China is Russia’s only friend who might mitigate the effects of economic sanctions on its invasion of Ukraine. However, President Xi Jinping’s government shows no indication that it is willing to compromise its access to the U.S. or European markets by doing too much.
Beijing is unable to import more Russian gas, even if it wanted to.
Although relations with Moscow have improved since Xi assumed power in 2012, they still have differences of opinion. Putin is concerned about China’s growing economic presence in Central Asia, Russia’s Far East and Central Asia.
“China-Russia relations have reached the highest point in history, but they are not an alliance,” stated Li Xin (international relations expert at Shanghai University of Political Science and Law).
Washington, Britain and the 27-nation European Union, along with other Western allies, have threatened or announced sanctions against Russian officials, banks, and business leaders, as well as export control measures to starve Russia’s high-tech industries and military.
Xi’s government could support Putin within these limits — and Chinese businesses might use this situation to seek better deals — but they will not openly violate sanctions or be subject to penalties, experts stated.
Mark Williams, Capital Economics’ chief Asia economist, stated that China doesn’t want Russia to become so involved that it suffers.
China’s trade with Russia grew to $146.9billion last year. However, that is only a tenth of China’s $1.6 trillion total trade with the United States and EU.
Williams stated, “It all depends on whether they’re willing or not to risk their access in Western markets to help Russia.” It’s not that large.
China, which is the second-largest country in the world, is the only major government that has not condemned the invasion.
Kevin Rudd, an ex-prime minister from Australia and president of Asia Society, wrote on the Asia Society website that “The extent of Chinese support Russia gets is likely to be a key factor in how it can weather long-term consequences.”
After the 2014 sanctions that were imposed on Russia for his seizure in Crimea, Ukraine, trade and financial sanctions have been lifted by China for multibillion dollar purchases of Russian gas.
Putin’s government spent the last decade trying to increase exports to Far East in order to lessen its dependence on European markets. Both Beijing and Moscow are trying to dedollarize the U.S. currency, which means they use it less in trade to reduce their dependence on European markets.
According to Rajiv Biswas (chief Asia-Pacific economist at IHS Markit), China purchased one-sixth Russia’s total exports in 2013. Two-thirds of those were oil and gas.
Biswas stated that China will be a major growth market for Russian exports of energy.
China needs more gas. Moscow cannot immediately supply it. The pipelines linking the two countries have been fully loaded. Although they signed a 30-year supply agreement last month, the two countries said that pipes to transport that gas will not be complete for at least three more years.
Beijing used the 2014 sanctions against Moscow as leverage to get lower gas prices for an earlier contract.
Li stated that “We won’t take advantage of other people’s difficulties.” “But, as an economic entity Chinese companies will seek the maximum gains with possible lowest costs.”
When asked Friday if China might purchase more Russian oil, a spokesperson for the Foreign Ministry didn’t respond directly. He did however criticize “illegal unilateral sanctions” but said that Beijing and Moscow continue to “normally trade cooperation”.
Wang Wenbin, a spokesperson for the group, stated that “we demand that relevant parties not damage the legitimate right and interests of China or other countries.”
China also announced this week that it will allow wheat imports from all regions of Russia. This cannot replace the gas revenue lost by Europe, but it could boost incomes for Russian farmers.
However, the announcement was accompanied by a warning: Shipments should be free from a fungus which caused China to abandon Russian wheat earlier in its history.
Moscow may have also undermined Beijing’s willingness for help by launching an invasion after Xi endorsed Russian concerns about security and the expansion NATO military alliance in a statement last month with Putin.
Xi’s government tried to distance itself form the attack by urging respect of national sovereignty, which Foreign Ministry Wang Yi stated last weekend included Ukraine.
Trade deals will continue, but “China won’t side with Russia over the invasion of Ukraine,” stated Zhang Lihua (an expert on Chinese-European relations at Tsinghua University, Beijing).
Xi spoke with Putin on Friday and said that China supports Russia and Ukraine in resolving the problem through dialogue, state TV reported.
China’s relations to Washington and Europe are already strained by complaints over Beijing’s technology ambitions and market access. Hong Kong is also being criticized for its claims to the Himalayan territory and disputed seas.
The United States and its allies accuse China of helping Iran and North Korea avoid sanctions. However, the severity of the violations and the penalties are limited.
Beijing claims it is in compliance with the U.N. ban that prohibits most trade with North Korea due to its nuclear weapons production. China is accused of not enforcing the ban fully in fear of creating an economic crisis and refugee crisis at its border.
Chinese-flagged vessels are accused of transporting oil to North Korea and coal. However, it isn’t clear if this has the approval of Chinese leaders. North Korea is accused in China of using Chinese brokers for the laundering of stolen cryptocurrency.
Except for Huawei Technologies Ltd., a tech giant accused of trading with Iran. The Chinese violators are very small and are not exposed to sanctions.
The West is angry more about Putin’s attack against Ukraine, which suggests that governments will pay more attention and enforce the law more strictly.
Beijing has criticised U.S. threats of imposing “secondary sanctions”, which would not only affect banks or companies that deal with North Korea, but also their customers and business partners. China would have little to no recourse if Washington imposed secondary sanctions against Ukraine.
Li stated that earlier sanctions against Moscow had adversely affected some Chinese oil and gas companies, as well as Russian partners.
Li stated that this is what Chinese companies worry about.
