Sanctions Imposed on Russia Hurt Chinese Economy

New Delhi — 

As the world’s biggest trader and buyer of crude oil, China has been hit hard by the economic sanctions unleashed on Russia over its invasion of Ukraine. Even Chinese government officials have begun to predict economic difficulties on the horizon.

“This year, the pressure on foreign trade will be huge, and the situation will be very severe,” Commerce Minister Wang Wentao said at a recent press conference.

The current sanctions regime has pushed up the price of crude oil. This will result in a heavy financial burden on China, which is the world’s biggest oil importer. The economic restrictions may also affect the $147 billion annual trade between China and Russia. Fund transfers to Russian entities can no longer occur in U.S. dollars, the currency of choice for 86% of international transactions.

“Chinese firms are caught between a rock and a hard place,” Jacob Gunter, senior analyst at the Berlin-based Mercator Institute for China Studies, told VOA.

Chinese companies with operations in the U.S. or the European Union may fall victim to secondary effects of the sanctions if parent corporations in China maintain business links with Russia, he said.

Four pallets of Lenovo Chromebook laptops sit in a Denver Public Schools warehouse after arriving, Friday, Aug. 21, 2020, in Denver.

Two Chinese firms, Lenovo and Didi, which recently announced plans to cease doing business in Russia, faced a storm of ridicule and criticism on Chinese social media for “pandering to American whims.” This has caused a lot of concern among dozens of Chinese firms, which fear losing the domestic market if they cut ties with Russia.

Energy imports constitute two-thirds of China’s purchases from Russia. For now, the ban on Russia-related SWIFT fund transfers does not affect energy payments. This safeguard primarily shields European countries that are heavily dependent on Russian gas supplies, but it will also protect Chinese energy-related transactions. SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, is an international bank-to-bank transfer system.

Some experts also predict China will end up importing inflation. The prices of many imported commodities have risen since the Russian invasion, said Mark Williams, chief Asia economist for Capital Economics.

“If the situation escalates further and energy trade between Russia and the West is cut off, then the impact would be even larger,” he said.

On the other hand, Williams said, the war offers some economic opportunities for China.

“With much of the world cutting off ties with Russia, China is in a strong position to negotiate long-run energy supply contracts on favorable terms. Meanwhile, bans on Western exports of certain goods may allow some Chinese suppliers to take their place instead,” he said.

Russian President Vladimir Putin attends the opening ceremony of the 2022 Winter Olympics, in Beijing.

An important question is whether Beijing will stick to its recent deal with Russia for enhanced trade, including expanded purchases of Russian gas. Russian President Vladimir Putin signed the agreement February 4, the opening day of the Winter Olympics, during a visit to Beijing.

“I think Beijing is frustrated by Russia’s actions in Ukraine so soon after the deal, but it is unlikely to walk away from it,” Gunter said, adding that although China will become a crucial lifeline for Russia, there are limitations to the extent Beijing can offer support without drawing the ire of the West.

Besides, demand for energy, one of Russia’s most important exports, cannot increase significantly in the short term, because importing quantities of Russian gas in excess of what has been contracted will require additional pipeline facilities, which take time to build.

China has for years been trying to reduce its dependence on U.S. dollars and has signed currency swap agreements with several trading partners, including Russia. In 2015, Beijing launched the Cross-Border Interbank Payment System, an international yuan payment and clearing system, as an alternative to SWIFT.

“It remains to be seen how CIPS will work and if it could act as a possible ‘competitor’ for the SWIFT,” Lourdes Casanova, director of the Emerging Markets Institute at Cornell University, told VOA.

The CIPS system may not be entirely immune to U.S. intervention if it is used by China for transactions with countries other than Russia, said Williams of Capital Economics. At present, 17 Russian banks are connected to the CIPS system.

“It is also subject to Western sanctions on transactions involving Russian banks,” he said. “While the CIPS payments system doesn’t touch the U.S. banking system, payments through it that were deemed to be intended to circumvent U.S. sanctions could trigger sanctions for those involved. That effectively limits the use of CIPS to bilateral transactions between Russia and China.”

1 Killed, 5 Hurt In Park Shooting in Portland

PORTLAND, Ore. — 
One person was killed and five others were wounded in a shooting Saturday night at a Portland park where a march was planned to protest police violence.

Officers responding to a report of shots fired at Normandale Park found one woman dead, according to the Portland Police Bureau. Two men and three other women were taken to the hospital.

Their conditions have not been released, and police have not named anyone involved in the shooting.

Social media flyers show that at the same time as the shooting, a march was planned for Amir Locke, a Black man who was fatally shot by police in Minneapolis, KOIN-TV reported.

Portland, Oregon’s largest city, saw months of nightly protests in 2020 that often spiraled into violence following the murder by police of George Floyd in Minneapolis. Portland became the center of the movement to defund the police, but the sustained protests in the city have largely faded away.

The city is now dealing with a plague of gun violence.

Police responded to six shootings within a nine-hour span between Thursday night and early Friday. Shortly before Saturday night’s shooting at Normandale Park, police who were called to a separate disturbance were involved in a shooting that left one person dead. It wasn’t immediately clear if the person died by police gunfire.

Although last year was marked by record-high numbers of gun violence in Portland, the number of shooting incidents during the first month of 2022 outpaced January 2021, according to police data. During January alone, police recorded 127 shootings.

Police and city officials say the increase in violence, which disproportionally affected Portland’s Black community, was fueled by gang-related arguments, drug deals gone wrong and disputes among homeless people. The situation was exacerbated by the pandemic, economic hardships and mental health crises.

The number of homicides in Portland last year surpassed more populous cities such as San Francisco and Boston — and was more than double the number of slayings in its larger Pacific Northwest neighbor Seattle.

Portland recorded 90 homicides in 2021 amid a surge in gun violence, shattering the city’s previous high of 66 set more than three decades ago.

Why a Russian Invasion of Ukraine Would Hurt China, Too

washington — 

China’s deepening ties with Russia will come with heavy geopolitical and economic consequences should the Ukraine crisis escalate, analysts say.

While the two powers have recently intensified their so-called comprehensive strategic partnership, Beijing has not offered its full support for Moscow’s military encirclement of its neighbor.

And there have been signs Beijing is worried that a Russia-Ukraine confrontation might not be in China’s national interest while its relationship with the West is deteriorating and its economy is slowing down.

The country called again Friday for a political resolution of the crisis. “Efforts should be made on the basis of the Minsk-2 agreement to properly treat the reasonable security concerns of all sides including Russia through dialogue and negotiation,” said Foreign Ministry spokesperson Wang Wenbin.

Debate on response

The Wall Street Journal reported this week that Beijing is weighing how much it will support Russian President Vladimir Putin on Ukraine. According to people with knowledge of the matter, the report said, China’s top leaders have debated how to respond to the crisis without hurting China’s own interests.

“I can’t see how China could support Russia in any sort of meaningful way and not do rather significant damage to the U.S.-China relationship,” said Michael Hunzeker, an assistant professor at George Mason University’s Schar School of Policy and Government. He spoke to VOA in a telephone interview.

FILE – White House national security adviser Jake Sullivan speaks during a press briefing at the White House in Washington, Aug. 17, 2021.

The U.S. has recently strongly criticized China’s support for Russia.

National security adviser Jake Sullivan accused China of giving a “wink and a nod” to a Russian invasion of Ukraine and said, “I believe that China will ultimately come to suffer consequences as a result of that in the eyes of the rest of the world, most notably in the eyes of our European partners and allies.”

Dustin Walker, a nonresident fellow at the American Enterprise Institute, told VOA he believed that Europe would see China’s support for Putin’s brinksmanship on Ukraine as further evidence that China is a systemic rival, leading the region to “rethink its relationship with China.”

Testing ties

A possible Russian-Ukrainian confrontation would also test the relationship between Beijing and Moscow. If China, fearing repercussions for its own economy, were to comply with Western sanctions against Russia, Walker noted, it would be seen by Moscow as an unreliable partner.

Walker pointed out that in the joint statement issued after Xi and Putin met at the Beijing Olympics, China explicitly opposed NATO enlargement for the first time, but didn’t mention Ukraine.

That “has to raise the question whether Putin asked for something that he didn’t get from China,” Walker said.

Experts also note that China did not recognize the Russian annexation of Crimea in 2014, as it places fighting against separatism at the heart of its national security.

In Beijing’s diplomatic parlance, China and Russia maintain a “comprehensive strategic partnership of coordination.” Russia remains the first and only major country to establish this type of partnership with China, said Craig Singleton, a fellow at the Foundation for Defense of Democracies.

With China’s economy rapidly cooling, Xi will be focused, at least for the foreseeable future, on maintaining economic stability, which is something that Putin may or may not be inclined to respect as he pursues his interests in Ukraine, Singleton said in an email exchange with VOA. “China and Russia will find it incredibly difficult to synchronize their strategies,” he wrote.

War undermines stability

China also has important financial ties with Ukraine. It is Kyiv’s largest trading partner, and the two countries have had a strategic partnership since 2011. Ukraine joined China’s Belt and Road Initiative, a global infrastructure plan, even before Russia did.

FILE – The Lithuanian Embassy is seen in Beijing, Thursday, Dec. 16, 2021. Beijing on Monday, Jan. 10, 2022, accused Washington of inciting Lithuania to “contain China” in a feud over the status of self-ruled Taiwan after U.S. officials expressed support for the European Union-member country in the face of Chinese economic pressure.

While China is also the EU’s largest trading partner, the relationship is believed to be at its lowest point in decades. When Beijing began trying to sanction EU member state Lithuania over its policies toward Taiwan, the EU rallied to Vilnius’ defense, suing China for coercive trade practices at the World Trade Organization.

China exports almost 10 times as much to the European Union and Britain as it does to Russia, noted Singleton in a recent article published by Foreign Policy. He said Xi, in recent months, has personally stepped in to try to soothe relations with Europe because China needs enhanced ties to help it weather the current economic storm.

Some analysts believe that an extended showdown with Moscow over Ukraine could distract the United States from its vaunted “pivot to Asia,” leaving China more space to expand its influence in the region.

Hunzeker, the George Mason University professor, acknowledged that such a development would be advantageous to China. But, he said, “I don’t think we’re going to play into that sort of mistake.”

Iran Supreme Leader Says 'Wrong Decisions' Have Hurt Economy

TEHRAN — 

Iran’s Supreme Leader Ali Khamenei said Sunday that the country’s poor economic situation was not only due to international sanctions but also to government mismanagement.

“Wrong decisions and shortcomings” were part of the reason for the Islamic republic’s “unsatisfactory” economic data, he said about the decade from March 2011 to last year.

Indicators such as “GDP growth, capital formation, inflation, housing and liquidity growth were not satisfactory,” Khamenei said.

“The main cause of these problems is not only sanctions, but also wrong decisions and shortcomings,” he told a meeting with economic officials.

“If the authorities had cooperated more with the producers in these 10 years, the damage would have been less, and the successes would have been greater,” he added in an implicit attack on former president Hassan Rouhani’s governments from 2013 to 2021.

Iran, which last year elected President Ebrahim Raisi, has been hit by severe economic sanctions imposed in 2018 by the United States, and has seen its inflation rate surge to close to 60 percent.

Khamenei criticized the high prices and low quality of some home-made products, especially cars.

He also charged that “despite the government’s support,” the price of some domestically-produced home appliances had doubled.

Iran has witnessed a number of protest rallies in the past few weeks by civil servants, including from the judiciary, against tough economic conditions.

Regarding companies operating despite the sanctions, Khamenei said that “we have successful examples and businesses that did not wait for the lifting of sanctions.”

Iran has been negotiating in Vienna — directly with Britain, China, France, Germany and Russia, and indirectly with the United States — to revive its tattered 2015 nuclear deal.

The landmark agreement offered Tehran sanctions relief in exchange for curbs on its nuclear program.

But the U.S. unilaterally withdrew from it in 2018 under then-president Donald Trump and reimposed biting economic sanctions on Iran.