China Will Face 'Consequences' If It Helps Russia Evade Sanctions, US Official Says
Ahead of a meeting with Chinese officials, U.S. national security adviser Jake Sullivan publicly warned China that it will face severe penalties if it helps Russia evade Western sanctions. The Biden administration is “watching closely” to see whether Beijing provides Moscow with “material support or economic support,” Sullivan told CNN March 13, which could give Russia an economic lifeline as it faces crippling financial restrictions from Europe, the U.S. and many of its trading partners.
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“It is a concern of ours,” Sullivan said. “And we have communicated to Beijing we will not stand by and allow any country to compensate Russia for its losses from the economic sanctions.”
Other U.S. officials have threatened penalties against China for aiding Russia, including Commerce Secretary Gina Raimondo, who said last week the agency could “essentially shut” down any Chinese company that defies the sanctions, including Semiconductor Manufacturing International Corporation (see 2203080053). Matthew Axelrod, Commerce’s lead export enforcement official, also threatened to place companies on the Entity List for helping Russia, which is subject to a range of strict export licensing requirements.
The administration increased export controls on Russia last week by restricting shipments of luxury goods to the country (see 2203110056). The U.S. also announced a series of controls the week prior, including tightened restrictions on exports to Russia's oil refinery sector (see 2203040020) and two new foreign direct product rules to impose licensing requirements on certain foreign-produced goods made with U.S.-origin content (see 2202240069).
Sullivan declined to say what specific penalties the U.S. would impose on China for helping Russia evade U.S. sanctions and export controls, but suggested that China is aware. “There will absolutely be consequences for large-scale sanctions evasion efforts or support for Russia to backfill” the controls, Sullivan said. “We will not allow that to go forward and allow there to be a lifeline to Russia from these economic sanctions from any country anywhere in the world.” Russia recently said it asked China for aircraft parts, but the offer was rebuffed (see 2203110008).
A Chinese foreign ministry spokesperson declined to say whether the country will supply Russia, but said it's pushing for peace talks between Russia and Ukraine. "Sanctions are never effective means to resolve problems," the spokesperson said March 14, according to a transcript in English of a regular press conference. "China opposes all forms of unilateral sanctions and long-arm jurisdiction of the U.S., and will resolutely defend the legitimate rights and interests of Chinese companies and individuals."
China may be criticizing the U.S. sanctions, and any other restrictions not approved by the U.N., as a way to justify helping Russia later down the line, said Thomas Shannon, a policy adviser with Arnold & Porter and former State Department official. "Its criticism of sanctions because they're not U.N.-authorized really sounds like the initial justification of what could be its smuggling and economic support efforts should the Russian economy really hit a difficult spot," Shannon said during a March 14 webinar hosted by the firm.
In an interview earlier this month, Nazak Nikakhtar, former acting undersecretary for the Bureau of Industry and Security, said China was likely calculating the risk-reward benefit of aiding Russia and is concerned about the impact that severe U.S. sanctions could have on its companies. China also may have been “caught off guard” by the strong, unified Western response to Russia’s invasion of Ukraine, Nikakhtar said, which could sway it against coming to Russia’s rescue.
“China very much wants the United States economy, the global economy, to be dependent on its industries,” said Nikakhtar, a Wiley Rein trade lawyer. “You don't want to push the United States and its allied nations into sanctioning you, because that defeats the whole purpose of creating global dependence on your nation and your economy.”
China and others should expect strong U.S. enforcement. During the Arnold & Porter webinar, John Barker, a trade lawyer and a former export control official with the State Department, said he expects enforcement efforts to ramp up. "The Department of Justice, at the senior-most level, has indicated this will be one of their highest levels of enforcement," he said.
Barker also said U.S. agents have been reaching out to companies over the last two weeks to make sure they understand the new restrictions. "These are friendly visits from friendly enforcement agents," Barker said. "But, of course, if the government believes that those companies are not following the rules, those friendly visits can and will be held against the company because they will have been warned."
Sullivan, along with officials from the National Security Council and the State Department, met with Chinese foreign affairs official Yang Jiechi in Rome March 14. The two sides planned to discuss efforts to “manage the competition between our two countries and discuss the impact of Russia’s war against Ukraine on regional and global security,” the White House said.