State Dept. Official Touts Tech Controls, Eyeing China-Iran Sanctions Evasion

The U.S. is making “good progress” on aligning export controls over sensitive technologies with allies, Deputy Secretary of State Wendy Sherman said this week, adding that almost all the administration's recent discussions with trading partners have involved China technology issues. She also said the agency is working to counter a growing oil partnership between China and Iran, but said preventing China’s purchases has proven challenging.

Sherman, speaking during a Feb. 9 Senate Foreign Relations committee hearing, said the U.S. and its allies “are really together in a way we have not been before on China, writ large.” She also said Taiwan is a topic that some allies, including the EU, “didn't want to talk about at first, and now it's in every document, whether it's the G-7 or the EU" or NATO. “China is now a strategic component of every discussion that we have,” she said, adding that the U.S.-EU Trade and Technology Council is particularly “laser focused on technology.”

Sherman’s comments came after Sen. Chris Van Hollen, D-Md., applauded the administration's October export controls on semiconductor-related items and its work so far to try to convince Japan and the Netherlands to adopt more chip export restrictions against China (see 2302080048, 2210070049 and 2301270002). “We need to do everything we can to prevent the most sensitive, high-end technologies that originate in the United States or with our partners from falling into China's hands in a way that they can use them and incorporate them in their military,” Van Hollen said during the hearing.

Although the U.S. has made progress during those talks, Sherman said it has been “very painstaking work.” Van Hollen urged Sherman to make more progress. “Obviously, the success of a strategy to prevent our most sensitive U.S. origin technologies from going to China relies on our partners,” he said. “To be successful, we need to do this across the board -- our EU partners, our other democratic partners in East Asia and elsewhere.”

Sherman also confirmed the administration is considering a new “pilot” program that would create an outbound investment screening regime to better prevent China from acquiring sensitive technologies. The White House has been reportedly crafting an executive order that would establish the mechanism, which could focus on U.S. capital flows tied to specific technology sectors in China, including artificial intelligence and quantum computing (see 2301120035 and 2301190024).

“That's something that we are continuing to discuss, and we'll consult with all of you on Capitol Hill before we go forward, should we go for it,” Sherman said. “But I think it's important.”

Sherman also said the administration is tracking Chinese purchases of sanctioned Iranian oil and designating any Chinese entity involved. The Treasury Department this week sanctioned nine entities involved in Iranian petrochemical and petroleum sales to Asia, including Iranian company Amir Kabir Petrochemical, a "major" polyethylene producer that has supplied low density polyethylene to Chinese buyers (see 2302090019).

But Sen. Robert Menendez, D-.N.J., said more needs to be done, adding that China has imported more than a million barrels per day from Iran for the past three months. “That relationship is mutually beneficial,” said Menendez, chair of the committee. “Iran gets to export its oil despite U.S. sanctions, and Beijing receives a steep discount.”

The administration is “working on sanctions evasion, including by seeing what's happening to tankers around the world, and taking actions that we can to interdict and stop those oil shipments and to sanction those companies that are undermining our sanctions regime around Iranian oil,” Sherman said. But she told Menendez the issue is complicated. “I agree with you,” Sherman said. “This is a problem.”

Menendez asked Sherman to provide an update soon on the administration's plan to more effectively stop the shipments. “Listen, you don't hide a million barrels a day for the last three months, and not know what's out there. And it's largely with impunity,” he said. “We should be doing much better.”