Fearful of Western sanctions,Lenovo,Xiaomi stop sales in Russia

Mark O'Neill May 19, 2022 06:00

Before Vladimir Putin ordered his army to invade Ukraine on February 24, Lenovo was the second largest seller of personal computers in the Russian market, after Hewlett Packard, and Xiaomi second in mobile telephones, after Samsung.

Since then, both companies have suspended new shipments to this important market, selling only what was already in their warehouses there.

Like many Chinese firms, Lenovo and Xiaomi fear that they could be subject to the withering sanctions which the West has imposed on the Russian state and companies to punish them for the invasion.

DJI, the world’s largest maker of commercial drones also announced earlier it was suspending all business activities in Russia and Ukraine. Ukrainian officials accused it for leaking data on its military positions to the Russian army, DJI strongly denied this.

Many Chinese state companies and banks are taking a similarly cautious approach. All are uncertain how and when the war will end and what will be the economic consequences.

Joerg Wuttke, president of the European Chamber of Commerce in China, said that Chinese firms were scrupulously careful not to break the sanctions. “The banks are all complying for fear of being hit with secondary sanctions by the Americans. They all still have the Huawei shock in mind, when the best company in China was brought to its knees by Donald Trump in a matter of weeks and has not really recovered to this day.

“I know of European banks that tried to sell their Russian client contracts to Chinese banks – but they were not interested,” he said.

The one exception are private oil refiners who have been buying Russian oil at steep discounts, some of it taking over purchase quota for Russian crude from Chinese state companies who have largely refused to sign new contracts since February 24.

Sinopec, CNOOC, Petrochina and Sinochem have declined to buy Russian cargoes to be delivered in May, despite steep discounts, because they do not want to be sanctioned for buying Russian oil. But they are honouring contracts signed before the war.

In March, the Ministry of Foreign Affairs in Beijing summoned top officials from China’s three largest energy companies for a meeting on their business ties with Russian partners. It told them to be cautious and not to make any hasty moves to buy Russian assets.

Beijing continues to support Russia and blames the expansion of NATO for the war. State media follow the Russian example and do not speak of “war” or “invasion” but refer to a “special military operation”.

Last Thursday (May 12), China and Eritrea were the only two countries to vote against an investigation by the U.N. Human Rights Council into possible war crimes by Russian troops in the Kyiv region in February and March. A total of 33 countries voted in favour.

But some members of the Chinese elite disagree with the government. The most dramatic example came in remarks by Gao Yusheng, Beijing’s ambassador to Ukraine from 2005 to 2007. He was speaking to a recent online seminar held by the Chinese Academy of Social Sciences.

“It can be said that Russia has completely lost Ukraine,” he said. “The so-called revitalisation of Russia under Putin’s reign is based on a false premise. Russia’s decline is evident in all areas… and has had a significant negative impact on the Russian military and its combat capabilities. The odds are stacked so heavily against Putin that it is only a matter of time before Russia is fully defeated.”

He criticised Putin for relying on fabricated history in his bid to restore Russia’s alleged glory. “Considering the former Soviet Union as its exclusive sphere of influence and violating the independence, sovereignty and territorial integrity of other former Soviet states are the greatest threat to peace, security, and stability in Eurasia,” he said.

It seems that boardrooms across China have reached a similar conclusion to that of ex-ambassador Gao. The war will leave Russia weaker, isolated and cut off, in part or wholly, from the international financial system.

As businesses, they may not have to weigh the political and diplomatic issues at stake. But they see where their future business, profits and supplies of technology come from.

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Mark O'Neill

A Hong Kong-based writer, teacher and speaker.