Limitations – Plan B
The United States is preparing sanctions that could eliminate some Chinese banks from the global financial system, The Wall Street Journal (WSJ) reported, citing people with knowledge of the matter.
According to them, such a measure is being considered as an escalation in the event that it is not possible to persuade Beijing by diplomatic means to stop supplying Moscow with dual-use goods that can be used for the production of armaments. US Secretary of State Anthony Blinken will try to use diplomatic leverage during his visit to China on April 24-26. In recent weeks, US officials have stepped up pressure on Beijing, warning in in-person meetings and phone calls that they are ready to apply restrictions on the country’s banks.
According to American officials, while China has heeded Western warnings and is not sending weapons to Russia, it has become a major supplier of blueprints, planes, machinery and machine parts. According to Washington, this aid allowed Moscow to restore its military-production potential. The main intermediaries for such exports are Chinese banks, which process payments and provide credit to companies, according to the WSJ article.
Washington’s Center for Strategic and International Studies (CSIS) in an April report drew attention to post-2023 the sharp increase in the export of Chinese dual-purpose goods to Russia following the negotiations between the leaders of the two countries held in the Kremlin in March. According to CSIS, supplies have increased from a few thousand to 30 thousand. per month. They include parts for helicopters, navigational equipment and machine tools for the production of precision parts for armaments and avionics. According to one of the report’s authors, Max Bergmann, a senior research fellow at CSIS, this allowed Russia to accelerate weapons production and secure a credible defense during a Ukrainian counterattack.
The West is worried that in such a situation, Russia could beat Ukraine in a “war of attrition”, the newspaper says. The US hopes that the risk to Chinese banks of losing access to US dollar settlements and the prospect of deteriorating trade ties with Europe will convince Beijing to stop supporting Russia’s military industry.
The WSJ points out that the loss of access to settlement in US dollars, one of the world’s main trading currencies, would have far more serious consequences than ordinary sanctions on individuals or companies, and therefore should only be used when no other options are available. American officials describe the current relations between the United States and China as fragile and stable and hope that they can avoid actions that could worsen them.
In December of last year, US President Joe Biden authorized the Treasury Department to punish foreign banks supporting the Russian military-industrial complex. After that, China’s major state-owned banks tightened checks on Russian customers, while some others refused to accept yuan payments.
The geography of sanctions is expanding
12 companies from different countries are suspected of supplying Russia with European and American military goods, informs “Bloomberg”. According to the agency, we are talking about companies operating in Turkey, the United Arab Emirates, China, Hong Kong and Russia itself. The EU is considering the possibility of imposing sanctions on them.
The agency emphasizes that the companies are related to natural and legal persons of Belarus and Russia. The EU can start considering the issue of imposing sanctions on them as early as this week, but this requires the approval of the majority of the bloc’s members. EC refused to comment on this information to the agency.
On Wednesday, the EU opened an investigation into Chinese procurement of medical devices, the institution’s official publication announced. There is a risk that the move will further increase tensions between Brussels and Beijing.
After a recent meeting in Italy, the heads of the G7 countries’ MFAs agreed to apply additional sanctions to those countries that cooperate with Russia and help Moscow circumvent the restrictions previously applied to it. EC Vice President Valdis Dombrovskis announced that the EU has started preparing the 14th package of anti-Russian sanctions. It is planned to include measures preventing the circumvention of restrictions.
Will withdraw from EU jurisdiction
In the past, the EU applied exemptions to European subsidiaries remaining in Russia: they could receive legal and accounting services despite the general insurance in force. From June 20 special licenses will be required to engage in such activities. New restrictions that the EU has decided to apply to subsidiaries that have not left Russia could force businesses to operate through their subsidiaries or Russian companies, the Financial Times (FT) predicts.
We are talking about one of the 12th sanctions package that the EU adopted in 2023. in December, the point. Based on it, from June 20 European companies wishing to provide certain services to their subsidiaries operating in Russia will have to obtain the relevant license from the national authorities. It will be required to receive accounting assistance, management and legal advice. For now, companies can provide these services to their subsidiaries, but not to other companies. The representative of the EC clarified that the innovation will close the “loophole” in the sanctions exemptions.
As part of the sixth package of anti-Russian sanctions, the EU banned Russian companies and state institutions from providing European companies with accounting, auditing, business, tax and management consulting and advertising services. “But there was no reason to withdraw the relief applied to European subsidiaries. No one wanted to put them in the hands of Russian consultants,” said one of the managers of a European company that has not left Moscow.
The European Federation of Pharmaceutical Industries and Associations has warned that the new measure will make it harder to get medicines to patients.
Michael Albrecht von Kolke, a lawyer at the Skadden law firm, believes that in this way the EU is trying to count the companies still working in Russia. According to him, some companies are already taking care of new licenses, other functions included in the restricted list can be entrusted to offices outside the EU.
David Lorello, a partner at the law firm Covington & Burlington, said that instead of dealing with such matters, regulators could focus more on preventing the entry of sanctioned goods into Russia and finding hidden assets included in the sanctions list.
Russia views all sanctions against it as illegal and says that they are most harmful to the countries that declare them.
