As the Russian economy sinks under the weight of crippling sanctions, its most powerful ally, China, has shown little initiative to offer Moscow a lifeline.
Beijing has offered some moral support to the Kremlin, but U.S. officials and experts contend that even if China wanted to fill an economic void created by sanctions and Western companies fleeing over Russian President Vladimir Putin’s invasion of Ukraine, it would face major obstacles in offering Russia the reprieve it might need to sustain its weekslong offensive in Ukraine.
AS HIS INVASION OF UKRAINE BOGS DOWN, PUTIN ADMITS WESTERN SANCTIONS ARE KILLING HIS ECONOMY
“I’ve not seen evidence that China is providing Russia with any significant workaround for our sanctions,” Secretary of the Treasury Janet Yellen told CNBC on March 10. “Chinese banks do a lot of business with the West. They care very deeply about their relationship with the U.S. and European financial systems, and they seem to be very cautious in their willingness to do business with Russia.”
The United States and its allies have frozen more than $300 billion worth of Russia’s massive $640 billion foreign reserve holdings, sanctioned dozens of Russian companies and officials, kicked major Russian banks off the SWIFT banking system, and begun curbing oil imports. Compounding the burn of the sanctions, foreign companies have begun to flee in droves. These moves have battered Russia’s economy, prompting forecasts from financial institutions such as JPMorgan that its annual gross domestic product will tank by a whopping 12.5%.
Sustaining the war effort has been costly. Russian troops are reportedly running low on fuel and food, and there has been speculation that it is running out of missiles, per the New York Times. Military hardware will be hard to resupply. as sanctions have restricted Russian access to chips and other technology.
China has condemned the West’s use of sanctions against Russia. While sanctions do not hinder China’s ability to expand trade with Russia broadly, they inhibit Chinese firms from using key Western products and services. For example, as tech companies such as Apple and Microsoft draw down sales in Russia, Chinese tech firms would be cut off from the U.S. market if they sent banned materials into Russia.
“We could essentially shut [Chinese chip manufacturer SMIC] down because we prevent them from using our equipment and our software,” warned Secretary of Commerce Gina Raimondo last week. “They have their own self-interest to not supply this stuff to Russia.”
Still, China could tap into its playbook for dealing with sanctions against North Korea and quietly flout the punitive measures. Gary Hufbauer, author of Economic Sanctions Reconsidered, told the Washington Examiner he believes China will start conducting more trade with Russia off the books.
“I think the word is ‘subterfuge,’” Hufbauer told the Washington Examiner. “I think they will not make a big show of breaking the sanctions, but in many subtle ways or ways that cannot be easily perceived, they will help Russia escape the most harsh sanctions.”
But Hufbauer noted such a reprieve would likely provide only minimal relief to Russia. Western officials have expressed interest in monitoring against such violations. Jake Sullivan, President Joe Biden’s national security adviser, issued a stern warning to his Chinese counterpart this week that there would be “consequences” if China helped Russia evade sanctions.
BIDEN UNDER PRESSURE TO DO MORE FOR UKRAINE
During a phone call Monday with his Spanish counterpart, China’s foreign minister, Wang Yi, indicated China was keen to avoid the West’s wrath. “China is not a party to the crisis nor does it want the sanctions to affect China,” Wang said, according to a readout of the call. “China has the right to safeguard its legitimate rights and interests.”
In a call with Biden on Friday, Chinese General Secretary Xi Jinping emphasized that China is saddened by the crisis in Ukraine and that the U.S. and China have a responsibility to work toward global peace and tranquility, per a readout from the Chinese government. He also cautioned that sanctions against Russia could bruise the global economy. Biden defended the sanctions and reiterated U.S. warnings of retaliatory measures if China provided material support to Russia, according to a White House readout of the call.
Without subverting sanctions, China could expand with Russia the trade of goods and services that are not restricted by the West. For example, Beijing could ramp up oil and commodity purchases from Russia and try to sell critical goods to which Russia has lost access.
Chris Miller, visiting fellow at the American Enterprise Institute, believes Chinese firms may not be eager to enter the Russian market.
“There are still opportunities for Chinese firms and specific commodity exports. But broadly speaking, you know, Russia is not a growth market for anyone,” he told the Washington Examiner. “The types of goods that are controlled by the Western sanctions are things that China will really struggle to replace.”
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, told the Washington Examiner that it would be difficult to scale up trade right away but emphasized that in the long run, China has an interest in developing alternatives to Western-dominated economic structures like SWIFT.
“Logistically, they haven’t traded a lot, so there’s not interconnectedness that you might see,” she said. “These are things that are going to take time to develop. China has steadfastly opposed the use of sanctions by the U.S., so having workarounds for these sanctions, I think, is in their long-term interest.”
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
In spite of China’s reluctance to provide Russia with economic workarounds, Russian leaders have indicated that Moscow will increasingly rely on China for trade as Russia grows increasingly isolated from the West.
“I think that our partnership with China will still allow us to maintain the cooperation that we have achieved — and not only maintain but also increase it in an environment where Western markets are closed,” Russian Finance Minister Anton Siluanov told reporters last Sunday, per RT.
