Ukraine’s National Agency on Corruption Prevention (NACP) announced on Tuesday that it had decided to add China’s three largest oil and gas companies to its list of “international sponsors of war” for their lucrative business interests in Russia, potentially driving a wedge between Kyiv and Beijing.
China is one of Russia’s closest international allies and has dramatically increased its imports of Russian fossil fuels since the government of strongman Vladimir Putin announced a “special operation” to invade Ukraine in February 2022. Russia overtook Saudi Arabia and China’s top source of oil in June 2022 and has rerouted ships into the Arctic to more efficiently meet China’s demand for its products — at a time in which Europe imposed sanctions on Moscow in response to the invasion.
The Chinese Communist Party also enjoys close ties to the government of Ukraine, however. Ukraine is a member of China’s Belt and Road Initative (BRI), a debt-trap scheme in which Beijing offers predatory loans to poor countries that serve to erode their sovereignty and increase Chinese influence. Ukrainian President Volodymyr Zelensky has encouraged Chinese businesses to help rebuild a post-war Ukraine and invited dictator Xi Jinping to maintain communication lines open. Xi and Zelensky last spoke in April, in a phone call Zelensky described as “long and meaningful.”
The Chinese government has repeatedly described itself as a neutral party in the war despite refusing to support sanctions on Russia. It published an alleged “peace plan” to end the Russian invasion in which Beijing advised both Russia and Ukraine to “calm down as soon as possible.”
The NACP’s decision to brand the China National Offshore Oil Corporation (CNOOC Group), China Petrochemical Corporation (Sinopec Group), and China National Petroleum Corporation (CNPC) “international sponsors of war” on Tuesday may complicate Zelensky’s efforts to maintain friendly ties with China.
The three companies, the Ukrainian government agency asserted on Tuesday, “continue to implement joint projects with Russia and finance Russia’s strategic industry by paying significant taxes.” The NACP listed several business interests that each company maintains with Russia. CNOOC, it detailed, has “a 10% stake in the Arctic LNG-2 project located on the Gidan Peninsula in the Arctic region of Russia. Capital investments for the launch of the Arctic LNG-2 project at full capacity are estimated at USD 21.3 billion.”
Sinopec has openly defied calls to stop importing Russian oil, the agency noted, and CNPC “has significant integration with Russia’s largest oil and gas companies as well as the government of the terrorist state.”
“Owning a share of companies in Russia, CNPC pays significant taxes to the aggressor’s budget, which allows it to continue this war. For example, Yamal LNG paid RUB 80 billion (or USD 1.14 billion) as income tax in 2022,” the NACP continued in its announcement of the blacklisting.
The list of “international sponsors of war” is the Ukrainian government’s attempt to document financial support for Russia during the ongoing invasion. The consequences of being on the list are not concrete – NACP did not state the companies are banned from engaging in business with Ukraine, for example. The anti-corruption agency described the list as a “powerful reputational tool” meant to discourage private companies from cooperation with those on the list.
“One of the ‘leverages’ of the platform is cooperation with the World-Check database, which is used by banks and insurance companies for risk assessment,” NACP detailed.
The South China Morning Post noted on Wednesday that Ukraine has placed more Chinese companies on the “international sponsors of war” list than those of any other country. Among the other 12 companies making the cut are telecommunications corporation Xiaomi, the online shopping site Alibaba, and the China State Construction Engineering Corporation.
While China has maintained its business ties to Russia in all sectors, oil and gas sales have become a critical source of revenue for Moscow in the country. China has a minimal supply of domestic oil and is the world’s largest importer of crude oil. It replaced Saudi Arabia with Russia as its top source of oil purchases in June 2022. Beijing hit record-high Russian crude oil imports in May 2023.
China has also greatly increased purchases of Russian liquified natural gas (LNG). As Foreign Policy documented in June, Chinese LNG purchases from Russia abruptly surged in the months before the Russian invasion of Ukraine, raising questions regarding the government’s information about a potential military action.
“From Sept. 1, 2021, through the end of February 2022, when Russia invaded Ukraine,” Foreign Policy observed, “almost a dozen PRC entities, including state-owned companies China National Offshore Oil Corp. (CNOOC), Sinopec, and Sinochem, bought more than 91 percent of all global LNG purchased worldwide under term deals (typically spanning four years or longer).”
“During the seven months from Sept. 1, 2021 to April 1, 2022,” the magazine added, “Chinese companies contracted for more than 23 million metric tons of LNG per year—more than twice what they had purchased in any prior full calendar year.”
While Zelensky has maintained friendly ties to Beijing, his administration has not shied away from sanctioning Chinese companies when deemed appropriate. In February 2021, Zelensky imposed unilateral sanctions on the Chinese company Beijing Skyrizon Aviation for its attempt to purchase a controlling stake in the critical Ukrainian jet engine manufacturer Motor Sich, in addition to three other companies and three Chinese individuals involved in the Motor Sich negotiations. Zelensky justified the sanctions by asserting that Motor Sich is too important to Ukraine’s national security to be controlled by a foreign entity; Skyrizon Aviation called the sanctions a “barbaric robbery.”
The Motor Sich affair did not prevent Zelensky from turning to China following the beginning of the full-scale invasion.
“It’s a very powerful state. It’s a powerful economy … So (it) can politically, economically influence Russia. And China is [also a] permanent member of the U.N. Security Council,” Zelensky told the South China Morning Post in August 2022, asking Xi for “direct” talks and for “Chinese businesses” to help rebuild the country.
Zelensky’s top diplomat Dmitry Kuleba similarly asked China to “play an important role” in finding a “political solution to the war” that year.
Xi and Zelensky spoke via telephone in April. Chinese state media claimed that Xi used the call to urge Zelensky to embrace “dialogue and negotiations” and to promise the Chinese government would send a touring delegation to Ukraine, Russia, and western Europe to discuss the situation.
“China’s willingness to develop its relations with Ukraine is consistent and clear,” Xi reportedly told the Ukrainian president.