The sanctions on Russia only bite if someone outside Russia can be made to care. Executive Order 14114, signed on December 22, 2023, is the clearest attempt to produce that effect. On closer reading, its target is not the Russian buyer at all. It is the foreign bank that pays for the goods.
The order lets OFAC impose secondary sanctions on foreign financial institutions that support Russia’s military-industrial base, according to a January 2024 client note from the law firm Davis Polk. Banks, broker-dealers and cryptocurrency companies are all in scope. The trigger is business with Russian entities in the technology, defense and related materiel, construction, aerospace or manufacturing sectors. The catch is how wide that net runs: holding an account, moving funds, selling listed items to Russian importers or building a payment channel designed to hide the trail can each qualify.
What the lenders are told to do
OFAC attached an initial list of items. It covers manufacturing materials for semiconductors and related electronics, advanced optical systems, and machine tools and manufacturing equipment. Davis Polk reads the guidance as demanding “robust, risk-based controls” from foreign institutions, meaning customer due diligence, attestations, and a look at the documents behind each transaction. The mechanics here are simple. A bank that cannot show it checked risks losing access to the U.S. financial system, and compliance officers price that risk far above the fee on any single Russian payment.
The China channel
Why does that matter for technology flows? Because of where the goods come from. A December 2024 Brookings analysis says China “has supplied Russia with industrial inputs, many dual use, including microelectronics, military optics, drone and turbojet engines, armored vehicles, satellite technology, and materials like nitrocellulose.” Shipments moved “directly through Chinese suppliers and via third countries,” the authors write, and helped Russia rebuild its defense manufacturing. In their view, Chinese support lets Moscow keep fighting.
Their prescription follows the same logic as the executive order. Brookings proposes “a mix of strategic and reputational costs, such as the threat of secondary sanctions, as well as diplomatic incentives,” plus “public recognition for cooperative behavior when due, such as when China supports sanctions enforcement.” Pressure first, a reward for compliance second.
Evasion adapts
Follow the money and the workarounds appear fast. A report published on October 13, 2026 by the Foundation for Defense of Democracies describes the A7 Network, a loose web of shell companies that it says moved over $90 billion in 2025 by converting ruble-backed assets into dollar-backed cryptocurrencies such as USDT. Hundreds of companies, the analyst Angela Howard writes, transact for A7 in the traditional financial system while falsifying trade documents. Investigators have tied Chinese suppliers to the network.
The same report cites a leaked briefing note saying Vladimir Putin planned to ask Xi Jinping to help connect a payment product called Vexpay to China’s Cross-border Interbank Payment System. Any such link, the report says, would strengthen evasion and also expose the platform to secondary sanctions.
Sources
- Russia sanctions update: U.S. expands secondary sanctions regime for foreign financial institutions
- The China-Russia relationship and threats to vital US interests
- Russia's Leading Sanctions Evasion Tool Is a New Kind of Illicit Finance Threat
