Indirect Military Supplies Support by China in the Russia-Ukraine War
Pressuring China by Blocking Dollar Access for Chinese Banks
The United States is reportedly considering measures to block Chinese banks' access to the US dollar in order to sanction China, which is indirectly supporting Russia with various military supplies. Since the US dollar is the world's primary reserve currency, this is regarded as the most powerful financial sanction, but major foreign media analyze that it is uncertain whether this can disrupt the close trade relationship between China and Russia.
Blocking Chinese Banks' Access to the US Dollar?
On the 22nd (local time), The Wall Street Journal (WSJ) reported that "the United States is drafting sanctions to exclude some banks in China from the global financial system." This is because Chinese banks are playing a key intermediary role by processing payments for Russia's commercial exports and providing credit to Russian corporate entities amid Western financial sanctions on Russia following the Russia-Ukraine war.
According to WSJ, the draft sanctions against Chinese banks include blocking their access to the US dollar. WSJ forecasts that if sanctions against Chinese banks materialize, it could deal a fatal blow to China. Especially, China still faces economic uncertainties due to the ongoing real estate downturn crisis.
However, the plan to block Chinese banks' access to the US dollar is expected to be a last resort if China continues to support Russia's military production. US Secretary of State Antony Blinken is expected to use the draft regulations as leverage during his visit to China starting on the 23rd, WSJ reported.
Strengthening Russian Military Supplies... Is China Behind It?
The United States believes that China has been supplying Russia with military supplies such as drone and ballistic missile components since last year. After Western sanctions against Russia in 2022, it was confirmed that Russia has been suffering from shortages of military supplies and manpower in the war of attrition with Ukraine. However, the fact that Russia captured Avdiivka in eastern Ukraine through intense shelling in February has raised suspicions that China may have indirectly supported military supplies.
If China's indirect support continues, there are even predictions that Ukraine may be defeated by Russia. This is why the United States is rushing to pressure Chinese authorities who are indirectly aiding Russia. On the 14th, US Treasury Secretary Janet Yellen said on CNN, "Companies providing various supplies for Russia, including banks facilitating transactions supplying military goods to Russia, will face US sanctions." On the 18th, the US government also reminded Western allies of this at the Group of Seven (G7) foreign ministers' meeting held in Capri, Italy.
The United States is urging Europe to actively participate in sanctions against China. While Europe sympathizes with the US's intentions, it hesitates to take action considering China's influence in trade. Notably, Germany's largest trading partner has been China for eight consecutive years. Maria Snegovaya, a senior fellow at the Center for Strategic and International Studies (CSIS), said, "Both the US dollar and the euro need to exert power simultaneously to have a greater impact on China."
China Pushes Back
China is pushing back against the US's related sanctions. A spokesperson for the Chinese Ministry of Foreign Affairs recently emphasized at a press conference, "The Chinese government will continue to do what is necessary to firmly protect the legitimate rights and interests of its enterprises."
However, since China's indirect support for Russia is also a strategic investment for China, there is an assessment that the US's sanctions warnings will not immediately take effect. A source familiar with China-Russia relations said, "The two countries spent years laying the groundwork to increase trade as a way to protect their economies from Western sanctions imposed before the Ukraine invasion."
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