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Russia and China Cemented Economic Ties Before Ukraine Invasion

“If they do not comply with the US, they are in trouble with the US, but if they do not comply with China, they may also face fines in China,” he said.

Of course, levying fines from companies that are unwilling to pay and monitoring whether businesses comply with the rules can be difficult, Mr. Chorzempa added. “It is already proving difficult to monitor controlled items, and if you expand that list, it will be a real challenge to verify what is happening in Russia,” he said.

The Biden administration’s export restrictions apply to goods manufactured in any country as long as they use US technology – including chip manufacturers such as Taiwan Semiconductor Manufacturing Company and Shanghai-based Semiconductor Manufacturing Industry Corporation.

Gabriel Wildau, managing director of consulting firm Teno, said the two companies continue to rely on the United States for specific components and manufacturing technology. If they continue to supply Russia, SMIC and other Chinese companies could be cut off from US technology, the same kind of penalty that crippled Huawei.

“If Beijing is seen as a supporter of Moscow, the pressure on the US Congress to extend these sanctions will increase,” he said. Wildow wrote to customers in a note. Beijing will also face the risk that other major technology exporters, such as Japan, South Korea and the Netherlands, will “adopt Washington’s strict line,” he said.

China’s state-owned banks could also face risks if they continue to lend to Russia. China and Russia are settling their trade using the renminbi and the ruble. Beijing is also trying to develop a digital use of its currency as an alternative to the dollar, which could help limit the impact of monetary sanctions on Russia.

But Chinese banks still rely heavily on the US dollar. While major Chinese banks appear to be already withdrawing their loans to Russia, Mr. Weldau said Beijing could choose to support Russia by using smaller state-owned banks that do not do much international business that requires the use of dollars.

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