China’s Help a Key Reason Sanctions on Russia Are Working

 

Despite its ”no limits” partnership with Russia, China’s help has played a key role in the dramatic impact that sanctions have had on the country’s economy following Vladimir Putin’s invasion of Ukraine.

That’s according to a new report by the Peterson Institute for International Economics in Washington, which says China’s exports to Russia have dropped 38% compared with the second half of 2021, a fall that’s comparable with non-sanctioning countries.

“After the European Union, China is the second-largest contributor to Russia’s import decline since the invasion,” says the report’s author, senior researcher Martin Chorzempa. “One of the crucial successes of sanctions is that China and other countries that would like to bail out Russia have found it is difficult to do so and prudent not to try.”

China supplied a quarter of Russia’s imports in 2021—more than any other country—with exports of $73 billion, says the report. It also provided 57% of Russia’s semiconductors and 20% of its integrated circuit imports in 2020, according to the United Nations’ Comtrade Database, it adds.

 

Watch What China Does

But while China denounced sanctions and proclaimed that it will maintain normal economic relations with Russia, and despite its state media’s pro-Russia stance, Chorzempa says it is important to “watch what China does, not just what it says.”

Russia’s imports have fallen significantly, and that’s because of both the sanctioning coalition and non-sanctioning countries that have refused to adopt the sanctions, most notably China, says Chorzempa.

A key factor in China’s compliance is that foreign multinational corporations account for half of China’s exports, he says. They are plugged into the global economy and follow orders from their own corporate headquarters in sanctioning countries, not Beijing, it says.

Still, it is clear that foreign multinational corporations are not the only driver of compliance, says the report. China UnionPay refused to work with Russian banks, and  Huawei, the tech giant that’s heavily sanctioned by the US because of national security concerns, has curtailed its Russian operations.

 

Crucial Technology

“Chinese firms violating the ban on sensitive goods sold to Russia could lose access to crucial technology, goods, and currency (all major reserve currency issuers have joined sanctions),” he said.

Exports to Russia from sanctioning countries have fallen 60% from the average level in the second half of 2021, the report estimates, while exports from non-sanctioning countries have fallen about 40%.

“The decline in imports overall has inflicted major pain, and anecdotal evidence suggests that the inaccessibility of foreign tech and components is hitting Russia’s maintenance; supply; and future development of chips, guided missiles, tanks, cars, planes, and much more,” says Chorzempa. “Russia’s own economy ministry is projecting a GDP contraction of up to 12.4% in 2022.”

 

• Jim Pollard

 

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