Janet Yellen warns China of ‘significant consequences’ if its companies support Russia’s war

The US has warned of “significant consequences” if Chinese companies provide support for Moscow’s war against Ukraine in one of the sharpest messages it has yet delivered to Beijing.

Following discussions in Guangzhou on Friday and Saturday, the US Treasury said: “Secretary Yellen emphasised that companies, including those in the PRC, must not provide material support for Russia’s war against Ukraine . . . and the significant consequences if they do so.” 

Janet Yellen’s warning comes after secretary of state Antony Blinken told EU and Nato foreign ministers that Beijing was assisting Moscow “at a concerning scale”, and providing “tools, inputs and technical expertise”, according to three people familiar with the discussions.

They quoted Blinken as saying the assistance was particularly focused on Russia’s production of optical equipment and propellants and its space sector, which he said “not only contributes to Russia’s aggression in Ukraine but threatens other countries”.

Blinken raised the concerns about China in every session of a meeting of Nato foreign ministers on Wednesday and Thursday, one of the people said.

“The warnings were explicit,” the person said. “There has been a shift and it was felt in the room . . . this was a new development. It was very striking.”

Western countries have imposed dozens of rounds of sanctions and trade embargoes against Russia in a bid to cripple its economy, starve it of military supplies and halt its two-year war against Ukraine.

But Moscow has been able to keep its economy running and scale up its defence industry owing in large part to expanded trade with China, imports from third countries of so-called dual-use goods that can be used to make weapons, and direct military supplies from North Korea and Iran.

Russia’s ability to raise significantly production of arms, particularly artillery shells, missiles and kamikaze drones, has spooked western capitals as they rush to increase their own defence output to give Kyiv a chance to withstand Moscow’s onslaught.

“We’ve been clear with China that we see Russia as gaining support from goods that Chinese firms are supplying to Russia,” Yellen said on Saturday. “On their side, China emphasised that it is their policy not to provide Russia with military support — neither of us want this to be an issue with our bilateral relationship.”

Yellen added that Treasury officials believed they had made some progress when it came to specific financial institutions that were of concern. “We think there’s more to do, but I do see it as an area where we’ve agreed to co-operate and we’ve already seen some meaningful progress,” she said.

“They understand how serious an issue that is to us.”

Blinken, who this week held talks in Paris before attending the Nato ministerial discussions, called on allies to do three things, the people said.

He asked them to raise their concerns directly with China in their own bilateral meetings, speak publicly about the deepening co-operation and take appropriate action on entities and companies bolstering Russia’s industrial base.

“We see how China is propping up the Russian war economy, delivering dual-capable equipment which is also used in the Russian military industry. In return, Moscow is mortgaging its future to Beijing,” Jens Stoltenberg, Nato secretary-general, said on Thursday after the talks with Blinken.

President Joe Biden raised the issue directly with President Xi Jinping in a phone call on Tuesday. The White House said Biden voiced concern about China’s “support for Russia’s defence industrial base and its impact on European and transatlantic security”.

Speaking before the call, a senior US official said Washington had seen China “start to help to rebuild Russia’s defence industrial base, essentially backfilling the trade from European partners”. One person familiar with the situation said the Biden administration was particularly concerned about the provision of propellant for missiles.

US officials have said strong warnings they issued to China just after Russia’s invasion in 2022 prompted Beijing to reverse course on a plan to provide military equipment to Russia.

The US in February last year expressed concerns to allies about Chinese assistance to the Russian defence sector, but was met with more scepticism, with some countries saying they had not been given strong evidence.

China’s trade with Russia has more than doubled since 2020 from $108bn to $240bn last year, with business people flocking across the border to explore opportunities following western sanctions.