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US, Allies to Impose New Russia Sanctions, Export Controls, Official Says

The U.S. and its allies are planning a “renewed effort” to counter Russia’s sanctions evasion tactics, Treasury Deputy Secretary Wally Adeyemo said this week, speaking during a Feb. 21 event hosted by the Council on Foreign Relations. He said part of the effort will include new sanctions and export controls, more enforcement cooperation with allies and more direct conversations with companies that are still doing business with Russia.

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“We will use all of our economic tools to give countries, companies and individuals a choice: to do business with a coalition representing half of the global economy, or to provide material support to Russia,” Adeyemo said.

Although the new effort will look to “rigorously enforce the sanctions and export controls we've already put in place,” Adeyemo said, companies can expect new restrictions. The U.S. will “further tighten our export controls and sanctions to go after some of these dual-use goods that we know are furthering their war effort,” he said, adding that the EU is “committed” to taking similar actions.

While he didn’t give specifics, Adeyemo said the administration wants to “shut down the specific channels through which Russia attempts to equip and fund its military.” Despite broad, multilateral export restrictions, researchers say Russian defense equipment still relies on Western technology, and the country has worked to build new supply routes to access Western microelectronics, including through “transshipment hubs” and other “clandestine” networks (see 2208090044).

Adeyemo said the new controls will look to close off those routes and limit Russia’s ability to acquire semiconductors and other technologies from commercial products. “The Kremlin has sought to backfill lost inputs by repurposing goods, like chips that come from non-military electronics like refrigerators, and retooling manufacturing facilities to produce the goods it needs to support its war effort,” he said. “Our counter evasion efforts will deny Russia access to the dual-use goods being used for the war and cut off these repurposed manufacturing facilities from the inputs they need to fill Russia's production gaps.”

The “final element” of the renewed effort will be placing more “pressure” on companies in countries that “we know are allowing or facilitating evasion,” Adeyemo said. He said some nations, despite publicly denouncing Russia’s invasion of Ukraine, “are falling short of their obligations to enforce the sanctions.”

The U.S. and allies are meeting with companies and banks in those countries to “tell them directly” that they will be subject to sanctions if they don’t comply with U.S. controls. “The cost of doing business with Russia and violation of our policies is a steep one,” Adeyemo said. “And companies and financial institutions should not wait for their governments to make the decisions for them.”

Adeyemo's comments came as a group of EU member states tries to lobby the bloc to improve its ability to target Russian sanctions-evaders. The member states are considering a proposal that could allow the EU to impose trade restrictions on people or companies in and outside the EU that are supplying Russia with items to aid its war effort, Bloomberg reported Feb. 20.

The U.S. has specifically seen “troubling patterns” in countries that neighbor Russia, he said. The U.S. is providing “intelligence and actionable information” to those countries to help them “stamp out sanctions evasion in these jurisdictions.” And if they don’t follow through, Adeyemo warned, “we and our partners are prepared to use the various economic tools at our disposal to act on our own.”

But Adeyemo also said the warning extends beyond countries that neighbor Russia. “Fundamentally, for any jurisdiction, be it China, be it the [United Arab Emirates], be it a country that is neighboring Russia, the choice they're going to have to make is not only with regard to their economic relationship with the U.S.,” he said, “but their economic relationship with the other members of our coalition.”

Adeyemo also briefly touched on new potential outbound investment restrictions, suggesting new controls may be necessary to prevent U.S. companies from funding the ability of certain “adversaries” to develop advanced technologies (see 2302140083). “If we're concerned about the ability of adversaries to build up things like quantum computing, or to make investments that help them accelerate their defense production, we should ensure that our companies here are not assisting them in doing that,” he said. Adeyemo added that the administration is “thinking through what additional tools that we need in the toolkit” to impose those restrictions.