Senators Probe Biden Admin Over China’s Fentanyl Subsidies

Pink, heart-shaped fentanyl-laced pills, pressed to look like candy seized in Lynn, Massachusetts by the FBI’s North Shore Gang Task Force, Nov. 2023. Courtesy of Department of Justice

At a Senate hearing on April 30, a White House representative refused to disclose whether the administration knew about China’s fentanyl subsidies before making concessions to the Chinese regime to secure counternarcotics cooperation.

Responding to Sen. Chuck Grassley (R-Iowa), Kemp Chester from the White House’s Office of National Drug Control Policy assured him that the Biden administration has “what we consider to be a very good picture” of the Chinese regime’s role in the fentanyl flow into the United States and said engaging China is “critically important.”

Then, Mr. Grassley, co-chair of the Senate Caucus on International Narcotics Control, a group with legislative authority, asked the question differently: “So our government was aware of the illicit narcotic subsidy program before it made concessions to the Chinese government?”

Mr. Chester responded that he wouldn’t publicly discuss what the administration knew or didn’t know about the Chinese regime.

Earlier this month, the House China Panel released evidence that the Chinese Communist Party (CCP) allowed and encouraged the export of illegal chemicals used in fentanyl production through tax rebates. The rebate, as high as 13 percent for some fentanyl precursors, is much more lucrative than what other products get, usually below 10 percent.

After President Joe Biden met Chinese communist leader Xi Jinping in California in November 2023, the Biden administration touted the U.S.–China agreement to slow fentanyl flow into the United States as a major achievement.

In exchange for Beijing’s pledge, the administration lifted a sanction on a Chinese Ministry of Public Security entity originally sanctioned in 2020 over alleged abuses of Uyghurs and other minority groups.

Mr. Grassley also asked if the Treasury Department planned to raise the subsidy issue in future talks with China.

Brian Nelson, the Treasury Department’s under secretary for terrorism and financial intelligence, said he didn’t know about the CCP’s subsidy program.

“We are looking closely at the [House China Panel] report and then happy to have a follow-on conversation in a confidential or classified space,” he said.

Currently, fentanyl overdose is the leading cause of death for Americans aged 18 to 45. The deadly drug was responsible for about 75,000 deaths, or 200 per day, in 2022. From 3,105 deaths in 2013, the death toll increased 24-fold. A vast majority of the chemicals or precursors needed for fentanyl production come from China.

Sen. Maggie Hassan (D-N.H.) wanted to know if the Treasury had assessed whether the CCP’s subsidies provided “material support for the international fentanyl trade.”

Mr. Nelson didn’t answer the question directly. He deferred to the U.S.–China Counternarcotics Working Group, a multi-agency body launched in January, to press China to “live up to the commitments.”

When Ms. Hassan pressed the same question again, Mr. Nelson said that any individual or entity providing material support to illicit fentanyl trade might be subject to sanctions by the Office of Foreign Assets Control under the Treasury.

In addition to providing precursors, Chinese money laundering organizations (CMLOs) are also essential for cartels to have access to their illicit gains.

According to a report the Treasury published two months ago, CMLOs are cheaper than their competitors and pay faster. The authors wrote: “By charging low fees and providing these guarantees, CMLOs are becoming one of the most significant money laundering threat actors facing the U.S. financial system.

“CMLOs enable Mexican cartels to seamlessly exchange USD derived from the sale of narcotics for Mexican pesos.”

Andrew Thornebrooke contributed to this report.