US Treasury widens sanctions to curb Russia's war production

FILE PHOTO: The Treasury Department is pictured in Washington

By David Lawder

WASHINGTON (Reuters) - The U.S. Treasury Department on Wednesday announced new sanctions on over 300 entities and individuals aimed at cutting off Russia's access to products and services needed to sustain military production for its war in Ukraine, including dozens of Chinese components suppliers.

The announcement, along with new Commerce Department export restrictions on semiconductors and other technology goods, was made on the eve of a G7 leaders summit in Italy, where efforts to curb Russia's growing war economy will be a major discussion topic.

U.S. officials have expressed increasing concern over Russia's ability to procure advanced semiconductors, optical equipment, software and other products needed to manufacture advanced weapons systems despite prior sanctions.

The sanctions target third party firms and entities, including dozens of suppliers of electronics in China, as well as those in the Middle East, Africa, Europe and the Caribbean. The action stops short of imposing secondary sanctions on banks in China and other countries where Treasury has warned that dealings with Russian entities could cut institutions off from dollar access.

But the Treasury did say it was modifying the sanctions on previously targeted Russian banks, including VTB and Sberbank, to include branches and subsidiaries in China, India, Hong Kong, Kyrgyzstan and other locations.

"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," U.S. Treasury Secretary Janet Yellen said in a statement.

Another senior U.S. Treasury official told reporters that many large banks have pulled back from Russian business since Treasury's new secondary bank sanctions authority went into effect at the end of last year, but Moscow is turning to smaller institutions with weaker compliance departments.

The official said Treasury was working to identify these smaller banks still helping to process transactions aiding military output and was enlisting the help of large Western financial institutions to help that effort.

Treasury's new sanctions also open up a new front to try to limit Russia's energy revenues by targeting entities involved in three major liquefied natural gas projects that Russia is working to bring online: the Obsky LNG, Arctic LNG 1 and Arctic LNG 3 projects. These include Gazprom Invest and other construction firms associated with the projects, equipment suppliers and shipbuilding firms and operators of seven Russian LNG vessels under construction.

(Reporting by David Lawder; editing by Rami Ayyub and Angus MacSwan)