Within days of Russia’s invasion of Ukraine, the West imposed tough and far-reaching sanctions against Moscow, hoping to limit the Kremlin’s ability to cover the costs of the war.

The sanctions were supposed to bring Russia to its knees. Initially the value of the ruble plummeted and in 2022 the Russian economy shrank by 1.2%. But last year Russia’s growth reached 3.6%, outpacing both the US and Europe – and it looks like 2024 will see strong growth continue.

This growth was largely contributed by trade with China, which acted as a counterweight to the West, refusing to impose sanctions and gradually becoming one of the main buyers of Russian energy. Thus, despite the pressures of the US and the EU, the two countries created a deeper alliance than when the war in Ukraine began.

Third time Putin in Beijing in the last two years

Last year, Chinese President Xi Jinping spoke of a “new era” in Sino-Russian relations. His Russian counterpart, Vladimir Putin, is expected in Beijing this week for the third time since the start of the war and is also due to attend the eighth China-Russia Expo in the northeastern Chinese city of Harbin.

“China is an important lifeline for Russia’s wartime economy, a country besieged by sanctions and isolated from the global community,” Philip Ivanov, founder of the Geopolitical Risks + Strategy Practice consultancy, told DW. “China is the main destination for Russian energy exports and one of the biggest suppliers of important equipment and technology that Russia can no longer get from the West.”

As European and American firms pulled out of the Russian market, Moscow increased its purchases of Chinese goods, from cars to cellphones. Bilateral trade reached $240.1 billion last year, according to Chinese authorities – an increase of more than 25 percent from the previous year.

Technological and defense exports are “key”.

Some analysts estimate that technology exports boosted bilateral trade more than energy exports. Besides, Russia closed various energy agreements with China, but with big discounts.

“Russia wouldn’t have enough trucks, chips, drones or other equipment without Beijing’s help because China is the only country exporting such products to Russia now,” Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at French investment bank Natixis. China is the second largest economy in the world – hence it is not afraid of US and European sanctions.

“Payments in trade with Russia are made in renminbi (Chinese currency) through the Chinese international payment system to make the transactions harder to trace,” adds Garcia-Herrero.

In December, President Biden signed an executive order authorizing second-degree sanctions on foreign banks that do business with the Russian war machine. The order also allows the US Treasury Department to isolate the banks in question from the dollar-dominated global financial system on which all banks rely heavily.

Chinese banks are cautious

This year several Chinese banks suspended or limited transactions with Russian clients to reduce the risk of being sanctioned. In addition, there are more checks on cross-border settlements that can take months – so smaller exporters are at risk of going bankrupt.

“The US succeeded in forcing Chinese banks not to finance exports to Russia,” explains Garcia-Herrero. “Now it is very important that the US continues to exert such pressure, as well as include in the sanctions all companies that export to Russia, even those that trade in dual-use products (that is, products that have both military and commercial use) but also the banks that finance these transactions”.

On a recent visit to Beijing, US Secretary of State Anthony Blinken accused China of fueling the Russian war machine by supplying Russia with electronic components, munitions chemicals and rocket propellants. Of course, Beijing has repeatedly denied the accusations. Blinken also said further sanctions would be imposed on China – the US’s biggest competitor – if it does not curb defense exports to Russia – which Washington sees as the country’s biggest threat.

Beijing is unlikely to change course

However, China is not expected to reduce its economic support to Russia, even though Beijing has also been targeted by American sanctions.

Noting that China and Russia are “acting together with the aim of undermining the current global system”, Ivanov emphasizes that both countries want to “shield their economies with a long-term horizon” as they disengage from the West in a new, multipolar geopolitical order.

“China will not dramatically reduce its economic support, but will look for more covert channels to provide it – with transfers and trade through third countries, as is already the case with Central Asian countries,” says Ivanov.

Edited by: Giorgos Passas