Focus on relations between Russia and China
C4ADS uncovers evidence of increased wartime trade in sensitive defense technologies between state-owned Chinese conglomerates and sanctioned Russian defense companies, as well as the presence of a key entity, Poly Technologies, in supply chains and Western capital markets.
Last year C4ADS - a nonprofit organization - released its Trade Secrets report, its analysis of state-owned Chinese conglomerates supporting Putin's military aggression in Ukraine through the sale of sensitive technologies to the Russian defense sector. Now, recent updates to international (and Russian) trade data records show not only an increase in this trade, but also the presence of a key firm in Western supply chains and capital markets.
Furthermore, in the latest investigation entitled TRADE SECRETS Exposing China-Russia Defense Trade in Global Supply Chains, C4ADS made further breakthroughs. In particular, C4ADS has revealed that the Chinese state-owned defense company Poly Technologies has traded with over 100 international counterparts involved in Western supply chains and has been a key player in capital markets since 2018, including in the United States. In fact, the nonprofit argues, California's Public Employee Retirement System — widely considered America's largest public pension system — alone holds shares in three different Poly Group companies (according to its 2022 annual report).
C4ADS says the recent updates to Russian and international trade data show an increase in trade in sensitive technologies from the People’s Republic of China (PRC) state-owned defense company Poly Technologies Inc (保利科技有限公司) to sanctioned Russian defense companies since Russia’s February 2022 invasion of Ukraine. These records shed light on an opaque network of Chinese and Russian companies that trade in military-applicable technologies at a time when both Beijing and Moscow are bolstering their military cooperation, laying the groundwork for a renewed period of global instability. These networks of companies financially and materially supporting Russia-PRC wartime defense-applicable trade are not isolated. Publicly available information shows entities of Poly Group – of which Poly Technologies is a 100% wholly-owned subsidiary – in Western supply chains and capital markets, directly implicating unwitting consumers and nation-states in supporting Russia’s wartime acquisition of financing and military-applicable goods.
According to aggregated global trade data, from June 2 to November 16, 2022, Poly Technologies exported 13 shipments labeled as spare or used parts for the Mi-171, Mi-Sh, and other unspecified Mi-system helicopters to the sanctioned Russian defense and aviation company Ulan-Ude, and one such shipment to Russia’s sanctioned United Engine Corporation.
This same trade data indicates that three of these post-invasion shipments from Poly Technologies were labeled as spare parts for the Russian Mi-8AMTSh (Ми-8АМТШ; МИ-171Ш), a military assault helicopter that Russian sources report has been used in the war against Ukraine.
Ulan-Ude is a Russian state-owned defense company subject to new rounds of stricter international sanctions in December 2022 through March 2023 for the production of items “that have been used in Russia’s assault against Ukraine.”
The apparent timeline of these shipments may indicate a growing Russian need for Mi-system helicopter parts. Trade records indicate that more than one-third of Poly Technologies’ total M-system helicopter shipments to Russia since 2014 took place in the nine months following Russia’s invasion of Ukraine.
International entities that trade with or invest in Poly Group entities or Poly Technologies’ primary trade partners should rigorously vet their supply chains to avoid any risks associated with financially or materially supporting sanctioned Russian defense supply chains, even unwittingly. See “Secondary Sanctions Risks Explained” below for more detailed information.
This investigation only pulls on one thread of the PRC’s efforts to assist Russia in its war of aggression against Ukraine, inviting the question of whether the cooperation may be more extensive than Poly Technologies. Indeed, says C4ADS, the growing willingness of the People's Republic of China to test redlines around its state-owned companies’ trade with Russian defense firms adds to an already fragile geopolitical environment that risks growing instability and potential conflict. Within this context, an array of U.S. and international firms, many of which have legitimate business dealings with Beijing-based companies, will have to face the choice of either divesting their interests from the opaque web of Chinese-Russia trade ties or at least accepting the consequences of public scrutiny for supporting Moscow’s war in Ukraine, if not the prospect of secondary international sanctions. While sanctions have failed to deter the PRC from trading with the Russian defense industry thus far, the public fallout of doing business with companies trading with the Russian defense industry could very well hurt unwitting affiliated U.S. companies and shrink economic gains. It may take real financial hardship to slowly turn the tide of the PRC partnership with Russia. Even then, geopolitical calculations will likely drive the relationship now and in the years to come.