A top Treasury Department official warned companies in China and around the world that they will be punished if they keep doing business with Russia in violation of US sanctions, as the Biden administration looks to sever President Vladimir Putin’s financial lifeline with the conflict heading into its second year.
(Bloomberg) — A top Treasury Department official warned companies in China and around the world that they will be punished if they keep doing business with Russia in violation of US sanctions, as the Biden administration looks to sever President Vladimir Putin’s financial lifeline with the conflict heading into its second year.
“The cost of doing business with Russia in violation of our policies is a steep one, and companies and financial institutions should not wait for their governments to make the decision for them,” Deputy Treasury Secretary Wally Adeyemo told an audience at the Council on Foreign Relations.
Adeyemo delivered a speech that outlined the US approach to squeezing Russia’s economy a year after it invaded Ukraine. The sanctions have had a devastating impact on Russia’s gas exports and imports of high-tech goods but have yet to seriously diminish Putin’s ability to wage war.
The US will also put new pressure on countries that help Russia evade sanctions by turning a blind eye toward them or by facilitating shipments via other nations.
“We have seen troubling patterns in several countries, including several of Russia’s neighbors, where the Kremlin has deepened its financial ties and trade flows as other markets have been closed off,” Adeyemo said in the speech.
He said the US is in touch with banks and companies to warn them that they risk being cut off from the US and its financial partners’ financial systems.
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The US won’t be afraid to sanction Chinese companies that support Russia’s invasion of Ukraine, Adeyemo told reporters before the speech. Officials will be “going directly to Chinese companies or financial institutions, and making clear to them that we were prepared to put sanctions in place if they were to provide material support to Russia,” he said.
“They have a choice between doing business with the countries of our coalition, which represent 50% of the global economy, and doing business with Russia, an economy that is becoming more isolated each day,” he said.
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Adeyemo’s sentiment underscored how much of a challenge the US has faced in trying to dissuade some of the world’s major economies, such as China, Brazil, Indonesia and India, from doing business with Russia despite Western arguments that Russia violated Ukraine’s sovereignty and has committed war crimes there.
US-China relations have become a particular sore point with Secretary of State Antony Blinken saying over the weekend the US had information that China is considering providing Russia with lethal aid such as weapons and ammunition even though “they haven’t crossed that line yet.” Beijing has called the US allegation “disinformation” and accused the US of “pouring weapons into the battlefield.”
While Adeyemo admitted the Russian economy has fared better than initially expected, he said that a price cap on Russian energy put new pressure on the country’s financial system, according to a text of his prepared remarks.
Adeyemo said Russia lost more than 9,000 pieces of military equipment during the invasion and is struggling to replace them. He is also expected to say that 40% of the chips Russia is receiving from China are defective.
“Our export controls and sanctions will continue to prevent Russia from accessing the equipment needed to make up for these losses,” he said. “Our sanctions will make it harder for the Kremlin to use the remaining resources Russia can access to pay for the weapons they need.”
(Updates with details of Adeyemo speech throughout)
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