The US just announced sanctions against Chinese companies and individuals for their alleged support of Russia’s military via the sale of so-called dual use goods, as well as yet more sanctions against Russia for among other things, the charge that Russia deployed chemical weapons in Ukraine. Since the Western press, presumably following official messaging, talked up Blinken’s recent trip to China and his lead demand, that China stop sending certain dual-use items to Russia, we’ll focus on the China action. Note that the fact that the US, EU, and UK have already been sanctioning Chinese companies over alleged support for Russia’s military has largely gone under the radar.1
The fast way to assess the seriousness of the delivery on the US threat display of sanctioning China over the US belief that Chinese trade is helping Russia’s military is the placement of news stories. The article is below the fold at the Financial Times, nowhere to be found on the landing pages of the Wall Street Journal or the Asian version of Bloomberg. Instead, Bloomberg gave a prominent position to this piece:
Before we get into what the sanctions seem to amount to, a reason for the lack of press interest is that the Biden Administration did not sanction any banks, as it had threatened to. That was widely expected to produce retaliation from Chinese, even if the US listed only some small fry.
Mind you, as with US and EU sanctions against Russia, the US will likely keep slapping on against China. Since sanctions are generally un- to counter-productive, so this round was never set to do all that much damage even before you look at what weak tea they seem to be. Yet the officialdom wants to be seeing to be Doing Something, and so somehow has convinced itself that Doing Something That Demonstrates Your Impotence is better than doing nothing.
To keep this post to a manageable length, we’ll skip over the inconsistencies in the US position, that it gets to arm allies openly but other great powers can’t even indirectly back theirs. This is an attempt at might makes right even though the US is not all that mighty these days.
Indeed, even though there are sure to be multiple motives for these China sanctions, it seems a reasonable guess that the Collective West being a victim of its own propaganda is a biggie. The US, UK, EU, and Ukraine spent enormous numbers of pixels depicting Russia as militarily backwards and weak. Remember how they were alway about to run out of missiles, and now inexplicably have the run of Ukraine’s air space? How per Ursuala von der Leyen, Russia was having to harvest chips from washing machines?
Now that Russia is decisively winning and pressing its advantage, there must be a narrative and ego-saving explanation. Those dastardly Chinese! They must have rebuilt Russia’s military after we so decisively mauled it!
The reason the faltering Ukraine war really does seem to be a significant driver of these China sanctions, and not just a pretext, is the timing. This is not a good juncture to be escalating with China (and the weakness of this current rounds indicates some adults get that). The Fed is talking about tightening. Sanctions blowback can easily squeeze supply chains and worsen inflation. Biden looks weaker in the latest national polls The last thing this Administration needs is anything that squeezes household budgets or puts Mr. Market in a swoon. If the Administration were to want to look tough with China, much earlier or much closer to the election (so any China response would not yet his the US) would be better.
It would be helpful to get informed reader input on whether Chinese supplies to Russia are actually are critical or meaningful to Russia’s military production. Russia fanboys reflexively say “no” without substantiation or elaboration, which is not exactly convincing. On the side of the US/Ukraine skeptics is the famed June 2022 Royal United Services Institute report by Alex Vershinin, The Return of Industrial Warfare. Vershinin found it would take the so-called Collective West a full decade to catch up to Russia’s manufacturing capacity, citing comparative standing in multiple weapons categories. A counter-argument is that Russia has massively ramped up its drone output, both in number and type, since the war started. Its workhorse Lancet is home grown but it did get the design for the Geran drone from Iran.
One of the items that the US singled out in Blinken’s gratuitously impolite statement from Shanghai was nitrocellulose. Alexander Mercouris pooh-poohed the idea that China was a critical supplier. He said many countries, including Russia, make it.
But first on Blinken’s list was machine tools. Contacts have argued that machine tools need to be continually serviced and fixed with parts and therefore it needs a constant supply. Other contacts with factory experience counter that old US machine tools used to last forever, and if Russia had been able to buy machine tools made to the former US standard, it would not need to buy all that many. A related question are the claims made by Brian Berletic and Andrei Martyanov about Russia’s military making sure its arms-makers have surge capacity, as in it would not need to do much in the way of expansion to considerably increase output.
Even if the US’ machine tools take is correct, there are reasons to doubt the caliber of the trade analysis:
This devastating report shows how a so-called "China expert" who was candidate to be US Undersecretary of Commerce was 100% wrong in claims he made to dub Chinese companies "national security threats".
This fake "expert" helps craft US sanctions on Chinahttps://t.co/zj1cDM77k2
— Ben Norton (@BenjaminNorton) April 30, 2024
Now of course, we have to return to the premise. Even if the US has China dead to rights, so what? The US persists in the fantasy that it can drive a wedge between Russia and China, after telling both in many ways that it is determined to cut each down to size. China instead, to US consternation, has not only refused to criticize Russia for the war in Ukraine (making it easier for other nations to resist US arm-twisting) but has even taken to embarrassing the US when it can. One example was at a Ukraine peace summit where the weird intent was to get all sorts of countries to unite behind the barmy Zelensky plan, of Russia withdrawing to its 1991 borders and being subject to various tortures, like war crime tribunals and reparations. As if mere disapproval has any impact, as the genocidal Israel is demonstrating.
Russia was of course not invited. China, who did attend, disrupted the confab by asking why Russia was not there and how could they think they could accomplish anything without Russia. Other non-Collective West parties piled on.
Even so, I have had colleagues who are otherwise sane argue that China would relent: The US economy is running hot due to all the fiscal stimulus and is thus importing a ton. China’s economy is in the doldrums and they do not want to risk US demand. Yet another proof of how effective the spin doctoring has been.
Finally, to the main event. An early account, which Lambert cited yesterday in Links, let the cat out of the bad. Anadolu Agency reported, “The US has sanctioned 31 Chinese companies among its 200 targets over Russia’s war in Ukraine.” The company targets in China are what China cares about. Sanctioning individuals is a stunt. And the number of businesses hit is comparatively small, and from what I can tell from the Financial Times and the lack of other headlines, none very consequential. The comments section of the Financial Times similarly seems unimpressed, even with huffy defenses of the need to whack China.
The targets of the sanctions announced on Wednesday include two Chinese groups that provided Moscow with nitrocellulose, an ingredient for gunpowder and rocket propellant, as well as Russian importers of the chemicals.
Again, if Mercouris is right about nitrocellulose, is this a deliberate wet noodle lashing, or inept sanctions design and messaging?
Back to the Financial Times:
The Chinese embassy in Washington said China “firmly opposes” what it described as “illegal unilateral sanctions”. It said Beijing “oversees the export of dual-use articles in accordance with the laws and regulations”.
The Chinese targets include groups that allegedly supplied Russia with drones, weapons and ammunition, in addition to chips, sensors and other military-related technology…
The Treasury placed sanctions on two Chinese groups — Wuhan Global Sensor Technology and Wuhan Tongsheng Technology — that officials recently told reporters were helping Russia. Wuhan Global produced infrared detectors for a Russian manufacturer of military optics….
It also targeted Juhang Aviation, a Shenzhen-based company that produces drone-related equipment, including propellers, signal jammers, sensors and engines…
Ukrainian troops are struggling to hold their positions along the front line in the east of the country.
“Combined, our support for Ukraine and our relentless targeting of Russia’s military capacity is giving Ukraine a critical leg up on the battlefield,” [Treasury Secretary Janet] Yellen said.
Wednesday’s sanctions also target Russia’s chemical and biological weapons programmes, according to the Treasury.
The US also designated shipping operators that have continued to support the development of Russia’s Arctic LNG 2 project after it was sanctioned last year.
Among them is Red Box Energy Services, a Singapore-based company founded by US-born shipping executive Philip Adkins. The journey of Red Box-operated vessels, the Audax and Pugnax, through the ice-bound Northern Sea Route to deliver equipment to Arctic LNG 2 was documented in a Financial Times investigation in February. Adkins has not been designated by the US. He did not immediately respond to a request for comment.
The US Department of State said: “Today’s actions demonstrate the United States’ continued resolve to constrain the Arctic LNG 2 project’s production and export capacity and limit third-party support to the project.”
The story mentions that the Senate has passed a bill which would ban US imports of enriched uranium from Russia, which now provides 20% of US supply. The White House backs the legislation….which includes temporary waivers though 2028. This is shades of St. Augustine’s “Grant me chastity and continence, but not yet.” And aside from that, has anyone in the Beltway worked out that there won’t be much of Ukraine left by then?
In any event, the good news is that the Biden Administration seems to have realized all it can afford to do is impose some feeble sanctions against China. The bad news is that as things keep getting worse in Ukraine, it may feel pressured to do more to preserve what is left of its manhood.
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1 Some examples from a March 2024 report, China’s Position on Russia’s Invasion of Ukraine by the U.S.-China Economic and Security Review Commission:
February 23, 2024
- [Sanctions] U.S. Department of Commerce adds eight entities from China to its Entity List for activities supporting Russia’s defense-industrial sector and war effort. Five of the eight entities allegedly facilitated the diversion of controlled microelectronics to Russia’s military and intelligence authorities, while two others allegedly procured U.S.-origin machine tools, electronics test equipment, and machine tool spare parts for Russian end-users.
- [Sanctions] The European Union approves its 13th package of sanctions in response to Russia’s invasion of Ukraine. Sanctions includes three Chinese firms and one Hong Kong-based company due to their role in trading electronic components of EU-origin products to Russia.
February 22, 2024
- [Sanctions] The UK announces sanctions targeting individuals and businesses sustaining Russia’s war in Ukraine, including three Chinese companies. According to the UK Government, China’s Finder Technology and Juhang Aviation Technology allegedly supplied sanctioned electronics to Russia, and Beijing Micropilot Flight Control Systems’ unmanned aerial vehicle (UAV) engines were found in UAVs used by Russian forces in Ukraine….
January 11, 2024
- [Sanctions] The Kyiv School of Economics releases a joint study with the Yermak-McFaul International Working Group on Russian Sanctions that details how Russia continues to import components for military production despite current export controls. According to the study, supply chains for battlefield goods and critical components shifted in large part because of current export controls. Russia now imports most of these goods from China…..
December 3, 2023
- [Sanction] Russia’s military purchases 500 Chinese Desertcross 1000-3 utility terrain vehicles manufactured by Shandong Odes Industry. Russian news Agency TASS reports that Russia’s military already has around 537 basic models of the Chinese-made vehicles in service and plans to procure another 1000 in the first quarter of 2024. Russian Defense Minister Sergei Shoigu notes the vehicles are “extremely in demand.”
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Give it a bit. This is just a taste.
The United States will without hesitation burn everything down rather than lose this war.
That still counts as losing this war.
Considering that US ICBMs apparently are too old to leave the silos on their own power, there’s not much USA can do but bark.
I somehow doubt that.
Anyway, the US will dial up the sanctions and order its vassals to follow suit.
One does need to account for the fact that western sanctions objectively aren’t working in terms of changing policy or foreign governments. Not on China, nor Russia, nor even North Korea (isolated completely from West; yet there he is, Mr. Kim Jong-Un!!) Still standing while a veritable who’s who of American politicians that tried sanctions are either dead, near dead, or irrelevant.
In fact, they are actively backfiring, accelerating the divorce process from the west.
To control a foreign government requires vassalization, at which point sanctions are not needed. Here’s lookin’ at ya, Europe!
I agree with hk down thread – sanctions at this point are performative; Kabuki theater aimed not at the country being sanctioned but at domestic voters in the sanctioning country. Look, we’re doing something!
China doesn’t seem too thrilled about the prospect of more US sanctions.
For that matter, the reason that the Houthis are the only people in the Middle East to show any sense of basic decency is in large part because they have no leaders with western assets to sanction or western toys to seize.
The gulfie tyrants, by contrast, hide their heads in the sand, cowering in fear that the Americans and their european lapdogs might take their playthings away.
It does not seem keen about sanction v. national champions like Huawei and TikTok or its cheap and very good EVs. These sanctions by contrast are noise.
Good observation. I think when it comes to the big companies, China and the US are locked in a kind of death embrace. Boeing is relying on China to sell more death-trap MAX planes. They only recently resumed deliveries to a few Chinese airlines. China can use this as leverage.
Oh you want to sanction TikTok? I see, we found a loophole in that contract, very sorry, no more planes from Boeing. But have another dumpling, Mr. Blinken!
Or, in a more tit-for-tat move, China has apparently already made Apple delete WhatsApp from the Apple store in China.
Yes please.
I disagree. The US will offer performances short of actual direct military confrontation, and claim “victory” regardless of the outcome on the ground in Ukraine.
‘Feral Finster’ – Here is a little taste of how badly the US is doing compared with Russia. This small aspect is symptomatic of all the rest of the technical economy.
https://militarywatchmagazine.com/video/russian-air-force-vs-us-air-force-summary-global-war
Paper Tiger, decaying empire, full of hubris, resorts to desperate, pathetic (and illegal) measures to project power and vain attempts to reassert hegemony.
As FF, and PS note above, the US has Nuclear First Strike doctrine and it looks like it’s own “Samson Option”. But even that won’t work.
Performative sanctions without a real bite, let alone a mortal one, seem stupid to me. The old saying had that, if you strike a king, be sure to kill him. The corollary should be that, if you insult the king, be sure that he’s already dead. Every pointless sanction is an insult and will be very costly in the future.
The West isn’t just out of capacity but really out of ideas. Do they know anything other than sanctions? Have they ever considered buying some voodoo dolls off of AliExpress and give that a try?
AliExpress? Make that Etsy!
I wonder who those sanctions are meant to pleasure. Wouldn’t most people see the hypocrisy? Congress critters waving UKR flags because we’re giving them $60b, and next let’s sanction China for selling Russia some dual use stuff? Seems stupid to me. Btw, would Ursula think washing machines are dual use as well?
They can buy them from Raytheon and then the dolls would cost $50,000 each.
I still predict a political civil war between U.S. arms makers and the non-defense sector corporations. The neocons want a full blown trade war with China, and once the U.S. CEOs do the arithmetic, they will remove the politicians who have empowered the neocons. The lobbying resources of the non-defense corporations are many times greater than those of the arms makers, and that will decide the issue. In a plutocracy, money rules.
Even the arms makers are heavily dependent on China: a high ranking executive (CEO?) from either Lockheed Martin or Raytheon was on record a few years ago that, without subcontractors and components from China, they’d have to close up shop.
Some bald guy with a goatee 100 years ago talking about “…selling the rope…”
“Vershinin found it would take the so-called Collective West a full decade to catch up to Russia’s manufacturing capacity, citing comparative standing in multiple weapons categories.”
People are looking at that kind of statement and thinking about the challenges of mass industrialization. The Blob looks at that and sees pension plans.
Ten years? At the rate the MCI works I would guess 25 to get even with today.
It’s how 10 becomes 25.
Well, Blinken really has no choice but to threaten and try and hurt.
The US has no way to play China’s win/win game. What does the US have to offer anyone as THEIR share in the “win”? Only letting their diplomats’ children get into Harvard — but princelings are already told not to be so conspicuous. So the usual carrots won’t work, and on the national level the US is barren.
What does the US have to offer anyone as THEIR share in the “win”?
— Michael Hudson
[ This strikes me as an important question since “development” would not seem to be an answer since that has not been a general answer before now.
Also, the striking advances in science education in Chinese institutions will limit a perceived advantage of Western institutions. Look to the Nature Index of high-quality international research publications for the past year, and notice that 3 of the top 5 publishing institutions are Chinese, 7 of the top 10 are Chinese, 9 of the top 15…]
High interest payments on it’s debt?
Which won’t matter if the US steals the foreign debt the way they did for Russia’s foreign reserves because your nation won’t blindly commit economic self destruction in Washington’s service.
“What does the US have to offer anyone as THEIR share in the “win”? ”
They don’t, other than their princes and politicians will continue to personally prosper.
They can still offer Hollywood movies.
Only the movies where the US wins.
“After Much Posturing, US Imposes (So Far) Underwhelming Sanctions Against China for Russia Trade
— Yves Smith”
This is a superb essay, but I would argue that the United States has thought from the Obama administration that tough sanctions against China would sharply limit Chinese technology advance and general growth only to be repeatedly wrong. The US became worried about China’s space program and decided to severely limit the program with the Wolf Amendment of April 2011 to limit Chinese work with NASA. At the same time, US policy became a pivot to Asia and particularly China containment.
The Obama policy appeared potent enough that The Economist, expanded by Berkeley’s Brad DeLong, thought China would be set back in growth by 10 years to half a century.
However, what is obvious and should have become obvious during the Trump years is that Chinese development is just not being stopped. China has a highly advanced space program, and looking “just” to Chinese ship-building containment is not going to be possible.
A superb essay indeed.
Yves heads up an all-star roster at a must read blog
I tell everyone
I’m waiting for China to ban the sale of rare earth element metals and compounds to the US.
The so-called leadership in the US is both incompetent and insane.
Lancet, I believe, is a domestic Russian product. Geran is the one based on the Iranian Shahed.
It seems the US administration is unable to experience embarassment. Psychologists probably have name for it.
Sorry, will correct. I can’t keep up with all the military porn.
To your question on whether Chinese supplies to Russia are critical to their military production, I would say yes, but more in terms of the consumer sector than military production. Chinese supplies are what is keeping the Russian civilian economy humming along with barely any disruption, and that stability is I would argue as important to keeping the defence sector going smoothly as anything. I mean, just look at ourselves in the West, we would be completely screwed in six months time if China cut us off, because so much of our basics come from Chinese suppliers. I suspect that Russia would be able to manufacture its’ defence industrial needs without China, because it’s put a lot of emphasis on rebuilding and strengthening the defence sector’s supply chain over the past 10-15 years – this is the entire reason the giant state-owned Rostec exists, who own/control/create or co-ordinate hundreds of firms all along the defence-industrial supply chain. A lot of the old Soviet capacities had to actually be re-created in Russia proper, as many never actually existed within Russia but in other Soviet republics. Ukraine itself probably inherited %40 of the Soviet arms industry! So rebuilding these capacities is something Russia has focused on this past decade and a half. But the civilian economy, they would be just as screwed as we would be I think. Those patriotic Russians working long overtime in the artillery factory probably appreciate having clean socks and underwear.
As to the machine tooling sector, there is a good recent paper on the Russian machine tool industry by Dr Julian Cooper of the University of Birmingham, who is a specialist on the Russian economy, and whos doctoral thesis was on the development of the Soviet machine tool industry. Full article is available here free to read, “The machine tool industry of Russia at a time of war and sanctions”
The machine tools sector is one the Russian government has targeted especially since the sanctions of 2014 as critical for defence production, and so has invested in developing and strengthening domestic producers, through various means that Cooper covers. It seems that machine tool production by domestic firms is up considerably since the sanctions have been implemented, although they still import half of their requirements. In general, most of Russia’s machine tools were imports even after the sanctions hit in 2014. Prior to then, Western firms were favored; afterwards imports shifted to Asian countries, especially South Korea, Taiwan, and China. Interestingly, South Korea and Taiwan didn’t apply sanctions even after 2022, although they have as of 2023.
‘A lot of the old Soviet capacities had to actually be re-created in Russia proper, as many never actually existed within Russia but in other Soviet republics.’
That was true of marine engines as they were built in the Ukraine. After 2014 the Russians had to rebuild a facility in Russia itself to build them and I think that a lot of the original marine engineers went to work there helping to set things up.
After the November election, I think that this is when they will ramp up sanctions. It does not matter that they do not work for their intended purpose but that is all they know. If China was a weak country they would lob missiles at it and it’s infrastructure but that is not possible here. So sanctions it is. But there is a problem. They have done it to Russia but Russia is a sophisticated country and knows when to react and when to defer reacting til a date of their choosing. With China, it is a very nationalistic – or should that be patriotic – country and they won’t stand for actions taken against it unanswered but will hit back. And right now, the US has a huge surface area of where China can hit it while that for China is not so large. Of course if the US had the EU remove China from SWIFT, that would be the time to lay in extra food and fuel as that would be the time that things really cut loose. I don’t even know what would happen if a US government decided to freeze all overseas Chinese assets and frankly do not want to find out..
From the little that I know, China seems to be a very patient country and does not react to US tantrums. When they do run out of patience, Japan and Taiwan will be the first helping of “toast”, later followed by US bases in the Pacific.
I’m not an expert on China, but they have a saying, “Swallow the teeth and blood.” A Chinese emperor had one of his generals severely beaten. The general submitted meekly and declared his undying loyalty. Twenty-five years later, the general overthrew the emperor.
Remember what Chou EnLai said about the French Revolution? “It’s too soon to tell.” The Chinese think in terms of centuries, not quarters.
Imposing sanctions on your most important trade partner? That worked brilliantly to boost the European economy, didn’t it?
Imposing completely ineffectual sanctions on your most important trade partner — isn’t that what they call a lose-lose strategy?
The reality is that the US relies far more on China than China relies on the US. Decoupling is impossible for the US, without incredible economic costs and would take decades.
https://kki.hu/en/decoupling-and-de-risking/
Even the military industrial complex, which is driving this wholeh hostility against China understands that.
https://www.ft.com/content/d0b94966-d6fa-4042-a918-37e71eb7282e
Famously, Tim Cook said the same thing about China.
https://global.chinadaily.com.cn/a/202403/20/WS65fb01fba31082fc043bdcba.html
This echoes what Steve Jobs said many years ago.
A trade war would certainly be harmful to the Chinese and there are vulnerabilities not presentin Russia (ex: China imports a large amount of its food and energy), but it would also mean that the US is hurt far worse.
The only good thing about this is that it might trigger a political revolution in the US that will bring down the existing neoconservative and neoliberal Establishment. I hope the ruling class loses everything in that case, especially the wealth they stole from the American people and the rest of the world.
“The reality is that the US relies far more on China…”
Really interesting and helpful analysis.
The core of understanding of hugely counterproductive US policies against China and Russia is a fact that west plays poker game while east plays chess. The west is doubling down on consecutive failures as a winning strategy to cover up weakening hand while east lures west to take counterproductive or even self even destructive moves on a chessboard.
That’s why outcome of this game is already decided. What is not yet clear how devastating damage to US global standing will it result in.
Reading from western propaganda of intimidation mostly targeting their own they pretend going for broke and that is what they are mentally preparing population for it. But in fact they are more and more constrained by reality as they discover their bluffs being called again and again not just by powerful like China or India but by many small countries.
One of the most of US overplayed card is supremacy of financial system. As since 2024 this card was repeatedly beaten simply because it supported, even gave extra fuel to natural process of multipolarity.
Thirty years ago US would have financially crashed all enemies, now America shoots its own remaining golden goose in the head instead what would
have been rational attempt to slow down inevitable process to buy time to adjust to new reality as unscathed as possible. Just few in DC and NYC quietly start to worry about self forced errors and are beginning to talk about rationalizing this self destructive madness driven by imperial hubris.
In addition to new phony sanctions against Russia and China which delay impact or circumvention mechanisms have already deployed old sanctions are quietly being lifted like for example several Russian banks were reconnected SWIFT while other sanctions were already officially declared like metal market bans ineffective or like Russian cargo and ship insurance ban imposed by Brits or U.S. trade representative humiliated herself insisting that pumping crude oil from one ship to another in third party (Indian orTurkish) port makes that oil no longer Russian. The panic about international dollar standing spreads as speculators smell blood. After China and IMF warning about huge unsustainable US National and corporate debt, EU musings and empty threats suddenly G7 took seizing Russian state assets off the table despite U.S. bill and EU declarations to contrary. Russia already retaliated against US banks that are subject to the the law by seizing JPM assets via court decision as insurance for their own litigation against western seizure.
Despite political pressure FED and ECB vehemently opposed any schemes to take Russian assets to transfer them to Ukraine or purchase weapons as not only China but now Saudis/GCC and Indonesia registered sharp protest threatening reorientation of their investments out of insecure west as they did to Swiss. In Africa right now there is frenzy of repatriation of gold deposits from western depositories back home and reduction of western currency reserves to focus on trade in national currencies. The fact that Russians just moved into one of three American military bases in Niger without US invitation speaks volumes of fading US hegemon.
The global hegemony is a funny thing. It gives huge premium but it’s enormously costly to maintain while easy to challenge as hegemon’s tolerance is very low. If US will insist to defend it as it does now it will bankrupt itself as costs to keep hegemonic premium raise it diminishes such premium even faster.