9th Jun 2023

EU implicates Hong Kong in Russia sanctions-busting

  • Hong Kong: China took over control from the UK in 1997, ending 156 years of colonial rule (Photo: Miquel Fabre)
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The EU fears that Chinese and UAE firms could be supplying weapons components to Russia, new sanctions indicate.

China has already backed Russian propaganda on the war in Ukraine while claiming to remain neutral and seek peace.

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But the EU's proposed addition of eight Hong Kong-based Chinese firms to a dual-use goods export ban in the next round of Russia sanctions exposes fears that China has also started giving clandestine military aid.

The companies — Allparts Trading, Alpha Trading Investments, Asia Pacific Links, 3HC Semiconductors, King-Pai Technology, Sigma Technology, Sinno Electronics, and Tordan Industry — make items such as microelectronics for missile guidance systems.

And they've been "involved in the circumvention of [EU] trade restrictions" on Russia's military-industrial complex, according to a European Commission document seen by EUobserver.

The EU is planning to add UAE-based I Jet Global and Success Aviation Services to the dual-use ban.

It also named 10 Iranian, Syrian, and Uzbek firms — in a thumbnail sketch of the global pro-Russian axis.

The list of banned dual-use technologies is ever-expanding, as Ukraine breaks open Russian military debris and shares intelligence on its components.

The Western effort to lobotomise Russia's security capabilities also extends to a proposed new asset-freeze and trading ban on eight Russian IT companies, such as Vulkan and Echelon.

These "develop encryption and cryptography technology, information systems, and telecommunication systems for the Russian intelligence services", the EU Commission document said, including "tools specifically designed to store, retrieve, and manage large amounts of data obtained through, for example, social media scraping".

But the main thrust of the latest proposals was to curb sanctions circumvention by Russia and her friends.

International ships that carried forbidden military and dual-use goods to Russia should become non grata at EU harbours in future, they said.

Vessels that "illegally interfere, switch off or otherwise disable their navigation system when transporting Russian crude oil and petroleum products" should also be blacklisted from "the ports and locks of the Union".

Third countries buying military and dual-use hardware from the EU won't be able to transit them via Russia to stop them being diverted, the draft sanctions said.

And, in a final bombshell, "third countries whose jurisdiction is demonstrated to be at continued and particularly high risk of being used for circumvention for the benefit of Russia" could face their own blanket ban on importing EU military and high-tech kit, the EU Commission proposed.

The "last-resort" measure raises the spectre of a trade war with China and the UAE if they go further toward arming Russia.

EU ambassadors will hold first talks in Brussels on Wednesday (10 May) on what will become the 11th round of Russia sanctions later this month.

The proposals are likely to change before their final adoption, but the commission drafted them after sounding out EU capitals via "confessional" meetings and informal policy "non-papers", in EU jargon.

Estonia had lobbied for a focus on sanctions circumvention, diplomats said.

Frontline EU countries, Latvia, Lithuania, and Poland, had also pushed for harder action against Russia's nuclear, liquid gas, oil, banking, and diamond industries, according to their non-paper.

'Friendship' oil

Poland has all-but secured a promise Germany won't buy oil via Druzhba in future.

"The temporary derogation granted to Germany … for the supply of crude oil by pipeline from Russia through the northern section of the Druzhba oil pipeline should end," the commission draft suggested.

But Hungary can continue building Russian nuclear reactors as well as buying Druzhba (meaning "Friendship" in Russian) oil, along with the Czech Republic and Slovakia, the proposal said.

It suggested visa-bans and asset-freezes on several dozen more Russian officials and entities, including two minor Russian banks.

But most Russian banks can continue using the Belgium-based Swift international payments gird.

Most of Russia's richest businessmen are still welcome in Europe.

Austrian, Dutch, French, Hungarian, German, and Italian bankers can continue thriving in Moscow despite the war.

And Belgium's Antwerp World Diamond Centre can keep on buying some €1.5bn of diamonds a year from the Kremlin-owned Alrosa company, the draft EU compromise indicated.


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