Beijing orders insurers to assess Russia exposure, Commerce Minister says PRC will not join sanctions & China’s economy already “hit hard” by Russia sanctions -- China Boss news 3.07.22
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Beijing orders insurers to assess Russia exposure
In the blink of an eye. That’s how long it took for Russian President Vladimir Putin to invade after the Beijing Winter Olympics Closing Ceremony and for the West to react with unprecedented sanctions for the act of unprovoked war and violation of international laws and norms. It’s also how long it took for Putin's “sanctions-proofing” to show signs of failure. Atlantic Council Senior Fellow Brian O’Toole told France24 that “Fortress Russia is gone.”
But whether China will decouple from Russia or “fund Moscow’s war chest,” as Politico’s Stuart Lau put it, is a calculus riddled with risks, and China’s policymakers appear to be grappling with the political and economic quagmire of their new situation.
It’s been an full month for President Xi
On Friday, February 4th, just before the 2022 Winter Olympics kicked off in Beijing, Chinese leader Xi Jinping and Russian President Vladimir Putin announced a “partnership without limits.” Twenty days later, Putin invaded Ukraine, and, by the beginning of March, Chinese officials had “told top state insurers to perform urgent checks on their exposure to Russia and Ukraine,” revealing concerns “about the damage to the two economies amid intense fighting,” as well as the West’s “sweeping sanctions,” Reuters analysts said.
Things were already dicey in China business. The U.S.-China trade war has driven up costs, while China's Zero-Covid policy is suffocating international travel and supply chains. But Beijing’s refusal to condemn and sanction Russian president Vladimir Putin’s invasion of Ukraine has cast a very dark cloud over China’s relations with the West that will, likely, upstage all other issues.
Here’s how Dan Harris, a veteran China and Russia international business attorney, put it in a recent post on Harris Bricken’s China Law Blog:
Harris, China Law Blog:
…Russia’s War Against Ukraine Will Worsen China’s Relations with the World. For a Long Long Time.
The world is angry and repulsed by Russia. Billions of people are looking at what companies and countries will do about Russia’s war against the Ukraine. Massive protests against Russia’s actions are proliferating and companies are being publicly shamed for their relations with Russia.
Many companies and countries are responding to the pressure. Germany, which at the beginning of the Russia war was hanging back, is now supporting removing Russian Banks from SWIFT and it is sending a massive amount of arms to Ukraine. Neutral Switzerland (the country that stayed neutral against literal Nazis) today agreed to freeze tens of billions in Russian assets. Neutral Sweden is sending military aid to Ukraine. Russia friends and allies, including Lebanon, Kazakhstan, Cuba, Venezuela, Argentina, Turkey and Brazil have spoken out against Russia’s war against Ukraine. BP has severed its ties to Russia, relinquishing billions in assets, rather than face the PR storm by staying in. See BP to ‘exit’ its $14 billion stake in Russian oil giant in stark sign that Western business is breaking ties over Ukraine invasion. Elon Musk’s Starlink satellite internet service has ramped up its internet services in Ukraine to help Ukraine, in response to a public tweet by a Ukrainian government official. Stores are pulling Russian vodka from their shelves. See Russian vodka being removed from shelves in U.S. and Canada.
…There is absolutely no way China’s position on Russia will fail to negatively impact China’s relations with most of the rest of the world and your business needs to prepare for what this will mean for it.
So what’s next?
Harris says China’s foreign policy stance underscores the “importance of diversification” for businesses. But beyond that it is time to recognize that both countries are "closing,” and that “[o]nce two blocs (roughly, the EU-US-Australia-Japan on the one hand and China and/or Russia on the other hand) go into sanctions mode, the sanctions tend to keep increasing from both sides, leaving companies betwixt and between.” Emphasis added.
Moreover, as MERICS analyst Max Zenglein told Politico’s Stuart Lau:
If China is perceived as undermining Western sanctions it also needs to realize that it will be dealing with a stronger voice in a united Europe, U.S. and Japan, which can quickly put China in a more uncomfortable position.
Going … forward?
Experts think that Putin is unlikely to pull back, and there’s less incentive for him to do that now as he could be facing a tribunal determination on war crimes. But, even if he were to start adjusting his position to save Mother Russia, some say “the damage is already done.”
The New York Times last week said “a Western intelligence report” indicates “that senior Chinese officials had some level of direct knowledge about Russia’s war plans or intentions before the invasion started last week,” and that “[g]iven the close nature of the relationship between Mr. Xi and Mr. Putin, senior Chinese officials are likely to have briefed Mr. Xi on any important exchanges between officials of their nations in the period around the leadership summit.”
NYT:
When asked by email on Wednesday whether Chinese officials had urged Russian officials to delay an invasion of Ukraine until after the Olympics, Liu Pengyu, the Chinese Embassy spokesman in Washington, said, “These claims are speculation without any basis, and are intended to blame-shift and smear China.”
China held the closing ceremony of the Olympics on Feb. 20. The next day, Mr. Putin ordered more Russian troops to enter an insurgent-controlled area of eastern Ukraine after state television broadcast a meeting between him and his national security council and, separately, a furious speech in which he said Ukraine should be a part of Russia. Early on Feb. 24, the Russian military began a full-scale invasion of Ukraine, including carrying out attacks on cities with ballistic missiles, artillery and tanks.
American and European officials have said they find it hard to believe it is mere coincidence that Mr. Putin’s invasion did not start until right after the Olympics. In August 2008, Russia invaded Georgia during the Summer Olympics in Beijing, which upset some Chinese officials.
Although there is no present indication of a change in China’s position, even if Beijing were to ultimately decide to disassociate from the world’s most reviled head of state, China Boss thinks President Xi is very unlikely to recover his pre-invasion credibility, and that China is now permanently stained with complicity in starting Putin’s war.
For Dan Harris’ post on China Law Blog, Russia’s War Will Impact Your China Business, click here. For Stuart Lau’s piece in Politico, Will China fund Moscow’s war chest as Western sanctions bite?, click here.
For Russian politics expert Fiona Hill’s interview with Politico Magazine, ‘Yes, He Would’: Fiona Hill on Putin and Nukes, click here. For The Guardian’s analysis, ‘The damage is done’: Russians face economic point of no return, click here, and for The Guardian’s update, ICC prosecutor to investigate possible war crimes in Ukraine, click here.
For the rest of NYT’s breaking news story, China Asked Russia to Delay Ukraine War Until After Olympics, U.S. Officials Say, click here.
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