Before Ukraine Invasion, Russia and China Cemented Economic Ties

“If they don’t comply with the U.S., they’re in trouble with the U.S., but if they don’t comply with China, they could also face penalties in China,” he said.

Of course, collecting fines from companies that are unwilling to pay and monitoring whether businesses comply with the rules could be difficult, Mr. Chorzempa added. “It’s already proving difficult to monitor the things that are already controlled, and if you expand that list, that’s going to be a real challenge to verify what’s going to Russia,” he said.

The Biden administration’s export controls apply to goods produced in any country as long as they use U.S. technology — including chip makers like Taiwan Semiconductor Manufacturing Company and the Shanghai-based Semiconductor Manufacturing Industry Corporation.

Both of those companies continue to rely on the United States for certain components and manufacturing technology, said Gabriel Wildau, a managing director at Teneo, a consulting firm. If they continue supplying to Russia, SMIC and other Chinese companies could be cut off from U.S. technology, the same kind of penalty that crippled Huawei.

“If Beijing is viewed as Moscow’s enabler, pressure will rise in the U.S. Congress to extend these restrictions,” Mr. Wildau wrote in a note to clients. Beijing would also face the risk that other major technology exporters, like Japan, South Korea and the Netherlands, “would adopt Washington’s tougher line,” he said.

China’s state-owned banks could also face risks for continuing to lend to Russia. China and Russia have been settling more of their trade using the renminbi and the ruble. Beijing has also been trying to develop the digital use of its currency as an alternative to the dollar, which could help Russia limit the effect of financial sanctions.

But Chinese banks are still deeply reliant on the U.S. dollar. While major Chinese banks already appeared to be pulling back their financing for Russia, Mr. Wildau said, Beijing could choose to support Russia using smaller state-owned banks that don’t do a lot of international business that requires the use of the dollar.

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