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  • Writer's pictureThe San Juan Daily Star

Before Ukraine invasion, Russia and China cemented economic ties

Presidents Xi Jinping of China and Vladimir V. Putin of Russia in Moscow in 2019. Food and energy deals are the latest signals of China’s recent economic alignment with Russia.

By Keith Bradsher and Ana Swanson

As Russia wreaks havoc in Ukraine, Moscow has a powerful economic ally to help it resist Western sanctions: China.

Chinese purchases of oil from Russia in December surpassed its purchases from Saudi Arabia. Six days before the military campaign began, Russia announced a yearslong deal to sell 100 million tons of coal to China — a contract worth more than $20 billion. And hours before Russia began bombing Ukraine, China agreed to buy Russian wheat despite concerns about plant diseases.

In a throwback to the 1950s, when Mao Zedong worked closely with Josef Stalin and then Nikita Khrushchev, China is again drawing close to Russia. As the United States and the European Union have become wary of China, Beijing’s leaders have decided that their best geopolitical prospects lie in marrying their vast industrial might with Russia’s formidable natural resources.

Recent food and energy deals are just the latest signals of China’s economic alignment with Russia.

“What happened up to now is only a beginning for both the Russian expansionism by force and the Chinese economic and financial support to Russia,” Shi Yinhong, a professor of international relations at Renmin University in Beijing, said in a text message. “This does not mean that China directly supports in any degree that expansionism — this only means that Beijing strongly feels the necessity to maintain and boost strategic partnership with Moscow.”

The United States and the European Union are hoping that sanctions force Russia to reconsider its policies. But Wang Wenbin, the Chinese foreign ministry’s spokesperson, said at a briefing Friday that China opposed the use of sanctions.

“Sanctions are never an effective way to solve the problems,” he said. “I hope relevant parties will still try to solve the problem through dialogue and consultation.”

At the same time, Russia’s invasion of Ukraine has imposed an awkward diplomatic quandary on China by violating the principle of national sovereignty that Chinese leaders regard as sacrosanct. While President Xi Jinping of China has not criticized Russia publicly, he could use his country’s economic relationship with its northern neighbor as leverage to persuade the Russians to resolve the crisis quickly.

Xi and President Vladimir Putin of Russia spoke by phone Friday. An official Chinese statement said afterward that Xi had expressed support for Russia in negotiating an agreement with Ukraine — a stance that Putin has also favored, provided that Ukraine accepts his terms.

Until now, much of China’s energy and food imports came across seas patrolled by the U.S. or Indian navies. As China’s leaders have focused lately on the possibility of conflict, with military spending last year growing four times as fast as other government spending, they have emphasized greater reliance on Russia for crucial supplies.

China and Russia share a nearly 2,700-mile border, and in recent years China has become Russia’s largest source of imports and the biggest destination for its exports.

“Given the geopolitical tensions, Russia is a very natural geopolitical partner,” said Andy Mok, a senior research fellow at the Center for China and Globalization in Beijing.

Initial Western sanctions on Russia have focused on limiting technology exports and imposing financial penalties. For now, U.S. officials have avoided targeting consumer goods, agricultural products and energy to try to avoid harming ordinary people and further fueling inflation.

China is the world’s dominant producer of electronics, machinery and other manufactured goods, and has been supplying them to Russia in exchange for food and energy.

A new cornerstone of relations between China and Russia is a statement that some Western officials say is effectively a Sino-Russian nonaggression pact. It was released by Beijing and Moscow Feb. 4, when Xi and Putin met before the opening ceremony of the Beijing Winter Olympics. The statement said the countries’ friendship “has no bounds.”

The two nations have been growing their ties for years, and the strength of the bond appeared to give Putin the confidence to move troops and military equipment from Russia’s border with China and other parts of Siberia earlier this winter to Russia’s border with Ukraine and Belarus. The more robust relationship is also ushering in closer economic cooperation.

“The joint statement is strong and has lasting consequences for the new world order,” said Jean-Pierre Cabestan, a research professor of political science at Hong Kong Baptist University.

It is not clear if China will help Russia evade sanctions put in place this past week. On Tuesday, the Biden administration added to previous measures by announcing sanctions against Russia’s two largest financial institutions and sweeping restrictions on advanced technologies that can be exported to Russia. The technological curbs, when taken in concert with allies, would block roughly one-fifth of Russian imports, the administration said.

Chinese companies that circumvent those rules could face escalating punishment by the United States, including criminal and civil penalties, said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Those businesses could also be cut off from U.S. technology and the financial system.

ZTE and Huawei, two Chinese firms that were barred from receiving American technological exports, attracted the attention of the U.S. government in part for evading sanctions on Iran.

“The interesting question is: Is China going to comply with this?” Chorzempa said. China also has a law designed to penalize companies for following extraterritorial sanctions by countries like the United States, he said, all factors that “could put companies in a real bind.”

“If they don’t comply with the U.S., they’re in trouble with the U.S., but if they don’t comply with China, they could also face penalties in China,” he said.

Of course, collecting fines from companies that are unwilling to pay and monitoring whether businesses comply with the rules could be difficult, Chorzempa added. “It’s already proving difficult to monitor the things that are already controlled, and if you expand that list, that’s going to be a real challenge to verify what’s going to Russia,” he said.

The Biden administration’s export controls apply to goods produced in any country as long as they use U.S. technology — including chipmakers like Taiwan Semiconductor Manufacturing Co. and the Shanghai-based Semiconductor Manufacturing Industry Corp.

Both of those companies continue to rely on the United States for certain components and manufacturing technology, said Gabriel Wildau, a managing director at Teneo, a consulting firm. If they continue supplying to Russia, SMIC and other Chinese companies could be cut off from U.S. technology, the same kind of penalty that crippled Huawei. On Friday, Taiwan Semiconductor said it was committed to complying with export controls.

“If Beijing is viewed as Moscow’s enabler, pressure will rise in the U.S. Congress to extend these restrictions,” Wildau wrote in a note to clients. Beijing would also face the risk that other major technology exporters, like Japan, South Korea and the Netherlands, “would adopt Washington’s tougher line,” he said.

China’s state-owned banks could also face risks for continuing to lend to Russia. China and Russia have been settling more of their trade using the renminbi and the ruble. Beijing has also been trying to develop the digital use of its currency as an alternative to the dollar, which could help Russia limit the effect of financial sanctions.

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