Washington is tightening the screws on Moscow's war chest by seeking to cut it off from financial institutions in China.
Andrea Gacki, the chief of the Financial Crimes Enforcement Network, a bureau within the Department of the Treasury, is currently in the East Asian country to push officials and financial institutions to do more to keep sanctioned transactions and goods from ending up in Russia, according to Nikkei Asia.
The U.S. is expanding its punitive toolkit with secondary sanctions to target those aiding the Kremlin in its war against Ukraine, now nearing its second year. The Russo-China partnership has so far helped Moscow withstand the freezes of its foreign currency reserves, departure of Western businesses, and exclusion from the SWIFT financial messaging system.
The delegation of 10 Treasury officials, led by Gacki, Assistant Secretary for International Finance Brent Neiman, and Undersecretary for Domestic Finance Nellie Liang, held two meetings in Hong Kong with representatives from Citigroup, JPMorgan Chase, Bank of China, Deutsche Bank, and other Chinese and Western financial institutions, a Treasury official told Newsweek, speaking on background.
The bank representatives reportedly asked the American delegation what more they could do in terms of oversight over transactions that would benefit Russia.
"The U.S. officials want to mitigate risk and for financial institutions to do more than what they are currently doing, such as reviewing transactions and containing goods that are going to Russia," Nikkei cited one attendee as saying.
The Treasury Department delegation arrived in Beijing on Thursday on a two-day visit and was scheduled to meet Chinese counterparts for a third round of talks since the launch of joint-economic and financial working groups in 2023.
"During these talks, the U.S. officials discussed financial stability and capital markets issues, international financial institutions, sustainable finance, cross-border payments and data, and anti-money laundering and countering the financing of terrorism, which includes discussion of counter-narcotics cooperation," the Treasury official said.
The Russian Foreign Ministry didn't immediately respond to Newsweek's separate written requests for comment.
U.S. Treasury Secretary Janet Yellen announced the working groups last year following her first official visit to the Chinese capital in July to pave the way for President Joe Biden's summit with Xi Jinping in San Francisco in November. She plans to return to China for another round of bilateral meetings this year, according to the treasury official.
Earlier this week, Bloomberg cited sources familiar with the matter as saying at least two Chinese banks were set to pull funding to Russian businesses on the U.S. Treasury's sanctions list to avoid being hit with the new secondary sanctions.
After the West and its allies sanctioned Moscow as punishment for Russian President Vladimir Putin's February 2022 invasion, Russia offered countries viewed as neutral or supportive favorable trade terms for its exports—most critically oil and gas.
Russia's ally China announced last month that 2023 had been a record year for trade between the countries. Total trade volume reached $240 billion between January and November, a year-on-year increase of about 26 percent, and over twice the figure posted for 2018.
However, as Russia turns increasingly toward Beijing to fill the hole left by the exits of major trading partners like the U.S., the European Union and Japan, it has become increasingly dependent on the world's second-largest economy.
China is Russia's largest trade partner, accounting for nearly a third of its total trade. However, trade with its northern neighbor accounted for only 3 percent China's total trade volume in 2023, according to China's Cabinet, the State Council.
The scale of this trade imbalance makes Russia particularly vulnerable to Chinese entities looking after their own interests, particularly by hedging against secondary sanctions from the U.S. and its allies.
"There are risks of secondary sanctions affecting the mutual trade between China and Russia, particularly if imposed against individual companies," Russian economists Alexander Knobel and Alexander Firanchuk wrote in a report last month.
Update: 1/20/24,8:30 a.m. ET: This article has been updated with comments from a U.S. Treasury official.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Micah McCartney is a reporter for Newsweek based in Taipei, Taiwan. He covers U.S.-China relations, East Asian and Southeast Asian ... Read more
