutions that handle transactions related to problematic Russian shipments.
Over the past few days, two US news media outlets and an activist group have released their analyses estimating the volume of the transshipments of the common high priority list (CHPL) items via Hong Kong to Russia.
On Thursday, the New York Times reported that Russia has obtained about US$4 billion in restricted chips since the country invaded Ukraine in February 2022. It said a cluster of shell companies in Hong Kong helped ship many of these goods to Moscow. It said the figure came from its analysis of Russian customs data since mid- 2021.
The newspaper said the chips were sent to Russia in nearly 800,000 shipments by more than 6,000 companies. New York Times staff visited the office of a Hong Kong company, which was allegedly involved in the transshipments, on the seventh floor at 135 Bonham Strand in Central but failed to meet anyone.
Between August and December 2023, 206 Hong Kong companies, known as consignors, have shipped US$750 million of CHPL items to Russia, the Committee for Freedom in Hong Kong Foundation (CFHK Foundation), a non-profit organization based in Washington, said in a report on July 22.
These items include data receivers, computer processors and controllers, digital storage and input/output units and other integrated circuits. Other items include static converters, amplifiers, memory chips and diodes.
They were made by 31 Western firms, including Texas Instruments, Analog Devices, Microchip Technology, Apple, Intel, Dell and Nvidia.
The CFHK Foundation said it used data collected by the Center for Advanced Defense Studies (C4ADS), another Washington-based non-profit organization.
It said the US should use its secondary sanctions authority to designate Hong Kong and Chinese banks financing illicit trade, and also designate Hong Kong as a primary money laundering concern (PMLC).
Meanwhile, an unnamed US Commerce Department official was quoted as saying in a report on July 22 that transshipments of CHPL items through Hong Kong had dropped by 28% between January and May.
Without explaining how the figure was calculated, the official said the decrease was a result of the US authorities’ aggressive law enforcement and engagement with product suppliers. But the official said Hong Kong is still a hub for Russians to evade global sanctions.
For the same period, transshipments of CHPL items through mainland China, excluding Hong Kong, fell 19%. The full dataset is unavailable as the US Commerce Department said it wanted to protect its access to the information.
All these new figures were released after NATO leaders in a joint declaration on July 11 called China a “decisive enabler” of Russia’s war against Ukraine. On July 19, US National Security Advisor Jake Sullivan said the US is preparing a new round of sanctions against Chinese entities that supplied dual-use items to Russia’s war machine in Ukraine.
Rubio’s amendment
Also on July 11, Rubio submitted his amendment to the National Defense Authorization Act.
He proposed that the US President have the power to impose sanctions on any “covered financial institution” that uses China’s Cross-Border Interbank Payment System (CIPS), Russia’s System for Transfer of Financial Messages (SPFS) or Iran’s System for Electronic Payment Messaging (SEPAM) to clear, verify, settle or conduct transactions with any other “covered financial institution.”
A “covered financial institution” means one located in or organized under the laws of one of the countries of concern, which include China (including Hong Kong and Macau), Russia, Iran, North Korea, Cuba and Venezuela.
The US Congress is expected to make a decision on NDAA amendments for 2025 by the end of this year.
Back in March 2022, Rubio had introduced a similar bill called the Crippling Unhinged Russian Belligerence and Chinese Involvement in Putin’s Schemes (CURB CIPS) Act. There has not been any update about it.
As of last month, CIPS has 148 direct participants, including Citibank, and 1,396 indirect participants around the world.
Moscow’s tactics
On June 18, C4ADS published a report with the title “War Machine – The Networks Supplying & Sustaining the Russian Precision Machine Tool Arsenal,” saying that China and Hong Kong, Turkey and the United Arab Emirates are among the countries of concern that are sourcing computer numeric control (CNC) machine tools for Russia.
The report said Russia has historically sourced foreign-produced CNC machine tools (FPCMTs) from jurisdictions whose governments now support Kyiv.
Wang Wenbin, former spokesperson of the Chinese foreign ministry and current Chinese Ambassador to Cambodia, said on April 23 that the US is hypocritical and highly irresponsible as it keeps making groundless accusations over normal trade and economic exchanges between China and Russia while providing a large amount of aid to Ukraine.
Some commentators said new US sanctions will only increase transaction costs for foreign exchange transactions to finance war-related Russian purchases, but not prevent them.
They said major Chinese banks have stopped financing trade with Russia in order to avoid US sanctions but smaller banks can continue as they do not have dollar businesses. They said other countries such as Kazakhstan and Armenia, instead of Hong Kong, can also handle Russian shipments.
Read: US warns Chinese banks over Russian shipments
Follow Jeff Pao on X: @jeffpao3
So what? Last I checked, PRC is a sovereign nation. US wants to tell everyone who they can do business with. Sign of a desperate country sliding downhill..
Get a brain, idiots. A laptop computer, running an open source operating system, minus the useless programming, has plenty enough power to run a cruise missile.
the US has lost the plot of trying to start the ukraine war to cave russia but that has obviously failed – now in desperation, its lashing at anyone, anywhere whom it suspect is defying its illegitimate sanctions against russia … the BIG Q is india is also a so called “enabler” of russia and why isnt the US doing anything about india ???