Russia was hit by a series of sanctions from Europe and the US over its attack on Ukraine, and its economy and finances have been hit hard, with long-term effects. In addition, the US has issued warnings to Beijing, which, according to analysts, has no ability or the courage to help Russia out of trouble.
A CNN article highlighted that although Russia relies on China to a certain extent, Russia is not China’s primary trading partner.
According to the WTO and China Customs data, CNN estimates that China is Russia’s largest trading source. However, Russia is much less important to China, as it accounts for only 2% of China’s trade volume, far less than China’s trade with the European Union (EU) and the US.
In addition, Chinese companies are also worried that if they keep doing business with the Russians, they will be indirectly affected by sanctions.
Craig Singleton is a scholar at the Foundation for Defense of Democracies, a DC-based think tank. He said that these Chinese entities “could very quickly find themselves subject to increased Western scrutiny if they are perceived in any meaningful way as aiding Russian attempts to evade US-led sanctions.”
Bloomberg recently reported that China’s largest state-owned bank, the Industrial & Commercial Bank of China Ltd. (ICBC), had announced restrictions on Russia’s commodity trade financing due to sanctions imposed by the EU and the US.
CNN’s analysis pointed out that China can’t replace the US in providing Russia’s many key technologies.
According to Reuters, an unnamed American official said at a media briefing a few weeks ago that China and Russia need technologies provided by other countries, including the US. Bloomberg said this might cause Chinese tech companies, especially large firms, to be extra cautious when dealing with Russia.
Neil Thomas, a China analyst at political risk consultancy Eurasia Group, said, “Most Chinese banks cannot afford to lose access to US dollars, and many Chinese industries cannot afford to lose access to US technology.”
Neil Thomas added that Beijing would also face “heavy economic punishment” for blatant violations of sanctions imposed by Western countries.
According to the International Energy Organization (IEA), China accounted for only 20% of Russia’s crude oil exports last year, with most of the Russian crude oil still exported to Europe.
According to Refinitiv data, Russia supplied about 2.66 million barrels of crude oil per day to Europe by sea and only 718,000 barrels per day to China, which is less than a third of Europe’s total.
Under the sanctions, European refiners are reluctant to buy Russian crude oil, so can China, which will not join the sanctions against Russia, absorb the extra crude oil? Author Xin He from the Chinese language Kanzhongguo said that the answer is complicated.
Reuters columnist Clyde Russell said that the crude oil shipped to China must pass through the Suez Canal or go round the Cape of Good Hope. Long sea voyages will push up transportation costs, and Chinese refiners will ask for deep discounts, and it would be hard for China to digest such a large portion.
A BBC analysis points out that China’s role is much less important to Russia outside of trade. It is not a major foreign investor or lender in Russia, and the EU plays a major role in this regard.
For example, the EU is currently the biggest overall trading partner with Russia as a bloc. Last year, total trade between the EU and Russia was worth almost twice as much as China’s trade with Russia.
On March 8, in an interview with The New York Times, US Commerce Secretary Gina Raimondo warned that if Chinese companies violate the ban on chip sales to Russia, the US will cut off the equipment and software supply China needs to make their products.
The Commerce Secretary said that the US could essentially sanction China’s leading chipmaker, Semiconductor Manufacturing International Corporation (SMIC), or any Chinese firms that continue to supply chips and other advanced technologies to Russia, to “prevent them from using our equipment and our software.”
Before Russia attacked Ukraine, most of Russia’s chips came from China.
White House Press Secretary Jen Psaki said on March 7 that the US could take action if Beijing does not comply with the sanctions on Russia.
If China doesn’t “abide by the sanctions, we always have — you know, we clearly have means to take steps, but that’s what we’ve seen to date.”