This Chinese Company's Compliance With Washington's Anti-Russian Sanctions Is Very Consequential

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by Tyler Durden
Monday, Jun 24, 2024 - 06:00 AM

Authored by Andrew Korybko via Substack,

China’s Wison New Energies announced in a LinkedIn post on Friday that they’re immediately stopping all their Russian projects “in view of the strategic future of the company” following the latest imposition of US sanctions against that country’s LNG industry in mid-June. wrote that this will “deal a blow” to Russia’s Arctic LNG 2 project after Wison was contracted to build its modules, “which are massive, prefabricated structures that facilitate the rapid construction of LNG processing plants.”

They also reminded their audience that Arctic LNG 2 “has been considered key to Russia’s efforts to boost its global LNG market share from 8% to 20% by 2030-2035.” The EU’s US-pressured “decoupling” from Russia’s pipeline gas network compelled that country to ramp up its LNG projects in order to freely export this resource in the coming future so as to make up for tens of billions of dollars in lost revenue. These plans might therefore be further delayed by Wison’s compliance with US sanctions.

RT reported in late December that two major Chinese energy companies had declared force majeure on their participation in Arctic LNG 2 after a prior round of US sanctions against that project, the significance of which was analyzed here at the time. To bring the reader up to speed for their convenience, the takeaway was that China’s complex economic interdependence with the West predisposes its national champions to complying with that bloc’s unilateral restrictions in order to not lose their market there.

China is officially opposed to all sanctions that are imposed outside of the UNSC, but it also gives its companies the choice whether to voluntarily comply with them, even those that are state-owned enterprises such as the ones from RT’s report last December. Their decision to go along with these measures is respected by the state since they’re supposed to serve China’s interests, not Russia’s or anyone else’s, and this sometimes requires them to make tough decisions for the greater national good.

Neither the Chinese state nor its companies should therefore be negatively judged for voluntarily complying with US sanctions, but the very fact that this compliance continues occurring should result in members of the Alt-Media Community (AMC) correcting their false perceptions about Russian-Chinese ties. Many top influencers adhere to the dogma that these two see eye-to-eye on everything and are jointly coordinating all their moves in order to accelerate multipolar processes, but that’s not true.

While their strategic ties are closer than ever and can nowadays even be described as them having formed a Sino-Russo Entente, they still disagree on Kashmir and the East Sea/South China Sea issues since Russia fully supports India and Vietnam’s respective positions. Nevertheless, Russia and China responsibly manage these disagreements for the greater multipolar good, the same as they’re expected to do regarding Chinese companies’ compliance with US sanctions, including those against Arctic LNG 2.

This insight is relevant with regards to the AMC since it’s important for top influencers to accurately reflect such facts in their work lest they inadvertently mislead their audience about those two’s ties.

Russia and China aren’t “against” one another, but they still prioritize their corresponding national interests. These largely overlap, in which cases they cooperate to pursue their shared goals, but they sometimes diverge and thus lead to developments like Chinese companies complying with US sanctions.

As regards this latest example, it’ll complicate Russia’s ambitious LNG plans and therefore risk slashing its future revenue flows, with the possible consequence being that it could also affect those two’s stalled talks on the Power of Siberia II pipeline. Russia might either concede to China’s reportedly requested basement-bottom prices out of financial desperation or it’ll refuse to do so out of resentment and thus leave this project in limbo indefinitely unless/until China eventually reconsiders its stance.

The second scenario of China agreeing to pay higher but nonetheless still privileged prices for Russian gas could play out if US pressure upon it increases in the coming future as is expected following the Russian-North Korean mutual defense pact. The preceding hyperlinked analysis explains these dynamics more in detail, but in brief, those two’s new agreement will likely be exploited by the US to redouble its regional military presence at the expense of China’s objective national security interests.

In that event, and if the abovementioned trend unfolds in parallel with the US applying more pressure upon China in the East Sea/South China Sea in ways that hint at a credible intent to blockade its energy shipments in case of crisis, then China might reconsider its stance and agree to Russia’s pipeline terms. The additional price would be well worth paying for receiving reliable gas from its neighbor instead of holding out for a better price and risking the US cutting off its LNG imports in the meantime.

Returning to the lede, Wison’s compliance with US sanctions against Russia should prompt the AMC to finally correct its false perceptions about the Sino-Russo Entente, and it might also play a role in determining how the Power of Siberia II pricing dilemma is resolved as was just explained. Considering that it’ll also complicate Russia’s ambitious LNG plans, from which a lot of its future revenue is expected to be derived, this makes that company’s decision much more important than many might have thought.