[Finance and Business World]Russia invaded Ukraine and Beijing was pulled into the water? | Xinwei Group | The Epoch Times

[Epoch Times, February 26, 2022]On the 24th, US President Biden and G7 leaders held an emergency meeting after Russia opened fire on Ukraine, and immediately announced additional sanctions against Russia. Biden said that Russian President Vladimir Putin is an aggressor, and Russia will bear the consequences for it. We know that the CCP and Russia are “not allies better than allies.” So, under the sanctions of Western countries, will the CCP lend a helping hand to Russia economically? And will the CCP also be sanctioned? We’re going to talk about these topics today.

Western sanctions against Russia and the CCP will help?

Let’s start with the sanctions announced by Biden, including: restricting Russia’s ability to use the dollar, euro, pound and yen for trade; stopping the ability to finance and develop Russia’s military; and weakening Russia’s competition in the high-tech economy of the 21st century capacity; sanctions on Russian banks, which collectively hold approximately $1 trillion in assets. Details of the sanctions include cutting off Russia’s largest financial institution, Sberbank, and 25 of its subsidiaries, from the U.S. financial system. Sberbank owns nearly a third of the overall assets of the Russian banking sector; four other large Russian banks have also been sanctioned.

So, what is the attitude of the CCP when Russia is sanctioned? What will be the result?

Some analysts believe that China may reach out to Russia to help it escape Western sanctions. Judging from the enthusiastic interaction between Putin and Xi Jinping before Russia’s invasion of Birdland, it is very likely that the two of them had some tacit understanding or commitment.

On February 4, on the opening day of the Beijing Winter Olympics, Putin and General Secretary of the Communist Party of China Xi Jinping announced the establishment of a new strategic partnership between the two countries. In the alliance model, China and Russia have “no limit to friendship and no restricted area for cooperation”. We see that the two sides have shown their attitude of cooperation without bottom line.

China and Russia also unveiled broader economic cooperation plans, particularly in the oil and gas sector, where deals topped $117 billion. The terms of the 30-year contract call for Russia to supply an additional 10 billion cubic meters of gas a year to China through a new pipeline.

Judging from the reported data, in 2020, China’s crude oil imports from Russia have accounted for 15.4% of its total imports, and the combined pipeline natural gas and LNG imports from Russia have accounted for 7.6% of China’s total natural gas imports. . According to Russian media reports, Russia is currently the second largest source of oil imports to China, behind Saudi Arabia only by a small amount. Therefore, China is quite dependent on Russian oil and natural gas, and there are also oil and gas pipeline projects under construction and planned between the two countries.

On the 22nd, the Bank of Montreal (BMO) also released a report predicting that Russian merchandise exports will eventually shift from Europe and North America to China. Russia has pledged to send 100 million tons of coal annually to China over the next few years. It seems that in addition to oil and gas, China’s coal shortage should also be relieved from Russia.

In the words of Chinese media, the energy cooperation between China and Russia is a win-win situation. So, with this connection on key resources, can China not open the door for Russia when the West is sanctioning Russia?

From Russia’s point of view, if the West really sanction Russia in terms of banking and energy, then deepening economic cooperation with China in advance will help Russia offset some of the impact of Western sanctions.

However, judging from the example of U.S. sanctions against Iran that year, after Iran was sanctioned, the implementation of the trade contract between China and Iran was hindered by all aspects, and the actual operation was very difficult. Moreover, it maintained trade with the sanctioned country. As a result, it is likely to be sanctioned as well.

We saw that on the 17th, the American “Foreign Policy” magazine published an article by Aaron Arnold, a senior researcher at the British defense think tank, that he believed that if Russia invaded Ukraine, it should be sanctioned The CCP, which allows Russia to understand that the West can destroy an economic lifeline from Beijing.

Arnold believes that the timing of the Sino-Russian joint statement is no coincidence. The strengthening of Sino-Russian ties, at least in the short term, offers Putin an opportunity to soften the blow of potential Western sanctions. It was indeed pointed out by Arnold. A few days after this article came out, Russia found a reason to open fire on Ukraine.

Arnold believes that, “In any case, the United States must be prepared to cut off all avenues for Russia to evade Western sanctions, including preparations for secondary sanctions on Chinese institutions and efforts to limit attacks on American interests.”

In fact, before this, Washington has also warned Chinese officials that if Chinese companies violate the US ban on exporting technology to Russia, they will be severely sanctioned. The lethality of the US sanctions is so powerful that Huawei, a Chinese high-tech enterprise, has a first-hand experience. Previously, the United States banned American companies from supplying chips to Huawei because Huawei violated the trade ban on Iran. As a result, Huawei’s turnover in 2020 fell by nearly 30%.

However, some analysts believe that the economic help the CCP can provide to Russia is limited. Germany’s “Frankfurt Allgemeine Zeitung” published an article saying that at best China can only fill a small part of Russia’s lost European market. Last year, although the trade volume between China and Russia increased by 36%, reaching 147 billion US dollars, in the year of the epidemic, the trade volume between Russia and the EU still reached a high level of 174 billion US dollars, which shows the relationship between Russia and the EU. trade between them is more important.

The article believes that Russia exports about 11 billion cubic meters of natural gas to China every year, but the gas transmission volume to Europe is as high as 185 billion cubic meters. Therefore, once the European market and the Chinese market are lost, it will be difficult to help Russia fill this huge market gap in the short term.

Berlin’s “Daily Mirror” also published a guest comment, arguing that in the confrontation with the Western camp, Putin hoped for support from Beijing. But in fact, Putin will walk into the trap laid by the CCP. The comment said that the CCP will neither openly challenge the United States in order to defend Russia, thereby ruining the prosperity of its own country, nor will it invest in Russia in order to save the Russian economy to make up for the huge space created by Russia under Western sanctions.

On the contrary, the CCP will keep Russia in a confrontational posture with the West at the lowest possible cost, so that the West will not have time to take into account the strategic challenges posed by the CCP. The minimum support provided by the CCP may be enough to keep Putin in the Kremlin, which is Putin’s only demand.

However, as for the comment that Putin will walk into the trap laid by the CCP, it is hard to say, because in the history of China and Russia, China has never obtained any advantage from the former Soviet Union or the current Russia.

Xinwei Ukraine takeover collapsed?

After analyzing the changes that the Russian-Ukrainian war may bring to China and Russia, let’s take a look at the situation in China and Ukraine. In recent years, Beijing authorities have not only made more and more investments in Ukraine, but also obtained a large amount of military technology from Ukraine.

For China, Ukraine has strategic interests. Reasons include Ukraine’s geographic location, the free trade agreement between Ukraine and the European Union, as well as Ukraine’s supply of mineral and agricultural resources, and Ukraine’s importance to China’s defense.

According to Chinese data, by the end of 2019, the total direct investment of Chinese enterprises in Ukraine was 150 million US dollars. According to the data from the Ukrainian Embassy in China, in the first three quarters of 2020, the investment of Chinese enterprises in Ukraine reached 75.7 million US dollars.

However, the intensifying Russian-Ukrainian crisis has also brought uncertainty to Beijing’s economic and defense interests in Ukraine.

According to data from the National Bureau of Statistics of Ukraine, in 2019, China surpassed Russia to become Ukraine’s largest single trading partner, and in 2021, the total trade volume will reach 18.98 billion US dollars, an increase of nearly 80% over 2013. .

Ukraine’s total exports to China in 2021 will be $8 billion, mainly commodities such as iron ore, corn and sunflower oil. Ukraine’s imports from China are mainly machinery and consumer goods, with a total value of 10.97 billion US dollars.

Moreover, Ukraine is also an important hub for the CCP’s “One Belt, One Road” project. In 2020, China and Uzbekistan signed an agreement to strengthen cooperation in areas such as financing and infrastructure construction projects.

Some friends may know that after the disintegration of the Soviet Union, Ukraine inherited a lot of military technology from the former Soviet Union, and these technologies also benefited the CCP.

The EurAsian Times reported that unrest in Ukraine, Beijing’s Belt and Road partner, could hurt China’s manufacturing of imitation weapons. Beijing’s imitation weapons industry relies heavily on some of Ukraine’s most valuable defense companies, the report said.

Moreover, the extent to which Beijing has attempted to acquire Ukraine’s most valuable defense companies and then transplant them and their personnel to China is alarming. Beijing’s goal is to address areas where China still relies on Russian imports, such as aero-engine technology, that is, Beijing is taking advantage of other countries’ neglect of Ukraine’s industrial capabilities.

In an episode of last year, we talked about the Pandora files and mentioned that there was a sensation behind the acquisition of a Ukrainian defense company, and there was a shadow of a Chinese state-owned enterprise. Wei Group.

But at this juncture when Russia and Ukraine opened fire, that is, on February 22, the Beijing court suddenly announced that Xinwei Group entered the bankruptcy liquidation process. However, although Xinwei Group was insolvent, it still indicated to the court that it would continue to advance the acquisition of Ukraine’s aviation engine assets, indicating that the group still had the possibility of restructuring.

So, why is Xinwei so resistant to bankruptcy and liquidation?

A person close to Xinwei Group revealed that once the bankruptcy liquidation occurs, the main body of Xinwei Group and Beijing Tianjiao Airlines, which is owned by the actual controller Wang Jing, will no longer exist, so the acquisition money that has been paid to the Ukrainian Motor Sich Company will not be possible. recovered.

So what company is Motor Sich in Ukraine? What happened to the acquisition case?

Motor Sich is the only aero-engine manufacturer in Ukraine and one of the important defense enterprises of the former Soviet Union. It is good at producing high-thrust engines and enjoys a high reputation in the field of aviation manufacturing, and has the title of “Power Tsar”. After 2014, due to the complete breakdown of relations between Ukraine and Russia, the trade of military supplies between the two sides was completely stopped, and Motor Sic was also hit hard and fell into a financial crisis.

In 2016, Beijing Tianjiao Airlines, which is controlled by Wang Jing, proposed to acquire a 56% stake in Motor Sich and promised to invest at least $250 million in the company in the next few years. However, because of concerns about the Chinese military’s acquisition of Ukraine’s aviation technology, Ukraine’s National Security Service, the court and the Anti-Monopoly Committee have successively blocked the acquisition. The Ukrainian president also signed a decree imposing sanctions on four mainland Chinese companies and three Chinese citizens, including Genghis Khan Airlines and its actual controller, Wang Jing.

Moreover, it is not just Ukraine who blocked the acquisition. The United States has also expressed its opposition to the acquisition, on the grounds that it will help the CCP to rapidly expand its military capabilities.

The current situation is that in November last year, Genghis Khan Airlines announced that it had filed an arbitration with the Hague Arbitration Court, requesting that Ukraine violated the China-Ukraine bilateral investment agreement and claimed 4.5 billion US dollars, which is equivalent to the net foreign exchange reserves of Ukraine. quarter of the amount.

However, many analysts believe that even if Genghis Khan wins the lawsuit, it may not be able to obtain this sky-high compensation. And now, Xinwei Group has entered bankruptcy and liquidation again. Although Xinwei Group is still thinking about continuing to promote the acquisition of Motor Sich, this desire is full of variables under the background of the rumbling fire from Russia and Ukraine.

Institute of Financial and Commercial Economics
Planning: Yu Wenming
Written by: Chen Siyu
Editor: Wei Ran, Yu Wenming
Edit: Song
Producer: Wen Jing
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