Western Sanctions On Russia Will Not Be Offset By Trade With China, According To The U.S.

Western Sanctions On Russia Will Not Be Offset By Trade With China, According To The U.S.
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According to the White House, China’s trade with Russia is inadequate to offset the negative effect of U.S. and European sanctions on Moscow.

The United States, the United Kingdom, and the European Union implemented fresh sanctions in the hours following Russia’s invasion of Ukraine on Thursday to isolate Moscow from the global economy. However, there were no limits on Russian oil and gas purchases, which are significant drivers of the local economy, in the broad measures.

Trade with Russia and Ukraine will continue as usual, and the attack would not be referred to as an “invasion,” China’s foreign ministry said in Beijing on Thursday. 

Meanwhile, the customs office has approved wheat shipments into Russia.

China and Russia account for a far lower share of the global economy than the Group of Seven, including the U.S. and Germany. As a result, U.S. Press Secretary Jen Psaki told reporters late Thursday in Washington that China “cannot conceal” the impact of the sanctions.

According to World Bank calculations, China accounted for 17.3% of global GDP in 2020 compared to Russia’s 1.7% and the G-7’s 45.8%.

China is Russia’s and Ukraine’s leading commercial partner. In addition, both countries are participants in the Belt and Road Initiative, a regional infrastructure development initiative widely seen as Beijing’s attempt to enhance its global influence.

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According to China’s customs bureau, China-Russia commerce reached a record high of $146.9 billion in 2021, up 35.8% year on year. By more than $10 billion, China’s imports from Russia surpass its exports.

To reach Moscow and Beijing’s goal of $200 billion in trade by 2024, commerce would have to increase by 37% from current levels.

According to customs data, China’s trade with Ukraine surged by 29.7% last year to $19.31 billion, a record high, with imports and exports split pretty evenly.

“China and Russia are comprehensive strategic partners. Likewise, China and Ukraine are friendly partners,” Assistant Foreign Minister Hua Chunying said Thursday in Mandarin, according to a translation by the media.

“Thus China will conduct normal trade cooperation, based on [China’s] Five Principles of Peaceful Coexistence [for international relations] and the basis of friendly relationship with both countries,” she said. “This, of course, includes cooperation on energy.”

According to Chinese customs statistics, energy products constituted for little under two-thirds of China’s imports from Russia in 2021. Yet, according to the agency, Russia is China’s top electricity supplier and second-largest crude oil supplier.

“China’s lifting of restrictions on Russian wheat and barley imports are intended to offset the impact of sanctions, but it remains to be seen if this will primarily be a symbolic gesture or if it will have a meaningful economic impact,” said Stephen Olson, a senior research fellow at the Hinrich Foundation, a nonprofit organization focused on trade issues.

“China’s ability to offset the impact of Western sanctions will be determined by the scale and scope of sanctions ultimately agreed to by the U.S. and its partners,” Olson said. “At this point, the West has not yet put all its cards on the table, leaving open the option of tightening the screws later, if need be.”

The Russian currency hit historic lows against the U.S. dollar on Thursday when the invasion of Ukraine began.

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Sanctions imposed by the West on Russia have not isolated the Kremlin from the global financial network SWIFT. According to SWIFT, the Chinese yuan was the fourth most often used currency for international transfers in January, up from the sixth two years ago.

On Thursday, China’s Hua news agency criticized the U.S. for providing military aid to Ukraine, arguing that Russia does not seek such support from Beijing or others.

The connections between Russian President Vladimir Putin and Chinese President Xi Jinping were strengthened earlier this month when the two leaders met in Beijing for a high-profile summit just before the Winter Olympics.

In an official readout, the Chinese side said that the two countries need to “strengthen their strategic partnership on energy” and “advance cooperation on scientific and technological innovation.” 

Gazprom and Rosneft, two Russian energy corporations, agreed to deliver oil and natural gas to China through the China National Petroleum Corporation on the same day.

“As long as China continues to implement its trading relationship, those measures would already be beneficial to Russia,” said Tong Zhao, a senior fellow in the nuclear policy program at the Carnegie Endowment for International Peace, based in Beijing.

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