Wednesday , 25 May 2022

China Undercuts Sanctions on Russia: Where Are the ‘Consequences’?

gatestoneinstitute.org – “For China… the Ukrainian crisis provided a unique opportunity to increase its access to Russia’s natural resources, particularly gas, gain contracts for infrastructure projects and new markets for Chinese technology, and turn Russia into a junior partner in the relationship between the two countries.” — Report by the European Council on Foreign Relations, February 2015.

In addition to undermining sanctions through the commodities trade, China is possibly also helping Russia hide its money.

Despite all of the above, the Biden administration continues to talk about China as if proof were still needed that it is undercutting sanctions on Russia.

China has clearly been giving material help to Russia. So where are the “consequences”?

The closest that the U.S. has come to going beyond words is the announcement, along with other G7 leaders, of an “enforcement initiative” to prevent Russia from evading sanctions, but it is — presumably deliberately — unclear what that initiative actually entails.

“The trade and the purchase of long-term energy supplies undercut the sanctions, because it shows Putin he has got somebody in his corner for the next five years or more.” — Michael Pillsbury, author of The Hundred-Year Marathon, Fox News, March 21, 2022.

The Biden administration, by repeatedly threatening “consequences” and issuing “warnings” to China, “if” it helps Russia undercut sanctions, merely continues to project indecision, weakness and lack of leadership …[and] will only result in the additional loss of credibility and the further degradation of U.S. deterrence to the detriment of the West.

Despite tough Western sanctions on Russia, President Vladimir Putin’s war on Ukraine has now lasted for more than a month and Putin is showing no signs of backing down. The power helping him to withstand the effects of the sanctions and continue the war is Russia’s most powerful ally — China. Pictured: Putin meets with Chinese President Xi Jinping in Moscow on June 5, 2019. (Image source: kremlin.ru)

Despite tough Western sanctions on Russia, President Vladimir Putin’s war on Ukraine has now lasted for more than a month and Putin is showing no signs of backing down. The power helping him to withstand the effects of the sanctions and continue the war is Russia’s most powerful ally — China.

Shortly before Russia’s invasion of Ukraine on February 24, Russia and China entered into contracts worth hundreds of billions of dollars. On February 4, Putin announced new Russian oil and gas deals with China worth an estimated $117.5 billion. On February 18, six days before the invasion, Russia announced a $20 billion deal to sell 100 million tons of coal to China. On the day of the invasion, China, lifting restrictions that had been in place previously due to concerns about plant diseases, agreed to buy Russian wheat.

All of these deals, by undermining Western sanctions on Russia, are lifelines to Putin and his war on Ukraine. “China could emerge as a major buyer for Russian wheat and sunflower oil as wide-ranging financial sanctions threaten Russia’s agriculture trade flows to its traditional markets in Europe,” S&P Global Commodity Insights wrote.

China, perhaps with a covetous eye toward Taiwan, has not condemned Russia’s invasion of Ukraine and has repeatedly stated that it is against sanctioning Russia. Chinese Vice Foreign Minister Le Yucheng called Western sanctions “outrageous.” China has not even tried to conceal that it continues to do business with Russia. As Chinese Foreign Ministry Spokesman Wang Wenbin said in his press briefing, “China and Russia will continue to conduct normal trade cooperation in the spirit of mutual respect, equality and mutual benefit.”

There is nothing new or surprising in China’s decision to supply the lifeline that enables Putin to stay afloat. After Russia annexed the Crimean Peninsula in March 2014 and was met with Western sanctions, Russia turned to China. In May 2014, Russia and China signed a gas supply deal worth $400 billion, making China Russia’s second-largest gas market after Germany. A February 2015 report by the European Council on Foreign Relations stated:

“After the European Union and the United States imposed sanctions on Russia [in 2014], President Vladimir Putin made a dramatic turn to China and signed a series of deals, including a $400 billion deal to export gas to China last May. Moscow is now attempting to reorient its entire economy towards Asia as a way to mitigate the negative impact of Western sanctions. For China, meanwhile, the Ukrainian crisis provided a unique opportunity to increase its access to Russia’s natural resources, particularly gas, gain contracts for infrastructure projects and new markets for Chinese technology, and turn Russia into a junior partner in the relationship between the two countries.”

In addition to undermining sanctions through the commodities trade, China is possibly also helping Russia hide its money. According to Foreign Affairs:

“Russia may have stashed tens of billions of dollars in reserve assets in opaque offshore accounts, where it holds dollar-denominated securities beyond the reach of international sanctions and asset freezes…there are signs, too, that Russia may have moved some of its dollars with help from a foreign government… It is not yet clear which intermediaries Russia would have used to stash Treasuries offshore. One strong possibility, however, is China, with which Putin now appears allied.”

Despite all of the above, the Biden administration continues to talk about China as if proof were still needed that it is undercutting sanctions on Russia. US National Security Advisor Jake Sullivan said on March 13:

“We are communicating directly, privately to Beijing, that there will absolutely be consequences for large-scale sanctions evasion efforts or support to Russia to backfill them. We will not allow that to go forward and allow there to be a lifeline to Russia from these economic sanctions from any country, anywhere in the world.”

After Sullivan held a seven hour long meeting with Chinese diplomat Yang Jiechi on March 14, a senior Biden administration official told reporters:

“I’m just going to reiterate that we do have deep concerns about China’s alignment with Russia at this time, and the national security adviser was direct about those concerns and the potential implications and consequences of certain actions,”

On March 18, in a video call with Chinese President Xi Jinping, U.S. President Joe Biden warned that there would be “implications and consequences if China provides material support to Russia,” but without being specific. One unnamed senior U.S. official even said, “The president really wasn’t making specific requests of China. I think our view is that China will make its own decisions.”

China has clearly been giving material help to Russia. So where are the “consequences”?

The closest that the U.S. has come to going beyond words is the announcement, along with other G7 leaders, of an “enforcement initiative” to prevent Russia from evading sanctions, but it is — presumably deliberately — unclear what that initiative actually entails. prior to Biden’s trip to Europe, Sullivan told reporters on March 23:

“[T]he G7 leaders tomorrow will agree on an initiative to coordinate on sanctions enforcement so that Russian efforts to evade the sanctions or other countries’ effort to help Russia evade the sanctions can be dealt with effectively and in a coordinated fashion.”

After the G7 meeting, the White House released a statement by the G7, which merely said:

“We will continue to cooperate closely, including by engaging other governments on adopting similar restrictive measures to those already imposed by G7 members and on refraining from evasion, circumvention and backfilling that seek to undercut or mitigate the effects of our sanctions.”

There was no mention of China; again, it all seemed too little, too late.

“They’re [China] the invisible hand behind Putin,” said Michael Pillsbury, author of The Hundred-Year Marathon.

“They are the ones who are funding the war. Roughly half of Russia’s gold and currency reserves are controlled now by the U.S. and by the West, he [Putin] can’t get access to them. But the other half the Chinese can provide access to and they’ve been doing it… The trade and the purchase of long-term energy supplies undercut the sanctions, because it shows Putin he has got somebody in his corner for the next five years or more. There’s a number of ways that China’s support is just crucial for Putin. I believe the Chinese could stop the war with one phone call to him. It would be like the banker calling you… so far it’s not happening… Probably the only way to get ahead is going to be American sanctions on China… the war will go on because the banker is not going to make that call.”

The Biden administration, by repeatedly threatening “consequences” and issuing “warnings” to China, “if” it helps Russia undercut sanctions, merely continues to project indecision, weakness and lack of leadership. The constant repetition of these warnings without follow-up actions by the Biden administration will only result in the additional loss of credibility and the further degradation of U.S. deterrence to the detriment of the West.

Judith Bergman, a columnist, lawyer and political analyst, is a Distinguished Senior Fellow at Gatestone Institute.

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