China’s state-run Sinopec Group has suspended talks for a major petrochemical investment and a gas marketing venture in Russia, sources told Reuters, heeding a government call for caution as sanctions mount over the invasion of Ukraine.
The move by Asia’s biggest oil refiner to hit the brakes on a potentially half-billion-dollar investment in a gas chemical plant and a venture to market Russian gas in China highlights the risks, even to Russia’s most important diplomatic partner, of unexpectedly heavy Western-led sanctions.
Beijing has repeatedly voiced opposition to the sanctions, insisting it will maintain normal economic and trade exchanges with Russia, and has refused to condemn Moscow’s actions in Ukraine or call them an invasion.
But behind the scenes, the government is wary of Chinese companies running afoul of sanctions – it is pressing companies to tread carefully with investments in Russia, its second-largest oil supplier and third-largest gas provider.
Since Russia invaded a month ago, China’s three state energy giants – Sinopec , China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOC) – have been assessing the impact of the sanctions on their multi-billion dollar investments in Russia, sources with direct knowledge of the matter said.
“Companies will rigidly follow Beijing’s foreign policy in this crisis,” said an executive at a state oil company. “There’s no room whatsoever for companies to take any initiatives in terms of new investment.”
The Ministry of Foreign Affairs this month summoned officials from the three energy companies to review their business ties with Russian partners and local operations, two sources with knowledge of the meeting said. One said the ministry urged them not to make any rash moves buying Russian assets.
The companies have set up task forces on Russia-related matters and are working on contingency plans for business disruptions and in case of secondary sanctions, sources said.
The sources asked not to be named, given the sensitivity of the matter. Sinopec and the other companies declined to comment. The ministry did not respond to a request for comment.
U.S. President Joe Biden said on Thursday that China knows its economic future is tied to the West, after warning Chinese leader Xi Jinping that Beijing could regret siding with Russia’s invasion of Ukraine.
Global oil majors Shell and BP, and Norway’s Equinor pledged to exit their Russian operations shortly after Russia’s Feb. 24 invasion. Moscow says its “special operation” aims not to occupy territory but to destroy Ukraine’s military capabilities and capture what it calls dangerous nationalists.
