China Seen as Not Likely to Help Russia Evade Western Sanctions
China is unlikely to violate U.S. sanctions against Russia because it fears the consequences of U.S. secondary sanctions too much, said Kevin Rudd, president of the Asia Society and former Australian prime minister. China also will likely avoid providing military support to Russia, Rudd said, which could invite similar U.S. sanctions that could hurt its major state-run and private technology companies.
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“Based on all the information I've got so far, the Chinese are acting in a manner which complies with existing U.S. and allied financial sanctions against Russia,” Rudd said during a March 21 event hosted by the Carnegie Endowment for International Peace. He said China is “deeply vulnerable to the U.S. dollar-denominated international financial system,” and any moves by the U.S. to limit China’s access to the dollar could damage its economy.
“Their predisposition to breach financial sanctions is going to be very tempered by the vulnerability that they fear they have if secondary financial sanctions were imposed against China itself for breaching sanctions against the Russians,” Rudd said.
The Biden administration has publicly and privately threatened consequences for China if it helps Russia evade Western sanctions (see 2203140009), which could include severe financial sanctions and strict export controls. Commerce Secretary Gina Raimondo said earlier this month the agency could “essentially shut” down any Chinese company that defies the sanctions, including Semiconductor Manufacturing International Corporation (see 2203080053).
Because of the risk of sanctions, China is also unlikely to send military support and other critical goods to Russia, Rudd said, despite Moscow's requests. Russia recently said China declined to supply it with aircraft parts (see 2203110008). “There'll be a reasonable degree of reluctance for the Chinese to cross that threshold,” Rudd said.
Beijing is in part reluctant to violate sanctions against Russia because they are coordinated among so many countries. Rudd said the Biden administration has been “highly competent in the way in which they have managed” the multilateral sanctions, adding that the global response may not have been as unified under the previous administration.
“The investment which the administration in the last 12 months has put into the rebuilding of alliance structures has actually been fundamental to what's been happening so far,” Rudd said. “If there wasn't European buy-in on the financial and economic sanctions front, frankly, we would be nowhere.”
China, however, will continue buying Russian oil and energy products, which don’t face U.S. trade restrictions until this summer and aren’t sanctioned by much of Europe, Rudd said. “On the trade front,” he said, China will pursue “anything that the Russians can do with the Europeans.” He added that Beijing could also seek to buy wheat from Russia to make up for its “bad harvest,” along with a “range of other commodities,” including forestry products.
Notably, Russia’s invasion of Ukraine could be providing Beijing with an example of the consequences it could face if it invades Taiwan, Rudd said. “If we thought there was a risk of financial and economic sanctions flowing to China over sanctions-busting activity in support of Russia,” he said, “can you imagine the volume of sanctions which would hit if China itself was to invade Taiwan?”
But a potential invasion is likely “quite a ways off,” Rudd said. Beijing needs to make itself more “financially and economically ready” before it considers invading Taiwan, he said, which includes becoming the world's largest economy and “no longer being vulnerable to the U.S.-dollar denominated financial hostility.”