EU cuts 3 Chinese firms from sanctions list after Beijing vows to stop flow of military goods to Russia

The European Union has narrowed the list of China- and Hong Kong-based firms it plans to sanction for funnelling banned European goods to the Russian military.

Five companies remain on a draft sanctions list, according to several diplomats and officials familiar with the matter. This is down from an initial eight, although the final number is not set in stone.

The measures are part of a broader package of sanctions, the 11th in total, designed to punish Russia for its invasion of Ukraine.

Three Chinese firms were tentatively removed from the list after talks with Chinese diplomats in Brussels. The Chinese side said it would work to ensure those businesses stop reselling hi-tech goods made in Europe that are flowing to Russia’s war machine.

EU to weigh sanctions on Chinese firms accused of helping Russian military

The five remaining businesses were found to be Russian entities operating in China and will be kept on the list. However, it is seen as a fluid situation: should the Chinese firms continue selling banned European goods to Russian military buyers, they can quickly be re-added.

Two EU diplomats said the arrangement can be seen as a test of whether China is acting in good faith.

In some cases, the companies stand accused of shipping microchips that are used in cruise missiles.

The discussions happened after the Chinese ambassador to the EU, Fu Cong, publicly complained that Brussels had not presented evidence that the firms – some of which are based in Hong Kong – were providing a loophole through which European hi-tech goods could move to Russia.

China has threatened to retaliate in kind to any sanctioning of its companies, but also offered to help the EU stop companies from providing loopholes, should it present evidence.

“When it comes to these companies, let me be very clear: if the European side imposes sanctions on Chinese companies without providing us with any solid evidence to show that these companies are engaged with activities that may circumvent or that have circumvented the EU sanctions on Russia, then we certainly will retaliate,” Fu told the British magazine New Statesman last month.

“But let me also emphasise that we want to resolve this issue in a cooperative way. I understand this 11th round of sanctions is aimed mainly at preventing circumvention. If the EU side has evidence that Chinese companies are engaged in such activities, please show us the evidence,” he added.

The 11th package has stalled because of a protest from a single member state – believed to be Hungary – about its own companies being listed on a name-and-shame registry operated by the Ukrainian government. Budapest wants the EU to pressure Kyiv to remove OTP Bank, a Hungarian entity, from the list.

However, diplomats are hopeful that a breakthrough can be reached at a meeting of ambassadors in Brussels on Monday.

This name-and-shame list – known in Kyiv as the “international sponsors of war” – contains six Chinese companies, more than any other nationality, with tech companies Hikvision and Dahua Technology added last week. Comnav Technology, China State Construction Engineering Corporation, Xiaomi Corporation and Great Wall Motor are the others.