Sullivan did not detail specific steps but said the administration of US President Joe Biden had nearly unprecedented power financially to take on its adversaries, including measures against Chinese banks.
Writ large, the picture is not pretty. China continues to be a major supplier of dual-use items to Russias war machine, he added.
At the same event, Secretary of State Antony Blinken said separately that China was providing 70 per cent of the machine tools that Moscow imports for its defence industrial base and 90 per cent of the microelectronics.
China cant have it both ways, said Blinken. It cant all at once be saying that its for peace in Ukraine when it is helping to fuel the ongoing pursuit of the war by Russia.
I feel strongly as long as we continue to confront these [domestic political] challenges directly, openly and transparently, well get through, said Blinken.
Added Sullivan: I cant predict what happens this fall, next year.
Blinken said China was increasingly aware of the global cost of any disruptive action, including in the Taiwan Strait, in light of stronger transatlantic, transpacific and European-Asian partnerships.
Weve now seen a chorus of countries from far afield, really impressing about China, the imperative of not having a crisis, not stirring the pot, not disturbing the status quo, preserving peace and stability, Blinken said.
The more you have that collective weight on China, I think, the more theyre likely to not lead us in that direction.
Beijing sees Taiwan as part of China to be reunited by force if necessary. Most countries, including the US, do not recognise Taiwan as an independent state.
But Washington opposes any attempt to take the self-governed island by force and is committed by law to supplying it with weapons for its defence.
War over Taiwan, war across the Taiwan Strait, would be absolutely calamitous for the world, for Taiwan, for China, for the United States, for everyone, said Sullivan.
I have worried about it and I believe that it has to be a fundamental objective of American policy to ensure that never happens.
He said additional meetings between senior American and Chinese officials last year leading up to the summit in California between Biden and Chinese President Xi Jinping had paid dividends.
We have restored regular, high-level engagements between our countries, and thats vitally important because if you want to avoid any kind of unintended conflict, youve got to start by talking, Blinken said.
This relationship cannot be put on a bumper sticker. At least, if it can be, maybe a very long, long bumper sticker because its the most consequential, the most complex relationship we have, he added.
If they want to mess with the United States and our allies, theyre going to have a very rude awakening about whats in store for them, said Sullivan.
He described the US as not trying to create an Asian Nato but rather a flexible latticework of agreements to respond to aggression.
We can build strength from strength in the years ahead not to start a war but to prevent a war, Sullivan added.
While Russia has been able to retool its economy onto a war footing and work around a growing number of financial and economic sanctions, Blinken said, it was paying a price for its aggression and that was not lost on China and others.
These costs included a brain drain as skilled workers exited Russia, longer-term economic costs as critical industries were impaired, the shifting of supply chains that excluded the country and its damaged global reputation, he continued.
Global threats once viewed as regional were increasingly global, according to Harvard professor emeritus Joseph Nye, in remarks during another panel discussion at Aspen.
You cant talk about Ukraine without thinking about how it affects Taiwan, the former senior US defence official said. You cant talk about Nato without thinking about Nato not just as a European problem but also how it relates to China.
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