(Bloomberg) -- US Treasury Secretary Janet Yellen said she was most concerned about smaller Chinese banks doing business with Russia, even as she didn’t rule out sanctioning a bigger lender if it engaged in “systematic violations” of sanctions against the Kremlin. 

“I think the large banks in China really, really value their correspondent-banking relations, and those are not banks that we most need to worry about,” Yellen told reporters in New York. “It’s smaller banks” that are of more concern, she suggested — though even there, “some of those banks also want to be able to process payments in dollars, do not want to be cut off from the US financial system,” she said. 

Her comments come just a couple of months after the Treasury chief first warned China during a visit to Beijing that its financial institutions could face sanctions if they facilitated trade with Russia that bolstered Moscow’s military capabilities. 

While Yellen stressed that China’s largest financial institutions have a very strong motive not to be designated, she left the door open to sanctioning them if they were found to systematically skirt US sanctions against Russia. 

“I’m certainly not going to say that you would not be willing to designate a large bank if we saw a systematic violations,” she said. 

Such a step would represent a significant escalation — and potential provocation towards Beijing — of the Biden administration’s willingness to use the US dollar as a weapon in its efforts to hobble Russia’s fight in Ukraine.

On Wednesday, the Biden administration widened the use of secondary sanctions on Russia with an eye toward curtailing the sale of semiconductor chips and other goods to Russia, targeting third-party sellers in China and elsewhere.

Sanctions can cripple any bank whose customers rely on that institution for access to US dollars.

--With assistance from Viktoria Dendrinou, Daniel Flatley and Charles Ayitey.

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