US considers sanctions against Chinese companies for assisting Russia’s war

The US is looking into hitting sanctions on Chinese companies it thinks are aiding Russia in supporting its war against Ukraine, a member of Congress told CNBC

It could be the first direct attribution of responsibility to Beijing since the start of Russia’s full-scale invasion of Ukraine two years ago.

Democratic Senator Gerald Connolly, a member of the US House Committee on Foreign Relations, said lawmakers were already debating penalties against Chinese corporations after the European Union suggested similar steps in February.

American lawmakers may “very soon” adopt identical proposals from the EU, in what would be the first direct punishment against Beijing for alleged military backing for Moscow.

“China has to understand that the same kinds of sanctions that are beginning to really take hold in Russia and are affecting Russian productivity, economic performance, and quality of life can also be applied to China,” he told CNN.

US sanctions could have a significant impact on China’s already struggling economy, which has recovered poorly from COVID-19 and is experiencing volatility in its real estate industry. So, Chinese authorities will be compelled to carefully calculate the consequences of their ties to Russia, he thinks.

EU penalties against Chinese companies for assisting Russia

The European Union is poised to impose sanctions on Chinese companies that it believes are assisting Russia in circumventing Western restrictions by importing parts used in drone production.

According to media sources, the draft blacklist includes at least three Chinese enterprises.

The proposals, which would have been part of the EU’s 13th sanctions package since the start of Russia’s war, could be adopted by February 24, the second anniversary of Russia’s all-out war.

China has become essential for Russia’s war effort—US intelligence

According to a US intelligence report, China “has also become an increasingly important buttress for Russia in its war effort, probably supplying Moscow with key technology and dual-use equipment used in Ukraine.

Beijing, on the other hand, has denied such claims, claiming that its trade with Moscow constitutes “normal economic cooperation.” 

Despite their denials, Washington has imposed sanctions on a number of Chinese enterprises that it claims are cooperating with the Chinese military.

Russia circumvents Western sanctions through third nations, including China

Western economic sanctions against Russia for its war in Ukraine have yet to deliver the desired results, as Russia continues to find ways to circumvent restrictions and import microprocessors, printed circuit boards, and other electronic and radio technical components.

Advanced technology, which Moscow cannot produce at home, is critical to Russia’s capacity to maintain its military production capabilities. This is critical because the FPV attack drones that Russia has begun mass producing require foreign dual-use components.

According to media sources, Russia is receiving assistance from various nations, particularly China, the country’s key economic partner in this field. It “exchanges” devices and their components for Russian energy resources.

China meets all of Russia’s electronic needs by circumventing sanctions, either directly or through intermediaries like Central Asian countries or the UAE. Mobile gadgets account for almost one-third of Chinese exports to Russia.

Trade between China and Russia

Since 2022, Russian imports from the world have decreased by about 38.8% because of the enacted sanctions. According to trademap.org data, China maintained its electronics exports to Russia near pre-war levels, whereas many other countries stopped doing so, and Moscow’s imports fell.

China is the world’s leading provider of electronics. China’s electronics exports surpassed the combined exports of Hong Kong, Taiwan, and South Korea, reaching almost a trillion dollars and surpassing the amount sold by the United States by five times.

Western countries have drastically decreased shipments to Russia, while China has increased them, with Hong Kong accounting for a percentage of exports. However, Western corporations’ policy of transferring production to China has hurt these countries.

Although Russia’s total imports from China have decreased, their percentage share has risen. In 2022, China will account for almost 60% of the Russian electronics market in 2022. China accounted for more than $13 billion in electronic shipments to Russia in 2022, when Putin’s war was already going on.

China exports advanced machine tools to Russia

Since the invasion of Ukraine, China has increased its supply of modern machine tools to Russia for use in the military industry.

Chinese vendors now account for the majority of shipments of ‘computer numerical control’ devices used by Russia’s defense industry. The Financial Times reported that Chinese shipments of a critical category of modern technology to Russia have increased since the full-scale invasion of Ukraine.

These machines are critical to the military industry in Moscow. They enable the rapid manufacturing of complex metal and other hard material components, making them vital in defense production.

Russian defense corporations import Chinese-made equipment, such as the Lancet kamikaze drones, which have caused substantial losses among Ukrainian forces.

According to Russian Customs, Chinese manufacturers contributed $68 million in CNC equipment in July (the most recent figure verified), up from $6.5 million in February 2022.

In July, Chinese-made CNC machines accounted for 57% of Russian imports by value in July 2023, up from 12% in the months before the war. They further claim that Moscow has continued to purchase large quantities of CNC tools manufactured in South Korea and Taiwan.

Beijing insists it does not give lethal weaponry to Moscow, but it opposes sanctions. China also supplies consumer goods—automobiles, machinery, electricity, and other stuff—to sanctioned Russia. In October, China’s President Xi Jinping reminded Russian dictator Putin that bilateral commerce had reached a “historic high” of more than $200 billion.

If China is not prevented from delivering modern machine tools to Moscow, it will be difficult to end Russia’s war in Ukraine and its military manufacture.

Chinese-supplied goods boosted Russian troops’ war capabilities

According to open-source trade statistics, an increase in imports of Chinese-manufactured military parts aided Russia’s ability to enhance its war capabilities on Ukrainian territory and keep Russian forces supplied to oppose Ukraine’s counteroffensive.

An unclassified US intelligence report reveals trade data indicating that China is supplying significant amounts of equipment and technologies critical to Russia’s war in Ukraine.

The surge of Chinese silicon chips from China has provided crucial components for Russia to resume weapon production, allowing Russian artillery, missiles, and drones to continue targeting Ukrainian armed forces and civilians.

The EU calls on China to deal with companies involved in the supply of dual-use goods to Russia

The EU is concerned about China’s assistance with Russia’s war operations. During the EU-China summit on December 7, European Council President Charles Michel urged Chinese President Xi Jinping to deal with enterprises that supply Russia with dual-use goods as the country continues its war against Ukraine.

More than a dozen Chinese enterprises are assisting Russia in evading Western sanctions placed on Moscow as a result of Putin’s conflict with Ukraine, according to the European Union.

These companies help Russia bypass the sanctions imposed by the West on Moscow due to Putin’s war in Ukraine by exporting dual-use goods for the defense industry.

Stopping Chinese exports is critical to ending Russia’s war

China may not be directly providing weapons to Russia at this time, but Xi’s government should be aware that Chinese businesses are contributing commodities and equipment that aid Russia’s invasion and takeover of Ukrainian territory.

As long as Russia receives supplies from Chinese firms, Ukraine will face significant challenges in repelling Russian air raids and liberating Russian-occupied territory.

Western nations must tighten export controls and constraints to close gaps in their sanctions frameworks and prevent future transfers of goods to Russia from fueling the Kremlin’s war machine.

Identifying and sanctioning Chinese enterprises that re-export Western dual-use goods to Russia would be the first step toward convincing the owners to stop evading sanctions.

These factors support the belief that Beijing, not Brussels, Washington, or even Moscow, holds the keys to peace in Ukraine. After all, as soon as China withdraws its aid from Russia, Moscow’s economy will begin to implode.

If China stops supplying electronics to Moscow, the Russian military industry will suffer the most, and it will be unable to continue fighting in Ukraine.

Therefore, we urgently need to halt the shipment of any military supplies and dual-use equipment to Russia through China and other third countries. Russia may be able to rebuild its military forces through sanctions evasion, and Putin’s war might spread beyond Ukraine’s borders into Europe.

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