Yellen Threatens Sanctions Against Chinese Banks Facilitating Russia-Related Transactions

Yellen, finishing a series of meetings in China over the past week, said she and Beijing officials had “difficult conversations about national security,” including on Chinese companies possibly facilitating transactions that are supporting Russia’s war against Ukraine. She said the U.S. is “concerned about the role that any firms, including those in the [People’s Republic of China], are playing in Russia’s military procurement,” and she told Beijing that its companies “must not provide material support for Russia’s war and that they will face significant consequences if they do.”

Any financial solutions “that facilitate significant transactions that channel military or dual-use goods to Russia’s defense industrial base expose themselves to the risk of U.S. sanctions,” Yellen said during an April 8 news conference. “President Biden and I are determined to do all that we can to stem the flow of material that is supporting Russia’s defense industrial base and helping it to wage war against Ukraine.”

Treasury has already sanctioned a range of Chinese companies for shipping sensitive electronics and technologies to Russia (see 2402230035), but the Biden administration is looking to extend its sanctions reach by punishing foreign banks that may be facilitating those transactions (see 2401120051).

Yellen also said she wants both the U.S. and China to more clearly outline how “each side defines national security in the economic sphere,” and said she committed to China that the U.S. will not “surprise” it with any of its national security measures. “Our actions are implemented through transparent rules and regulations with ample comment periods,” she said. “We would welcome transparency from the PRC on its national security actions and greater clarity on where it sees the line between national security and economic issues.”

She specifically mentioned recent restrictions on U.S. processors in Chinese government computers and servers, which the Financial Times in March reported could block certain sales from U.S. companies Intel and AMD. Beijing in May also announced a ban on certain Chinese companies from purchasing products from U.S. chip company Micron, calling those products a national security risk (see 2305220053).

“American firms are unclear exactly what kinds of steps China might take in the future,” she said, adding that the U.S. has “privately and publicly laid out our perspective” around some of its tech restrictions and wants China to do the same. “I've tried in our conversations to make clear that this is a reason for caution on the part of American firms about doing business here.”

Yellen said she didn’t want to “overemphasize this problem” because many U.S. companies “continue to do very profitable businesses” in China. “But I think on each side, we need to be as transparent as we can about our national security concerns and how the actions we take would resolve those concerns,” she said.

The U.S. announces new restrictions “with proposed rules, [we go] through a full rulemaking process in which we take comments," and the administration "makes it very clear what the rules of the game are, and I think that would be helpful from the Chinese side as well.”