Home World Ukraine War How the increase in trade with China contributes to the Russian war.

How the increase in trade with China contributes to the Russian war.

trade with China
Russian President Vladimir Putin and China’s President Xi Jinping shake hands after delivering a joint statement following their talks at the Kremlin in Moscow on March 21, 2023. credit: cnbc.com/Mikhail Tereshchenko | Afp | Getty Images

Trade with China,Chinese companies are playing a growing role in bolstering Russia’s war-torn economy and bolstering its military capabilities, according to a new CNBC analysis. Data provided by Russian customs up to August 2023 shows Chinese imports of drones, helmets, vests and radios, providing a lifeline to President Vladimir Putin’s 18-month war of attrition.

At the same time, analysts believe that the appearance of “underestimated” trade flows provides direct and indirect support for Russia’s offensive. Chinese companies are playing an increasingly important role in bolstering Russia’s struggling economy and bolstering its military capabilities, including trade in goods used on the battlefield in Ukraine, according to a new CNBC analysis.

Data from Russian customs in August 2023 show that continued imports of drones, helmets, vests and radios from China have provided a lifeline to President Vladimir Putin’s 18-month war of attrition and a lucrative avenue for Chinese business. Meanwhile, analysts told CNBC that China has emerged with a number of less-documented ostensibly civilian exports, including vehicles, construction equipment and synthetic materials, that provide direct and indirect support to Russia’s war effort.

“I think there is no doubt that the Chinese authorities understand the trade flows. They are big enough that they cannot continue without the consent of the Chinese government,” said Mark Kancian, a senior adviser at the Center for Strategic and International Studies, a Washington think tank.

Russian President Vladimir Putin and China’s President Xi Jinping shake hands after delivering a joint statement following their talks at the Kremlin in Moscow on March 21, 2023.
credit: cnbc.com/Mikhail Tereshchenko | Afp | Getty Images

The defense ministries of China and Russia did not respond to CNBC‘s requests for comment on the trade flows. This trade comes despite Beijing insisting that its trade with Moscow constitutes “normal economic cooperation” and is not directed at “third parties”. Last week, Chinese Foreign Minister Wang Yi confirmed that China would continue commercial cooperation with Russia ahead of a planned October meeting between Russian President Vladimir Putin and Chinese leader Xi Jinping.

The comments follow a US intelligence report released in July that said China “has also become an increasingly important pillar of Russia’s war effort and may supply Moscow with critical technology and dual-use equipment for use in Ukraine.”

Deliveries reportedly include navigation equipment, jamming technology and fighter jet parts. Indeed, Kiev reported that its troops were increasingly finding Chinese parts in weapons used by Russian forces since April 2023, the same month that Putin and then-Chinese Defense Minister Li Shanfu reiterated the establishment of an “endless partnership” between the two countries.

Ukraine’s Defense Ministry and the General Staff of the Armed Forces of Ukraine did not immediately respond to requests for comment on the battlefield results.

Trade in “dual-use” goods is increasing

In 2022, total bilateral trade between Russia and China reached a record high of $190 billion, up 30% from 2021. This year, that number will be surpassed, with trade reaching $134 billion in the first seven months of 2023.

China now accounts for about half (45%-50%) of Russia’s imports, compared with a quarter before the war, according to estimates from the Bank of Finland’s Institute for New Economics. This includes trade in so-called dual-use goods and technologies, goods that have both civilian and military uses, such as drones and microchips.

In 2022, China sold more than $500 million worth of semiconductors to Russia, up from $200 million in 2021. Meanwhile, China sold more than $12 million worth of drones to Russia a year through March 2023.

Semiconductor sales to Russia from China and Hong Kong more than doubled in 2022 as Western sanctions took hold.
Credit: CNBC.com

A CNBC analysis of declarations and certificates of compliance submitted by Russia to the Federal Certification Service, a prerequisite for importing and selling goods in the country, shows that trade in such goods between Russian and Chinese companies has increased since Moscow’s full-scale invasion of Russia. It has been. Ukraine, February 2022 to date. Such declarations are provided by the buyer and not by the manufacturer of the goods.

From September 2022 to January 2023, the Chinese multinational Shenzhen DJI Technology Co., Ltd. manufactured drones. registered several times in Russia to an unknown number. The imported products were both directly from the company and indirectly from Chinese exporters, including Shenzhen-based Autel Robotics and Iflight Technology. Although DJI released a statement on its website in April 2023 saying that “as of April 26, 2022, it will voluntarily suspend all sales and business to Russia and Ukraine and contractually prohibit resellers from selling products in these two countries from any sales and for combat purposes”.

A DJI Inspire 1 Pro drone is flown during a demonstration at the SZ DJI Technology Co. headquarters in Shenzhen, China, on Wednesday, April 20, 2016.
Credit: CNBC.COM/Qilai Shen | Bloomberg | Getty Images

A DJI spokesperson told CNBC: “We take compliance with the law very seriously and have taken all of our controls to emphasize that our products should not be used in combat to cause harm or be turned into weapons.”

One of the drone importers, Moscow-based Nebesnaya Mekhanika (roughly translated as “Heaven Machinery”), which was DJI’s official distributor in Russia before the war, submitted the application in September 2022, the documents show.

Another importer, Moscow-based Vodukh, also registered an unknown number of lithium-ion and lithium-polymer batteries and an unknown number of battery stations directly from DJI in July 2023 and November 2023, respectively. According to records, it is 2022. or These products can be used to power everything from small electronic devices to electric vehicles. A third company, Rostov-on-Don-based Pozitron, has imported more than 54,000 additional helmets from Chinese supplier Liaoning B&R Technology Co until the end of 2022. and Beijing’s KRnatural International Trading Co., according to unclear documents, whether it’s a construction or military helmet.

We see Chinese companies selling things to Russia that they may not be able to sell at higher prices in China or the West. Kanchan, a defense analyst, said it was clear that such items had always been a key aspect of Russia’s military arsenal.

“For example, they (Russia) fire 10,000 or even 20,000 rounds a day. To maintain this level of spending, they need outside help,” he said.

“Also, their cruise missiles are running low. Their supplies were almost exhausted in the first six months, so they could build more cruise missiles using Chinese-supplied components,” he added.

In November, helmets and vests were also purchased in large quantities, each batch containing 100,000 pieces. Shanghai-based military and police equipment manufacturer Deakin (Shanghai) Industrial Co., Ltd. was acquired by Moscow-based Legittelecom in 2022, documents show.

Legittelecom provides consulting services on licenses for “import, export, and sale of radio electronic products and high-frequency equipment,” according to its website, and imports an unspecified number of portable radios or walkie-talkies from wireless companies. March 2023 Hong Kong Reteness It is not clear from the documents whether Legittelecom is the end user of the products or to whom it licenses them, but Chinese-made radios have been recovered from the battlefields of Ukraine. The companies did not respond to CNBC’s request for comment on the deals. However, analysts say the erratic import patterns point to opportunism by companies on both sides as they seek to exploit Moscow’s military needs.

A Russian military radio produced by Chinese manufacturer Baofeng is displayed during an open-air exhibition of destroyed Russian military equipment and tactical gear on June 15, 2023 in Kyiv, Ukraine.
CREDIT: CNBC.COM/Global Images Ukraine | Getty Images

“We see Chinese companies selling things to Russia that they may not be able to sell at higher prices in China or the West,” said Antonia Hmaidi, an analyst at the Mercator China Research Center in Berlin. Examines China’s dual-use exports to Russia since the start of the war. “It’s not the big Chinese exporters that are exporting. Instead, it’s these small companies,” she continued, noting that Western sanctions against these companies have had minimal impact. “These companies really don’t have a lot of intrinsic value that makes it easy to create another one.”

In fact, Silva was incorporated in the remote Buryatia region of Eastern Siberia in September 2022 and submitted an import application in March 2023 to import 100,000 helmets from Shanghai Hanyun New Materials. Most recently, in August 2023, the company submitted an application for an import license. An unknown number of radio telemetry systems manufactured by Hubei Jingzhou Myatt Intelligent Technology Co., Ltd. can be used for drone tracking. Hmaidi also cited the example of a Hong Kong company founded in 2020 that had supplied North Korea and now included Russia. Pyongyang has boosted ties with Moscow, with the two leaders meeting earlier this month in the Amur region of Russia’s Far East amid Western suspicions that North Korea may be preparing to supply Russia with military equipment. CNBC contacted or attempted to contact all of the companies listed, but did not hear back.

“Undervalued” trade flows

In addition to goods with obvious military uses, Russia has also increased imports of Chinese goods with possible direct and indirect war implications, analysts say. For example, China’s exports of aramid fiber, a heat-resistant synthetic fiber used in everything from bicycle tires to bulletproof vests, to Russia rose more than 350% in dollar terms in 2022 compared to 2021, according to data compiled by CNBC on CNBC. . ImportGenius, customs data aggregator. In January and February 2023 alone, the import volume was close to 50% of the total volume in 2022. Meanwhile, Joseph Webster, a senior fellow at the Atlantic Council, said construction equipment has an “underappreciated” but important role in China’s investment in the war with Russia, helping to strengthen China’s defenses against a counterattack in Ukraine.
“Excavators and wheel loaders are one of the most important and, frankly, underappreciated aspects of China’s involvement in the war in Ukraine,” said Webster, who has studied the rise of such exports. In Russia, the equipment of burial pits increased enormously… This is almost certainly not a coincidence.

 “At the same time that the Russian army was digging trenches, there was a massive increase in Russian trenching equipment“.

This is almost certainly not a coincidence,” he added. In the first seven months of 2023, Russia imported almost twice as many Chinese backhoe loaders and more than three times as many excavators as in the same period last year, according to trade data.
From January to May 2023, China’s heavy truck imports, some of which were used on the battlefield and others indirectly, rose 11 times compared to the same period in 2021. In June, a video of Ramzan Kadyrov, the president of the Russian Chechen Republic, was shared on his official Telegram account. In it, he showed off a variety of armored vehicles, including what appeared to be Chinese Tiger vehicles and armored personnel carriers, which he said are being deployed in Russia’s so-called special military operations in Ukraine. “Even if Chinese exports don’t go directly to the front lines, they still provide important economic assistance to Russia,” Webster said. He said the additional fleet could have a major impact on Moscow’s ability to balance production, which is important. Russia, and Russia is crucial. civilian and military personnel.

A general view of the container terminal in Qianwan of Qingdao Port, a port in Shandong Province, China, March 17, 2023. 
CREDIT:CNBC.COM/CFOTO | Future Publishing | Getty Images

“As China exports supply trucks to the Russian civilian sector, Kamaz may be rebuilding production lines for armored vehicles,” Webster said of the Russian-sanctioned state truck maker.

Chinese government cooperation?

The findings add to a growing list of Chinese goods and companies, including state-owned companies, allegedly supplying Russia’s military. A US intelligence report in July said that state-owned China Taili Aviation Technology Co. and China Poly Technology Co. wereound to be supplying parts to Kremlin-linked defense companies, including parts for Xiaomi Systems helicopters found at the frontline.

Asked to comment on the intelligence report and the dual-use trade, China’s Ministry of Commerce referred to CNBC’s response to a similar question in May, in which it said its trade relationship with Russia is based on “mutual respect and mutual benefit.” on the “win-win” principle. , both sides win. “

“The Chinese authorities have repeatedly expressed China’s clear position on the Ukraine issue: China will not add gasoline to the fire, let alone exploit it,” the Foreign Ministry added, according to a translation. The State Department previously commented in April that China “will not supply weapons to any belligerent” and will “control the export of dual-use items in accordance with laws and regulations.”

It is not clear to what extent the Chinese authorities are aware of or involved in this trade. These dual-use products have so far left China plenty of wiggle room to avoid Western sanctions. At the same time, neither Washington nor the EU want to blame Beijing directly.

The White House National Security Council did not respond to a request for comment on the trade flows. However, analysts note that there are few signs that Beijing is taking steps to reduce sales.

Chinese exporters to Russia will not be penalized unless they clearly violate Western sanctions. “China’s exporters to Russia will not be punished for this unless they clearly violate Western sanctions and cause further tension with the West.

As long as they can keep calm on these exports, it seems unlikely that they will anger the Communist Party,” Webster said. However, a continued alliance with Moscow could have significant long-term consequences for China’s economic slowdown. The United States and several Western allies have restricted trade with China in certain sensitive technologies on national security grounds, as part of a broader risk reduction or diversification away from Beijing. “China wants Russia to not fail, but they also don’t want to get involved,” Hemedi said. “There may be a debate about sending weapons, and there is intelligence that they may want to send weapons. But at the same time, they follow the sanctions very, very carefully. “

Western allies now face a difficult decision: either target individual vendors, knowing the impact may be limited, or take action against Beijing that could have wider ramifications and risk retaliation.

“If China openly supports Russia, it will have enormous consequences for Beijing’s overall economic, political and security relationship with the democratic alliance led by Washington and Brussels,” Webster said.



Please enter your comment!
Please enter your name here

Exit mobile version