“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, it can be difficult to collect fines from companies that are not willing to pay and to monitor whether businesses comply with the rules, 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.
Russia’s attack on Ukraine and the global economy
Growing anxiety. Russia’s attack on Ukraine could lead to sharp rise in energy and food prices and scare investors. The economic damage caused by supply disruptions and economic sanctions will be severe in some countries and industries and unnoticed in others.
The Biden administration’s export controls 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 tough 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 large 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.