China is Russia’s best hope for blunting sanctions, but beware

BEIJING (AP) — China is the only friend that could help Russia soften the impact of economic sanctions on its invasion of Ukraine, but President Xi Jinping’s government is giving no sign it might be ready to. risking its own access to US and European markets doing too much.

Even if Beijing wanted to, its ability to support President Vladimir Putin by importing more Russian gas and other goods is limited.

Relations with Moscow have warmed since Xi came to power in 2012, driven by shared resentment toward Washington, but their interests may clash. As their armies hold joint exercises, Putin worries about China’s growing economic presence in Central Asia and the Russian Far East.

“China-Russia relations are at the highest level in history, but the two countries are not an alliance,” said Li Xin, an international relations expert at Shanghai University of Political Science and Law.

In response to the invasion, Washington, Britain, the 27-nation European Union and other Western allies have announced or promised sanctions against Russian banks, officials, business leaders and businesses, as well as export controls aimed at starving Russian industries and military of high-tech products.

Xi’s government could support Putin within those limits – and Chinese companies could use the situation to seek better deals – but will be reluctant to openly violate sanctions and be the target of sanctions, experts said.

“China doesn’t want to get so involved that it hurts for its support of Russia,” said Mark Williams, chief Asia economist at Capital Economics.

China’s trade with Russia hit $146.9 billion last year, but that’s less than a tenth of China’s total $1.6 trillion trade with the US and EU European.

“It all depends on their willingness to risk their access to Western markets to help Russia, and I don’t think they are,” Williams said. “It’s just not that big of a market.”

China, the world’s second largest economy, is the only major government not to have condemned the invasion.

“The degree of Chinese support that Russia receives is likely to prove a crucial factor in its ability to overcome the long-term consequences,” wrote Kevin Rudd, former Australian prime minister and president of the Asia Society, on the Asia Society website.

China’s multi-billion dollar purchases of Russian gas for its energy-hungry economy have been a lifeline for Putin following trade and financial sanctions imposed in 2014 over his capture of Crimea from Ukraine.

Putin’s government has spent the past decade trying to increase exports to the Far East to reduce dependence on European markets. Both Moscow and Beijing are trying to de-dollarize, or use the US currency less in trade, to reduce their exposure to the US financial system and official pressure.

China bought a sixth of Russia’s total exports last year, two-thirds of which were oil and gas, according to Rajiv Biswas, chief Asia-Pacific economist at IHS Markit.

“China will be an important growth market for Russian energy exports,” Biswas said.

China wants more gas, but Moscow cannot deliver immediately. The pipelines connecting the two countries are at full load. They signed a 30-year supply contract last month, but said the pipes to transport this gas will not be completed for at least three years.

Beijing has shown self-interest by using the pressure exerted on Moscow by the 2014 sanctions as leverage to negotiate lower gas prices in an earlier contract.

“We won’t take advantage of others’ hardships,” Li said. “But as an economic entity, Chinese enterprises will strive to achieve the maximum gains with the lowest possible costs.”

A Foreign Ministry spokesman did not respond directly when asked on Friday whether China might buy more Russian oil. But he criticized the “illegal unilateral sanctions” and said Beijing and Moscow were pursuing “normal business cooperation”.

“We demand that relevant parties do not infringe the legitimate rights and interests of China and other countries,” spokesman Wang Wenbin said.

Also this week, China announced that it would allow wheat imports from all regions of Russia for the first time. It can’t replace all the lost gas revenue if Europe stops buying, but could help support Russian farmers’ incomes.

Yet that announcement comes with a caveat that looms as a potential hurdle: shipments must be free of a fungus that led China earlier to eschew Russian wheat.

Moscow could also have undermined Beijing’s willingness to help by launching its invasion after Xi endorsed Russian complaints about security and the expansion of the NATO military alliance in a statement with Putin last month.

Xi’s government has tried to distance itself from the attack by calling for respect for national sovereignty, which Foreign Minister Wang Yi said last weekend includes Ukraine.

While trade deals will continue, “China will not side with Russia in its invasion of Ukraine,” said Zhang Lihua, an expert on China-EU relations at Tsinghua University in Beijing.

In a Friday phone call with Putin, Xi said China “supports Russia and Ukraine to resolve this issue through dialogue,” state TV reported.

China’s relations with Washington and Europe are already strained by complaints over Beijing’s tech ambitions, market access, human rights, Hong Kong and Chinese claims to disputed seas and territory of the Himalayas.

China is accused by the United States and its allies of helping Iran and North Korea evade sanctions, but the scale of violations and sanctions has been limited.

Beijing says it is complying with a UN ban on most exchanges with North Korea over its development of nuclear weapons. But China has been accused of not fully implementing it for fear of causing economic collapse and a refugee crisis on its border.

Chinese-flagged vessels are suspected of bringing oil to North Korea and exporting its coal, although it is unclear whether this has the approval of Chinese leaders. North Korea is accused of using Chinese brokers to launder stolen cryptocurrency.

With the exception of tech giant Huawei Technologies Ltd., which has been accused of trading with Iran, Chinese violators are small and have few overseas operations subject to sanctions.

Western anger over Putin’s attack on Ukraine is more intense, suggesting governments will be watching closely and enforcement will be tougher.

Beijing has criticized US threats to impose “secondary sanctions” that hit not only companies or banks dealing with North Korea, but also their customers and business partners. If Washington were to apply such secondary sanctions regarding Ukraine, China could do little to protect state-owned banks and other companies operating in foreign economies.

Some Chinese oil and gas companies with Russian partners have been hit by earlier sanctions against Moscow, Li said.

“That’s what Chinese companies are worried about,” Li said.


AP researcher Yu Bing and video producer Caroline Chen in Beijing and AP writers Hyung-Jin Kim in Seoul and David Rising in Bangkok contributed.