How China and Russia approach sanctions, with Francesca Ghiretti and Maria Shagina
Jul 19, 2023
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Francesca Ghiretti, MERICS Analyst, and Maria Shagina discuss China and Russia's approaches to sanctions. They cover topics such as China's sanction regime, unofficial sanctions, EU sanctions on Russia, Russia's evasion tactics, and the challenges of sanctions enforcement.
China has developed its own legal tools to respond to potential sanctions and targets individuals and small companies.
EU sanctions on Russia have expanded in scope and impact, and Russia employs strategies to bypass and mitigate their effects.
China plays a role in Russia's diversification efforts and acts as a key buyer of Russian commodities.
China is preparing for possible secondary sanctions through diplomatic efforts, legal frameworks, self-sufficiency, and addressing currency challenges.
Deep dives
China's Evolution of Sanctions Thinking
China's thinking on sanctions has evolved in response to changes in the geopolitical environment, particularly in relation to competition and confrontation with the United States. China has developed its own legal tools to respond to potential sanctions, such as the unreliable entity list and the anti-foreign sanction law. They have imposed official sanctions in response to sanctions from other actors or perceived breaches of red lines. China also targets United States individuals specifically rather than other actors. China has passed the foreign relations law, which strengthens its ability to respond to economic coercion from the West and promotes its own vision for global regulations and standards.
Measures Employed in China's Unilateral Sanctions
China's unilateral sanctions are characterized by asset freezes, visa bans, bans on cooperation, and targeted measures towards individuals or companies. Hong Kong, Taiwan, Xinjiang, and actions threatening China's core interests are major triggers for sanctions. While export controls are less common due to China's need to export, they have been used selectively. China aims to target individuals and relies on small companies to bypass and mitigate the impact of sanctions. They also employ diplomatic efforts and create a legal framework to respond to sanctions more effectively.
EU Sanctions on Russia and China's Role
The EU's sanctions on Russia have evolved since 2014, expanding in scope and impact. Sanctions on Russia include financial measures, export controls, and individual sanctions. The EU has coordinated extensively with other actors, such as the G7, to design and implement sanctions. The focus is on offense and defense, with considerations for domestic resilience and strengthening supply chain resilience. The impact of sanctions on Russia has been significant, but Russia has employed strategies to bypass and mitigate their effects. China plays a role in Russia's efforts to diversify and bypass European sanctions, including China's support as a key buyer of Russian commodities and cooperation in the Middle East. China's aim to internationalize the renminbi remains challenging due to capital controls and the currency's depreciation.
China's Preparation for Secondary Sanctions
China has been preparing for possible secondary sanctions by utilizing diplomatic efforts, creating a legal framework, focusing on self-sufficiency, and addressing the limitations caused by the dominance of the US dollar. Diplomatically, China engages with countries like the European Union to sway their positions. Legally, they have established frameworks such as the unreliable entity list, anti-foreign sanction law, and the foreign relations law. China seeks self-sufficiency to reduce vulnerability to sanctions and has been pivoting to Asia for trade. However, the dominance of the US dollar and capital controls pose challenges for China's preparations for secondary sanctions.
China's Response and Retaliation to Sanctions
China retaliates to sanctions by targeting individuals and entities, implementing both official and unofficial measures. Unofficial measures include leveraging relationships with businesses and applying pressure on governments. China is reluctant to impose economic costs when imposing sanctions and aims to avoid targeting its largest and most impactful companies. However, the use of small companies to bypass sanctions has been observed. China also relies on diplomatic efforts and is selective in imposing export controls. The ability to respond to and retaliate against sanctions is an ongoing challenge for China.
Europe's Challenges and Next Steps
European decision-makers face various challenges in responding to sanctions. It is crucial to enhance enforcement capabilities and ensure robust domestic enforcement of sanctions. Addressing sanctions circumvention through multi-layer ownership structures and enhancing coordination between sanctions and anti-money laundering efforts is necessary. Credibility is vital for European sanctions to function as a deterrent, and stronger coordination with partners like the G7 is important. Europe should also consider establishing a strong sanctions coronavirus mechanism to strengthen its efforts and credibility.
Conclusion
The podcast discusses China's thinking on sanctions, measures employed in China's unilateral sanctions, EU sanctions on Russia, China's preparation for secondary sanctions, China's response and retaliation to sanctions, Europe's challenges, and future steps. China has developed its own legal tools to respond to potential sanctions and targets individuals and small companies. EU sanctions on Russia have expanded in scope and impact, and Russia employs strategies to bypass and mitigate their effects. China plays a role in Russia's diversification efforts and acts as a key buyer of Russian commodities. China is preparing for possible secondary sanctions through diplomatic efforts, legal frameworks, self-sufficiency, and addressing currency challenges. European decision-makers face challenges in effectively responding to sanctions and should focus on enforcement, sanctions circumvention, and enhancing credibility.
International sanctions have become a common tool in the relationship between the US, the EU, and China in the last decade. If we add the sanctions on Russia in connection with its full-scale invasion of Ukraine into the mix and the question of Chinese adherence or circumvention of them, it seems high time that we devote some time to talking about Chinese thinking on this tool of international coercion.
In this episode of the MERICS China Podcast, we talk to MERICS Analyst Francesca Ghiretti, who has recently written a report on the evolution of China’s sanction regime, and IISS Senior Fellow Maria Shagina, who among other topics focusses her research on the issues of Russia and international sanctions. Questions by Johannes Heller-John.
This podcast episode is part of the “Dealing with a Resurgent China” (DWARC) project, which has received funding from the European Union’s Horizon Europe research and innovation programme under grant agreement number 101061700.
Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union. Neither the European Union nor the granting authority can be held responsible for them.
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