China has vowed to take necessary measures to safeguard its rights after American officials said the United States may sanction Chinese banks for facilitating transactions related to shipments to the Russian defense sector.
The US is preparing a new round of sanctions against Chinese entities that supplied dual-use items to Russia’s war machine in Ukraine, US National Security Advisor Jake Sullivan said at the Aspen Security Forum in Colorado on July 19.
Sullivan said the US side had seen Beijing respond to its concern that some Chinese banks are facilitating problematic transactions. However, he added that “the picture is not pretty” as China continues to be a major supplier of dual-use items to Russia’s war machine.
“There are targeted ways in which they are responsive, but the larger picture continues to travel in the wrong direction,” he said, adding that people can expect to see additional sanctions measures in the coming weeks.
He said US President Joe Biden had authorized Treasury Secretary Janet Yellen to sanction foreign banks while such a measure was put in place so that the US can take action if needed.
US State Secretary Antony Blinken said at the same event that China is providing the inputs for Russia’s defense industrial base.
“Seventy percent of the machine tools that Russia is importing come from China. Ninety percent of the microelectronics come from China,” Blinken said. “And that’s going into the defense industrial base and turning into missiles and tanks and other weapons.”
“China can’t have it both ways,” he said. “It can’t all at once be saying that it’s for peace in Ukraine when it is helping to fuel the ongoing pursuit of the war by Russia. It can’t say that it wants better relations with Europe when it is actually helping to fuel the greatest threat to Europe’s security since the end of the Cold War.”
On July 11, NATO leaders said in a joint declaration that China is a “decisive enabler” of Russia’s war against Ukraine.
‘Sinister intentions’
“Both China and Russia are independent major countries,” Mao Ning, a spokesperson of the Chinese Foreign Ministry, said in a media briefing on Monday. “China and Russia have normal cooperation, which does not target any third party and should not become a target for external interference or coercion.”
She said China firmly rejects all kinds of illicit unilateral sanctions and long-arm jurisdiction and will take all measures necessary to safeguard its legitimate rights and interests.
“China has said many times that Sino-Russian cooperation is not aimed at any third party, and China and Russia will not form an alliance. But did NATO listen? Absolutely not,” a Hebei-based military writer using the pseudonym “Xingchen” says in an article on Monday.
He says figures showed that 60% of Russia’s weapon parts were imported from the West while 72% of them came from the US.
“Based on NATO’s logic, are western countries including the US supporting Russia?” he says. “NATO has repeatedly accused China of its cooperation with Russia. Its sinister intentions are obvious.”
He adds that NATO, which offered US$43 billion of military support to Ukraine annually, is the real culprit that is shaking global peace and stability.
In June 2023, the KSE Institute, a think tank at the Kyiv School of Economics, said in a report that 66% of the foreign critical components found in weapons systems the Russian military has used in Ukraine were manufactured by American companies between March and December 2022. Newsweek pointed out that most of these parts were shipped to Russia via China.
Another Chinese commentator says that the Biden administration needs to show a tough stance against China as Republican presidential candidate Donald Trump has gained an upper hand since he was injured in an assassination attempt on July 13.
That commentator says that, by smearing China-Russia cooperation, Blinken wants to increase his bargaining power in the coming meeting with Chinese diplomat Wang Yi at the ASEAN ministerial meeting in Laos this week.
On July 8, Gonzalo Saiz, a researcher at the Center for Finance and Security of the Royal United Services Institute, a United Kingdom-based think tank, told TheBanker.com that some small Chinese banks operate as “burner banks” as they can be shut down if they are sanctioned by the US due to Russian transactions.
Hera Smith, director and practice lead for financial crime compliance, Moody’s Analytics, said major Chinese banks may face trouble if they unintentionally process problematic transactions for smaller banks.
US pressure
In 2023, China’s exports to Russia grew 46.9% to US$111 billion from a year earlier, according to China Customs. The figure increased only 1.5% year-on-year to US$24.4 billion in the first quarter of this year and fell 3.4% year-on-year to US$27.2 billion in the second quarter.
The changing trend is seen as a result of the United States’ increasing efforts to block China from shipping dual-use items to Russia.
In a visit to Beijing on April 8, Treasury Secretary Janet Yellen said the US could sanction Chinese financial institutions if they were involved in transactions related to shipments that bolstered Russia’s military capacity.
Russian newspaper Izvestia reported on April 12 that four more Chinese banks had recently stopped accepting payments from Russia after three largest Chinese banks did the same in February. On April 22, a US official told Reuters that the US did not have an immediate plan to sanction Chinese banks.
On June 12, the US Treasury Department’s Office of Foreign Assets Control (OFAC) revised the definition of “Russia’s military-industrial base” stated in an executive order previously-issued by the US President.
After the amendment, foreign financial institutions that conduct or facilitate significant transactions or provide any services involving Russia’s military-industrial base will run the risk of being sanctioned by OFAC.
Read: China hawk: Fix symbolic, ineffective US sanctions
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What interests me is how the United States knows what the transactions are. If they are being done in dollars then I get it. But surely sensitive transactions are being done in their own currencies. The US doesn’t have intercepts on their fibre-optic networks like with her allies. China especially is thoroughly opaque. So how do they do they know?
Sanction is manure of the west, it stinks but help Chinese companies to flourish.
US “warns”🤣
China’s response to US is 🖕