"Facing a wary United States and
worried about depending on imports by sea, China is buying more energy and food
from its northern neighbor.
BEIJING — As Russia fights 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 Joseph 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 spokesman, said at a briefing on 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
the 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.
Mr. Xi and President Vladimir V.
Putin of Russia spoke by phone on Friday. An official Chinese statement said
afterward that Mr. Xi had expressed support for Russia in negotiating an
agreement with Ukraine — a stance that Mr. 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 manufacturer 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 on Feb. 4, when Mr. Xi and Mr. 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 Mr. 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.
The Chinese and Russian governments share many values,
particularly their antipathy to sanctions the West imposes on human-rights
grounds. “The two sides firmly believe that defending democracy and human
rights should not be used as a tool to exert pressure on other countries,”
their pact on Feb. 4 said.
When the Obama administration imposed sanctions on Russia
after its invasion of Ukraine’s Crimea region in 2014, China helped Russia evade them.
But it is not clear if China will
help Russia evade sanctions put in place this 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 a 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 American 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?” Mr. 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, Mr. 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 chip makers like Taiwan Semiconductor Manufacturing
Company and the Shanghai-based Semiconductor Manufacturing Industry
Corporation.
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 the export controls.
“If Beijing is viewed as Moscow’s
enabler, pressure will rise in the U.S. Congress to extend these restrictions,”
Mr. 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.
But Chinese banks are still deeply
reliant on the U.S. dollar. While major Chinese banks already appeared to be
pulling back their financing for Russia, Mr. Wildau said, Beijing could choose
to support Russia using smaller state-owned banks that don’t do a lot of
international business that requires the use of the dollar.
China, Russia, Iran, Venezuela and
other countries have all felt the brunt of American financial sanctions,
highlighting their need for more trade and investment in currencies other than
the dollar, Mr. Mok said.
Even if Chinese entities circumvent
U.S. rules, Beijing is unlikely to publicize it. Despite its professed distaste
for sanctions, China regularly punishes trading partners that have offended it
in some way. But it does this through unannounced orders sent to customs
officials, to avoid clear violations of international trade rules.
China currently has an unannounced trade embargo
against Lithuania, after Lithuania agreed to let Taiwan open first in the world
office with Taiwan name on it there. Russia also has frosty relations with
Lithuania, a former Soviet republic that has joined the North Atlantic Treaty
Organization.
China quietly halted purchases of
barley, coal, wine and several other commodities from Australia for more than a year, and stopped
exports of crucial rare earth metals to Japan for two months in 2010 over a
territorial dispute.
China’s embrace of Russia on energy,
food and financial issues carries risks for Beijing and for Mr. Xi.
China is running huge and rapidly
rising trade surpluses with the United States and European nations. If China is
perceived to be enabling Mr. Putin’s aggressive moves, that could strengthen
support in the West for tariffs or other curbs on technology and trade.
Further trade barriers might start
to wean Western companies and consumers from their reliance on Chinese factories,
which have created tens of millions of jobs in China.
Anticipating such a threat, Mr. Xi
has worked hard over the last several years to reduce China’s reliance on other
countries by subsidizing companies to make a nearly complete range of
industrial goods domestically.
In a speech in 2020, he ordered that
China “tighten the dependence of the international industrial chain on our
country, so as to develop a strong countermeasure and deterrent ability against
external attempts to sever our supply chains.”
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