US escalates sanctions on Russia, targets war economy and Chinese support

The US Departments of Treasury and State announced a broad package of additional sanctions on Wednesday. They aim to hit Russia's "war economy" and cut it off from key materials and services, including those from China. Russians will also be cut off from American IT services.

In a release, the US Treasury Department announced that the actions taken on the eve of the G7 summit in Italy aim to significantly increase the risk of secondary sanctions for entities doing business with Russian banks, the defence industry, and other critical sectors of the economy. This also applies to China, which plays a significant role in circumventing current restrictions.

The long list of actions taken includes expanding sanctions on the largest state-owned Russian banks, including Sberbank, Vnesheconombank, and VTB regarding their significant transactions, including with their branches in China and India.

The sanctions also cover a total of 300 entities and individuals supporting the Russian defence industry, many of which are Chinese companies supplying dual-use goods—shipping items such as parts needed for the production of drones, counter-drone systems, and industrial machinery needed for weapon manufacturing—and networks of companies that allow Russia to bypass existing restrictions. In addition to China, this pertains to entities from Russia, Belarus, the British Virgin Islands, Bulgaria, Kazakhstan, Kyrgyzstan, Serbia, South Africa, Turkey, and the United Arab Emirates.

US National Security Advisor Jake Sullivan said on Wednesday that these sanctions are a signal to Beijing and other countries supporting Russia's war machine that "at serious risk of running afoul of the Treasury Department and falling under a sanctions regime."

The US also decided to introduce a ban on providing certain IT services, including cloud services, to nearly all individuals and companies from Russia. These changes are set to take effect from September 12 and impact the Russian industry, which relies on these services. Additional sanctions were aimed at nearly 100 Russian companies participating in the "war economy," including those from the energy, metallurgy, and mining sectors and companies involved in money laundering through activities such as gold trading. The restrictions are also set to hit Russian projects extracting and transporting liquefied natural gas (LNG).

The Department of Commerce announced measures to further hamper the re-export of sensitive goods to Russia through third-party entities.

A series of personal sanctions were also announced, including those on individuals and entities involved in the systematic deportation of Ukrainian children to Russia, people close to the Belarusian regime of Alexander Lukashenko, and Evghenia Gutul, pro-Russian leader of Gagauzia, an autonomous region in Moldova. Gutul is a politician associated with the sanctioned oligarch Ilan Shor, who was accused of massive financial fraud. Authorities in Moldova view her and Shor as figures used to destabilize the country.

- Today’s actions strike at their remaining avenues for international materials and equipment, including their reliance on critical supplies from third countries - said Treasury Secretary Janet Yellen. - Every day, Russia continues to mortgage its future to sustain its unjust war of choice against Ukraine - she concluded.