The United States has widened its sanctions against Russia as G7 leaders prepared to gather in Italy for a summit where the top priorities will be bolstering support for Ukraine and trying to limit Russia’s war capabilities.

Wednesday’s sanctions package from the US Treasury targets Chinese companies that the US says is helping Russia pursue its war in Ukraine, and it raises the stakes for foreign financial institutions that work with sanctioned Russian entities.

It also targets Russia’s financial infrastructure to limit the amount of money flowing in and out of Russia; however, shortly after the sanctions were made public, the Moscow Exchange announced it would suspend transactions in dollars and euros.

Sanctioned Russian entities

A new set of measures will widen a White House executive order that in December gave the Treasury the authority to apply secondary sanctions on foreign financial institutions if they were found to have acted for, or on behalf of, any of about 1,200 entities deemed by the US government to be part of Russia’s defense sector.

After yesterday’s changes, that number will rise to more than 4,500 and will encompass almost all Russian entities that have already been sanctioned, even if it was for reasons other than direct support of the war in Ukraine. They include banks such as Sberbank and VTB, the country’s largest lenders.

“Every day, Russia continues to mortgage its future to sustain its unjust war of choice against Ukraine.”

Janet Yellen, US Treasury Secretary

The expansion of the sanctions reflects the US view that two years after its full-scale invasion of Ukraine, Russia has built a structure of reliable support from targeted financial services firms willing to be tied to the Kremlin’s wartime goals.

In announcing the stronger sanctions regime, Janet Yellen, US Treasury Secretary, said: “We are increasing the risk for financial institutions dealing with Russia’s war economy and eliminating paths for evasion, and diminishing Russia’s ability to benefit from access to foreign technology, equipment, software, and IT services. Every day, Russia continues to mortgage its future to sustain its unjust war of choice against Ukraine.”

For the past year and a half, at a staggering scale, the US, UK and EU have banded together to use their relevant authorities to block Russian political and business elites, as well as substantial enterprises operating in sectors such as banking, energy, and technology seen as critical to financing and sustaining the Kremlin’s war effort. It will be interesting to see if the UK and EU follow suit in this latest action by the US Treasury.

Forced labor concerns in China

In another effort on the sanctions front – this time in the human rights context – several Republican senators last Thursday urged Yellen to share how Treasury plans to enforce and expand sanctions to combat the use of forced labor in China.

The effort is being led by Senator Marsha Blackburn (R-TN), and it comes amid heightened calls for stricter enforcement of the Uyghur Forced Labor Prevention Act, a law that assumes any product made with goods even partially sourced from the Xinjiang region of China is tied to forced labor unless a company can prove otherwise. Senators Bill Cassidy (R-LA), James Lankford (R-OK) and Mike Crapo (R-ID) joined Blackburn in signing the letter.

US government and media reports show that Uyghurs and other Muslim citizens have been held in prison camps in Xinjiang and forced to harvest cotton, in just one example of why the legislation was crafted. China has always denied that it is committing any human rights abuses.

The Department of Treasury “is a key implementing partner in ensuring the enforcement and effectiveness of US efforts to ensure that not a single good produced with Uyghur forced labor makes its way into US markets,” the lawmakers said in a letter to Yellen.

Lawmakers asked Yellin to produce a list of individuals and entities it’s sanctioned in connection with Uyghur forced labor, as well as a “detailed explanation of Treasury’s activities to enforce these sanctions.” They asked for these details to be provided by June 21.