U.S. Expands Sanctions on Russia as G7 Leaders Gather

The Biden administration on Wednesday announced a series of new financial sanctions aimed at interrupting the fast-growing technological links between China and Russia that American officials believe are a broad effort to rebuild and modernize Russia’s military during its war with Ukraine.

The actions were announced just as President Biden was leaving the country for a meeting in Italy of the Group of 7 industrialized economies, where a renewed push to degrade the Russian economy will be at the top of his agenda.

The measures were coordinated by the Treasury, State and Commerce Departments and aimed to further isolate Russia from the global financial system and cut off its ability to gain access to the technology that powers its military arsenal.

The effort has grown far more complicated in the past six or eight months after China, which had previously sat largely on the sidelines, stepped up its shipments of microchips, machine tools, optical systems for drones and components for advanced weaponry, U.S. officials said. But so far Beijing appears to have heeded Mr. Biden’s warning against shipping weapons to Russia, even as the United States and NATO continue to arm Ukraine.

Although the measures expand the reach of the U.S. sanctions program, the Biden administration has so far held back from imposing sanctions on Chinese or European banks that it believes are helping Russia. The new measures do not restrict banks from facilitating transactions related to Russia’s energy exports, which the Biden administration has allowed to continue out of concern that restricting them could fuel inflation.

Announcing the sanctions, Treasury Secretary Janet L. Yellen said in a statement that “Russia’s war economy is deeply isolated from the international financial system, leaving the Kremlin’s military desperate for access to the outside world.”

At the heart of the measures is an expansion of “secondary” sanctions that give the United States the power to blacklist any bank around the world that does business with Russian financial institutions already facing sanctions. This is intended to deter smaller banks, especially in places like China, from helping Russia finance its war effort.

The Treasury Department also imposed restrictions on the stock exchange in Moscow in hopes of preventing foreign investors from propping up Russian defense companies. The sanctions hit several Chinese companies that are accused of helping Russia gain access to critical military equipment such as electronics, lasers and drone components.

In addition to the Treasury Department’s measures, the State Department imposed sanctions on about 100 entities, including companies “engaged in the development of Russia’s future energy, metals, and mining production and export capacity.” And the Commerce Department announced its own set of restrictions, banning American exports to certain addresses in Hong Kong that the United States says are used to set up shell companies to funnel banned goods to Russia.

Mr. Biden has tried before to choke off supplies and financing to Russia, and overestimated the effects of that move. In March 2022, shortly after the war began, he announced an initial round of financial actions and declared, “As a result of these unprecedented sanctions, the ruble almost is immediately reduced to rubble.” It was not. After a brief dive, it recovered, and while today it is not as strong as it was a year ago, the Russian economy has been expanding because of the strength of war-related growth.

Much of that is thanks to China’s effort. It has been buying Russian oil, often at a discount to world prices. And it has ramped up its sale of dual-use goods, especially the microelectronics and software needed to manufacture weapons systems, drones and air defenses.

The result has been the rise of a somewhat parallel war economy involving Russia, China, Iran and North Korea. Many of the firms subject to sanctions are in Hong Kong or just over the border in Shenzhen, the technology manufacturing center of China. Yet administration officials insist that this time, they can choke off what has become a deepening commercial relationship.

In announcing new restrictions on Chinese firms, the Biden administration is also hoping to spur European governments and possibly Asian allies to take similar measures.

Secretary of State Antony J. Blinken discussed the issue with European counterparts at a meeting of the North Atlantic Treaty Organization in Prague last month, and U.S. officials intend to put it on the agenda of a leaders’ summit in Washington in July.

Mr. Blinken has also warned the Chinese government that it cannot hope to have an amicable relationship with European powers if it props up the Russian defense industry.

At a news conference in Prague on May 31, Mr. Blinken said 70 percent of the machine tools that Russia is importing are coming from China, as well as 90 percent of microelectronics.

“China cannot expect on the one hand to improve relations with countries of Europe while on the other hand fueling the biggest threat to European security since the end of the Cold War,” he said.