Obama Faces Whac-a-Mole Challenge If He Sanctions China Hackers

Any effort by the Obama administration to impose sanctions in retaliation for Chinese cyber-spying might evoke the old arcade game Whac-a-Mole.

That’s because that generally speaking, some potential targets of sanctions know how to avoid them, for example by changing names, said Adam M. Smith, an attorney who designed and enforced U.S. sanctions when he worked at the Treasury Department’s Office of Foreign Assets Control.

It’s one reason why the sanctions under consideration may be more effective as a political signal than an economic tool. Administration officials speaking on condition of anonymity have revealed the discussions about possible penalties at a sensitive time, just weeks before Chinese President Xi Jinping visits the U.S.

Even just the threat of possible actions, without actually imposing penalties, may be enough to trigger intensive conversations between the U.S. and Chinese officials.

“You wouldn’t need to announce the sanctions -- the threat of them would serve the same purpose,” said Robert Kahn, a senior fellow for international economics at the Council on Foreign Relations in Washington, who formerly worked at the U.S. Treasury Department.

The Obama administration is drafting an escalating series of actions, including economic sanctions and curbs on doing business in the U.S., to punish China and other nations accused of hacking its computer networks, two administration officials with knowledge of the planning said earlier this week.

U.S. Concerns

The White House declined to comment Friday on any moves to impose sanctions for hacking. Press secretary Josh Earnest said Monday that “it is no secret to leaders in China that President Obama and other leaders in the U.S. government have significant concerns with Chinese behavior in cyberspace.”

The Chinese government “firmly opposes and combats all forms of cyber attacks in accordance with law,” Zhu Haiquan, spokesman for the Chinese embassy in Washington, said in an e-mailed statement on Friday. China seeks a solution through dialogue and cooperation, and “groundless speculation and accusation or resorting to microphone diplomacy is counterproductive,” Zhu said.

Smith, now an international attorney with Gibson, Dunn & Crutcher LLP in Washington, said the success of any actions depends on who exactly the administration will target. While the punishments wouldn’t hurt the world’s second-largest economy because of how large and diversified it is, they might be harmful to individual actors, Smith said.

While initial penalties would probably include freezing U.S. assets of specific Chinese companies engaged in cyber attacks, America can make the measures more comprehensive and tougher later, just like in Russia’s case, said CFR’s Kahn.

After Russian forces took over Crimea in February 2014, the U.S. imposed asset freezes and travel bans on officials including ousted Ukrainian President Viktor Yanukovych. The U.S. later expanded the penalties to billionaire Gennady Timchenko and companies such as Bank Rossiya and eventually targeted large Russian banks, energy and defense companies. The European Union also imposed sanctions.