Despite Rhetoric, Chinese Companies Mostly Complying With Russia Export Controls, Experts Say
Although Chinese companies with little international exposure may decide to violate export restrictions against Russia, most of the larger companies likely won’t take the risk, experts said. So far, most Chinese companies are complying with the sanctions and only continuing to buy Russian oil and gas, the experts said, despite strong opposition to Western sanctions by the Chinese government.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Erica Downs, researcher at the Center on Global Energy Policy, said there is a “bit of a gap” between Beijing's rhetoric and the Chinese industry’s sanctions compliance. “The rhetoric of course, is that China does not support Western sanctions, it's not going to participate in them, and that business as usual is going to continue,” Downs said during a July 8 event hosted by the Atlantic Council. “But if you look at Chinese energy companies,” Downs said, “there are real concerns about running afoul of current and any potential future sanctions.”
The U.S. has placed a range of export restrictions on both domestic and certain foreign-produced goods destined for Russia, and has sanctioned a range of activities in Russia’s industrial and technology sectors (see 2205090042 and 2203040020). But as long as the U.S. isn't sanctioning foreign companies for buying Russian oil (see 2204110037), Chinese companies will continue to “take advantage” of “cheap” Russian fuel, Downs said. They will just be “very careful” not to violate other international sanctions and export controls, she said, especially if they have global operations.
Brian O’Toole, a sanctions expert with the Atlantic Council, agreed, saying Chinese companies are concerned about compliance with Western restrictions. “While there may be official statements out of Beijing, to a certain effect, pushing back against the existence of U.S. sanctions, companies, by and large, are following” the sanctions, O’Toole said.
But there will be some exceptions, he said, especially among smaller companies that “don't have an international profile.” The Bureau of Industry and Security last month added several Chinese companies to the Entity List for helping Moscow evade export restrictions, and none of them are viewed as major, international businesses (see 2206280056).
Similar Chinese attempts to backfill U.S. export controls will likely continue, said Edward Chow, an energy security expert with the Center for Strategic and International Studies. He expects some Chinese companies to supply Russia’s oilfield technology and equipment sector. “The medium- and long-term ability for Russia to continue to produce oil and gas at a high level will depend on access to modern equipment and technology,” Chow said. “And the Chinese will try to fill that gap, even if their technology today is not on par with Western suppliers.”
Russia likely will still struggle to import parts and necessary items for its energy industry, said Amy Myers Jaffe, managing director of the Climate Policy Lab at Tufts University. She said much of the equipment Russia has been using is now controlled by Western companies. “I think that it will be difficult for them to find other suppliers and assistance,” Jaffe said. “I think that's an area which, over the long term, the [liquefied natural gas] industry in Russia is going to have more difficulty progressing without the Western firms."
O’Toole agreed, saying the international export controls will eventually cripple many of Russia’s industries, even if the effects aren’t being felt immediately. “The most insidious of the sanctions is going to be the Commerce Department stuff that is going to take a longer time to kick in,” he said. “But it will be much more effective over the long run, because it will essentially deny technology to Russia.”