The United States is drafting sanctions that threaten to cut some Chinese banks off from the global financial system, arming Washington's top envoy with diplomatic leverage that officials hope will end Beijing's commercial support for Russian military equipment, citing people familiar with the matter, The Wall Street Journal reports, UNN writes.
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"With Secretary of State Anthony Blinken heading to Beijing on Tuesday, one wonders whether even the threat of the US using one of its most powerful tools of financial coercion will have any effect on the complex trade between Beijing and Moscow," the newspaper points out.
China, it is noted, has heeded Western warnings not to send arms to Russia since the war began, but since Blinken's trip to Beijing last year, Chinese exports of commercial goods that also have military applications have surged. "With China now a major supplier of circuits, aircraft parts, machinery and machine tools, U.S. officials say Beijing's aid has allowed Moscow to rebuild its military-industrial capabilities," the newspaper writes.
Blinken and other senior government officials are said to be sounding the alarm among Western allies, including last week at the G7 meeting in Capri, Italy.
"But this time, as he heads to China, officials are counting on the threat of Chinese banks losing access to the dollar, as well as the risk of deteriorating trade ties with Europe, to persuade Beijing to change course," the article says.
Banks, as noted, are key intermediaries in commercial exports to Russia, processing payments and providing credits to client companies for trade operations.
"U.S. officials say imposing sanctions on banks is an escalating option in case diplomatic efforts fail to persuade Beijing to limit its exports," the newspaper writes.
In recent weeks, as noted, "U.S. officials have stepped up pressure on Beijing in private meetings and phone calls, warning that Washington is ready to take action against Chinese financial institutions that trade in such dual-use goods.
"Any banks that facilitate large transactions that send military or dual-use goods to a Russian defense industrial base are at risk of U.S. sanctions," Treasury Secretary Janet Yellen said earlier this month at meetings with her counterparts in Beijing.
"Officials say they hope that joint Western diplomatic pressure will avoid the need to take measures that could disrupt the fragile détente between the two countries," the newspaper points out.
Reportedly, depriving banks of access to the dollar, the currency of most global trade, has much broader implications than conventional sanctions targeting individuals and companies, and is therefore often used as a last resort. Such sanctions often lead to bank failures, affecting their entire customer base, and pose a particular risk to China as the country struggles with growing credit problems, the publication writes.
At the same time, as noted, in the past, the mere threat of targeting banks has led to short-term results.
In December, President Biden signed an executive order that gave the Treasury Department the authority to impose sanctions on banks that help the Russian military-industrial complex. This has created bottlenecks in trade deals between China and Russia, as major Chinese banks have abandoned any role in facilitating deals, said Alexandra Prokopenko, a research fellow at Russia's Carnegie Eurasia Center and former official at Russia's central bank.
But, she said, these banks have gradually been replaced by regional Chinese banks that do little business in the dollar economy and are therefore less afraid of US sanctions. "Payment chains are slowly being rebuilt," Prokopenko said. - "Both Russians and Chinese are constantly adapting to new conditions.