China opposes sanctions and has a reputation for busting

Chinese companies have repeatedly evaded sanctions on trade with countries such as North Korea, Iran and Venezuela, according to sanctions investigators from a UN panel of experts, the US Treasury Department’s Office of Foreign Asset Control and other monitors. For example, a UN panel report six months ago documented how North Korea-linked ships illegally transferred 41 coal from China’s busiest port in nearly four months.

Western actions to sever many of Russia’s ties to the global economy as punishment for its war on Ukraine may be less effective if China offers to see Moscow as the market of choice for rogue nations.

Exposure of sanctions on the part of Russia would be massive, requiring direct state involvement such as deals with large government-run firms or the application of laws designed to weaken foreign sanctions. Monitors say it is usually small time traders who associate with North Korea.

As the world’s second largest economy and its top trading nation, China has the means to get its way on sanctions, and its government is clearly distrustful of US-led rulemaking. The size and fragmentation of China’s market, with more than 5,800 merchant ships, seven of the world’s 10 busiest shipping ports, and thousands of bank branches may help hide nefarious activities.

China is also in the field of developing technology designed as an alternative to Western-backed systems, such as a bank money-transfer service based on the SWIFT network and a digital version of its currency, as well as undersea- and satellite-telecommunications systems. adds up. Control.

Sanctions watchers say evidence suggests Chinese officials sometimes turn a blind eye to the theft. And how, they ask, North Korean smugglers manage to dodge controls in one of the world’s most efficient surveillance states.

Trade licenses, satellite photos and other documents in a UN panel’s 261-page report support the conclusion that between February and May last year, North Korean-flagged and controlled ships in waters near the Chinese port of Ningbo carried 364,000 of their country’s nationals. metric tons were unloaded illegally. Coal on other ships, including those sailing under Chinese flags.

“China has always seriously implemented the Security Council resolutions on North Korea and fulfilled its international obligations,” its foreign ministry said in a statement. It said China responded responsibly to the UN panel and drew the group’s attention to the negative impact of sanctions on North Koreans’ livelihoods, the UN report said, citing the Chinese government. It notes that the suspected ships had not called to their ports and that the negative humanitarian consequences of the sanctions would continue.

China opposes economic sanctions partly because its executives and companies are often targeted, from the 1989 Tiananmen Square crackdown to disrupting Huawei Technologies Company research by the Washington-based think tank Center for a New American Security. Until US-led efforts. shows that 70 of the 765 sanctions measures adopted by the Biden administration during 2021, including the reimposition of Trump-era sanctions, had a China dimension.

“If they don’t believe the sanctions are legal and valid, there is no incentive to enforce them,” said Jason Bartlett, who oversees the sanctions for CNAS.

While China seeks to register its distaste for sanctions, Beijing also benefits when North Korea earns cash to avert a collapse – a crisis China would not want on its border – while deals with Iran and Venezuela To provide much needed crude oil, he said.

The trading regime isn’t the only tool Beijing has for reducing the spread of Western sanctions.

Beijing is also baring its teeth against interference and prolonged jurisdiction, in order to challenge Western sanctions. Former US Secretary of State Mike Pompeo was sanctioned last year by Beijing along with think tanks and companies that China’s government says interfered with its domestic affairs.

Corporate executives making deals with China are nervously awaiting a time when Beijing deploys a bevy of new but hitherto untested rules, analysts call anti-sanction laws. The regulations give Beijing the authority to penalize individuals and companies for complying with a foreign government order, such as a technology manufacturer that withholds exports to an approved buyer.

Such rules could come in handy if Chinese companies get caught in the crossfire over Russian sanctions.

Andrew Polk, co-founder of the research firm, said, “We are just waiting for the moment where a foreign company… Or is breaking American law.” Trivium China.

Russia and China are neighbors with nearly $150 billion in trade, and both are led by autocratic leaders who are facing US opposition to their governance policies. Twenty days before Russia’s invasion, Chinese President Xi Jinping and Russian President Vladimir Putin signed a statement calling for “power politics … against bullying, unilateral sanctions, and the external application of jurisdiction, as well as export control policies.” Exploded as abuse.”

When asked about the imposition of sanctions on Moscow, Beijing officials reiterated their protest.

“China and Russia will continue to conduct normal trade cooperation in the spirit of mutual respect, equality and mutual benefit,” Foreign Ministry spokesman Wang Wenbin said. The country’s top banking regulator said China “will not participate in such sanctions.”

Although they do not carry an international imprint like UN sanctions against North Korea, the scope of measures aimed at Moscow by the US and Western allies is unprecedented for a major country.

The US and other countries have assets controlled by Mr. Putin, some of his top allies, prominent tycoons and companies, as well as government agencies; blocked Russia’s largest commercial banks from the global financial system; and prohibited trade in key goods and services.

China has a different calculus in this crisis. Russia is not North Korea, an economy so small and isolated that secret lump-sum shipments offer a material advantage.

Russia is a group of 20 members and the 11th largest economy in the world. Meaningfully easing the pain of Western sanctions would require the cooperation of banks, shippers and other business groups that in China are usually controlled by the government. Each entity taking the risk is being self-approved.

“My guess is that it will be very effective with respect to Chinese companies,” said Ryan Fahey, partner at Washington law firm Hughes Hubbard & Reed LLP and former Department of Justice sanctions expert. Even though individual Chinese players may be willing to work out a solution to sanctions on Russia, Mr. Fehi said it was unclear whether his bankers, insurers, shippers and other counterparties would go along.

“It’s very difficult to do business alone,” he said.