“If they don’t abide by the US, they have problems with the US, but if they don’t abide by China, they can be punished in China too,” he said.
Of course, it can be difficult to collect fines from companies that refuse to pay and check that companies are following the rules, Mr Chorzempa added. “It’s already turning out to be difficult to monitor the things that are already being checked, and as you expand that list it becomes a real challenge to verify what goes to Russia,” he said.
Russia’s attack on Ukraine and the global economy
An increasing concern. Russia’s attack on Ukraine could cause staggering increases in energy and food prices and deter investors. The economic damage from supply disruptions and economic sanctions would be severe in some countries and industries and undetected in others.
The Biden administration’s export controls apply to goods manufactured in any country as long as they use US technology, including chip manufacturers such as Taiwan Semiconductor Manufacturing Company and the Shanghai-based Semiconductor Manufacturing Industry Corporation.
Both companies continue to rely on the United States for certain components and manufacturing technology, said Gabriel Wildau, a director at Teneo, a consulting firm. If they continue to supply Russia, SMIC and other Chinese companies could be cut off from US technology, the same kind of punishment that crippled Huawei.
“If Beijing is seen as the engine of Moscow, pressure in the US Congress to extend these restrictions will increase,” Mr Wildau wrote in a note to customers. Beijing would also risk other major tech exporters, such as Japan, South Korea and the Netherlands, “taking over Washington’s stricter line,” he said.
China’s state-owned banks may also be at risk if they continue to lend to Russia. China and Russia have completed more of their trade using the renminbi and the ruble. Beijing has also sought to develop the digital use of its currency as an alternative to the dollar, which could help Russia mitigate the effect of financial sanctions.
But Chinese banks are still heavily dependent on the US dollar. While major Chinese banks already appeared to be withdrawing funding to Russia, Mr Wildau said, Beijing could choose to support Russia using smaller state-owned banks that don’t do much international business that requires the dollar.
