Discover more from Pekingnology
Beijing to cooperate with Brussels in investigating sanction-circumventing companies if provided with evidence
So far the EU hasn't substantiated its claims & risks countersanctions, says Fu Cong, Chinese ambassador to the EU. Plus, Ukrainian FM casts doubt over WSJ scoop on Beijing's proposals to Europe
Brussels has failed to provide details about certain Chinese companies’ alleged violations of European Union trade sanctions on Russia and refused to work with China in investigating the claims, Fu Cong, the Chinese ambassador to the European Union says.
Thus, Brussels risks a “strong response” from Beijing if it indeed sanctions the Chinese firms, Fu says in an interview with New Statesman by Bruno Maçães, the Portuguese Europe minister from 2013-2015, who describes Fu as “well-regarded in Brussels: most people I meet praise his cunning intelligence.”
Qin Gang, State Councilor and Foreign Minister, has already drawn the line on May 10 in Berlin
China does not sell weapons to parties involved in the Ukraine crisis and prudently handles the export of dual-use items in accordance with laws and regulations. Normal exchanges and cooperation between Chinese and Russian enterprises should not be affected. China resolutely opposes long-arm jurisdiction and unilateral sanctions against other countries in accordance with its own laws, and will take necessary measures to firmly safeguard the legitimate rights and interests of Chinese companies.
At the heart of the potential tit-for-tat that will most certainly, as Maçães correctly observed, “start a spiral of retaliatory sanctions that neither side will be able to stop,” is whether the Chinese companies have engaged in “importing electronic components from Europe in order to re-export them to Russia.”
The Financial Times first reported the EU’s plan on May 8 but unfortunately obscured the crucial justification for potential EU sanction of the Chinese firms that they allegedly imported dual-use goods from the EU and then sold them to Russia. Because the report basically didn’t mention the “import from EU” part until quoting an EU internal document in the seventh paragraph, less informed readers are likely to believe Brussels was trying to impose sanctions simply because of dual-use exports to Russia, which is exactly what the Reuters dispatch reporting the FT scoop did.
It’s important to note that there is a major difference between EU sanctions and U.S. sanctions. As Josep Borrell, the EU’s High Representative for Foreign Affairs and Security Policy, recently clarified on the circumvention of EU sanctions against Russia
We also don’t want to sell technological products and components that Russia needs for its war machine. These are our decisions that are binding EU economic operators. Even if we would like other countries to do the same, we cannot force them, because our ‘sanctions’, are not extraterritorial.
So by the EU’s rules, the key is not exactly whether these Chinese firms have just exported dual-use goods to Russia, but whether they have circumvented the bloc’s trade restrictions forbidding certain goods from the EU to Russia.
Here, the Chinese ambassador says he needs evidence, including in private consultations that haven’t been reported. He even questioned if the potential sanctions would have been ex post facto. From the transcript of the interview published by the Chinese Mission in Brussels (New Statesman has a paywall.)
Fu Cong: First, let me say when it comes to Chinese exports to Russia, China has not provided any military equipment to Russia, and China has exercised extreme caution when it comes to dual-use items. At the same time, China maintains normal economic relations and cooperation with Russia. So these normal economic cooperation and activities should not be interfered with, and it should not be the reason for any coercive measures from any side, either from the US or from the European side. The second point I want to say is that we are against unilateral sanctions without the basis of international law or the authorization of (UN) Security Council resolutions. In particular, we are firmly against the extraterritorial jurisdiction of all these measures. These are our basic positions.
When it comes to these companies, let me be very clear: if the European side imposes sanctions on Chinese companies without providing us with any solid evidence to show that these companies are engaged with activities that may circumvent or that have circumvented the EU sanctions on Russia, then we certainly will retaliate. Because, as a government, we have the obligation and duty to safeguard the legitimate interests of our companies. But let me also emphasize that we want to resolve this issue in a cooperative way. I understand this 11th round of sanctions is aimed mainly at preventing circumvention. If the EU side has evidence that Chinese companies are engaged in such activities, please show us the evidence.
And also, I have a question to ask. Now we know that they want to prevent the circumvention, but when the European companies export those items, was there a requirement in the contract that says that you should not re-transfer these items to Russia or to any other country? Because actually, in our case, if you want to prevent a re-transfer of certain items, we require what we call End-User Certificates (EUCs). So when the transaction was made, was there such a clause? Was there such a requirement? You cannot use a new law to penalize an entity for their actions that happened before this new law entered into force. This is the basic principle of the rule of law, right? So that’s why we say that we need to talk about this. But unfortunately, we have approached the EU side, and we have not been given any clear explanations. One thing they did tell us was that they did not have solid evidence that those companies had re-exported the items they had imported from the EU companies to Russia.
New Statesman: They said they did not?
Fu Cong: They did not. They said that they had noticed a sharp increase in the import of certain items. But I said that there may be legitimate reasons, right? And that’s why I said if you have concerns and if you have evidence, show that to me. Maybe we have a legitimate explanation for that, and we can investigate for you. But unfortunately, the EU side has not picked up or responded to our gesture to resolve this in a cooperative manner. Actually, let me also emphasize that what the EU is saying is that they will put the Chinese entities on the list, which is basically a control list. So in the future, these companies should be companies of concern, and certain items should not be exported to them. They say that this is not an extraterritorial application of their sanctions. But this is exactly the extraterritorial application of sanctions. This is exactly what the US has been doing when they sanction foreign companies: they put foreign companies on what they call the entity list. I’m very sad to see that the EU is copying what the US has been doing in the past years. I would even add that it is in violation of the EU’s own position against the extraterritorial application of national sanctions. They are doing exactly the same as the US in this case. So we have great concern.
Fu has worked very hard to stabilize China-EU relations for the past six months since taking over as Beijing’s envoy in Brussels. European Council President Charles Michel visited Beijing in December and European Commission President Ursula von der Leyen in April. High Representative Josep Borrell was supposed to visit Beijing as well (and deliver a speech at the Center for China and Globalization), but unfortunately tested positive for COVID-19 before boarding the plane.
Maçães wrote “It was clear from my conversation with Fu Cong that the Chinese authorities want to prevent a repeat” of the spiral of sanctions between Beijing and Brussels that shelved the bilateral Comprehensive Accord on Investment, which Fu has tried to revive.
Maçães did his job well as an interviewer in pressing Fu on whether China will deal with the Chinese companies in question if the EU presents the evidence. Fu says yes.
New Statesman: Just to clarify quickly, China would be willing to work with the EU to address the question of circumvention if the EU could provide evidence. You could perhaps even punish the companies if you agree with the evidence.
Fu Cong: I don’t know whether “punish” is the right word. As I said, the new law cannot be used to penalize past activities. Right?
New Statesman: You would be able to address the issue in China with those companies if the EU shows the evidence.
Fu Cong: Yes, that’s the essence of a cooperative way of resolving concerns. But again, they need to give us the evidence. They need to show us that these companies are re-transferring the dual-use items they have imported from Europe.
New Statesman: Very good. Hopefully, the interview can help with this issue.
Fu Cong: Indeed, I hope you can publish this in time. Because, as you said, they are making the decision, and they are not actually listening to our views.
The stakes are high here - not just for Ambassador Fu, who has charmed his EU colleagues with professionalism and pragmatism with considerable effort.
If there were any momentum - perhaps too generous a word - between China and Europe after a series of high-level visits, including also by heads of state or government from EU member states such as Emmanuel Macron, the sanctions and countersanctions would have derailed it.
Things don’t look good so far because Maçães reported that “the answer I heard from a top official in the European External Action Service, the EU’s diplomatic service, was that “in our system we cannot share evidence with a foreign government.”
Do read the interview in the New Statesman if you have a subscription!
And if you don’t, the Chinese Mission to the European Union provides a transcript.
In other news, Ukrainian media have reported comments from Dmytro Kuleba, its foreign minister, apparently responding to the Wall Street Journal scoop about Chinese envoy Li Hui’s recent trip to Europe. The Journal reported on Friday May 26
The Chinese envoy dispatched to push Beijing’s peace plan for Ukraine carried a clear message: U.S. allies in Europe should assert their autonomy and urge an immediate cease-fire, leaving Russia in possession of the parts of its smaller neighbor that it now occupies, according to Western officials familiar with talks in capitals across the continent.
[Title] Ukraine's Foreign Minister denies that Chinese envoy called on European countries to recognise Ukrainian territories as belonging to Russian
Ukrainian Foreign Minister Dmytro Kuleba has denied the information posted by the media that Chinese Ambassador Li Hui, as part of his European tour to promote the "resolution" of Russia's war against Ukraine, offered to call for an immediate cease-fire by way of recognising the Russian occupation of Ukraine territory.
Source: Kuleda during his video address published on Facebook, as reported by European Pravda
Details: The Ukrainian Foreign Minister noted that after this information appeared, he contacted his European colleagues from the capitals which Li Hui visited, and none of them confirmed it.
Quote: "None of them confirm that there have been announcements or talks about recognising the territories on which the Russian Federation is currently present in Ukraine as Russian. I urge you to keep a cool head, rationality, and not to react emotionally to every publication. We control the process, no one will do anything against us behind Ukraine's back," the minister emphasised.
He added that Ukraine will continue to conduct talks with China, but "it will be conducted in accordance with three basic principles": mutual respect for territorial integrity, Ukraine will not consider any proposals that involve territorial concessions, no frozen conflict.
Published content on the war in Ukraine from Pekingnology, The East is Read, and CCG Update