An isolated Russia could be driven further into China's arms economically in the wake of sanctions imposed over the invasion of Ukraine, but Beijing appears wary of offering a warm embrace.

Western countries have hit Russia's economy hard including by closing airspace, freezing assets and excluding seven banks from the SWIFT interbank messaging network.

The impact is expected to be wide-ranging and impede Moscow's ability to shore up the beleaguered ruble and purchase imports.

China has avoided openly condemning Russia's attack and has the financial strength to soften the blow against its giant neighbour.

But analysts say Beijing will likely tread carefully to avoid violating the most severe international restrictions.

- 'Financial muscle' -

China is the only country with the "financial muscle to help Russia", said Paola Subacchi, professor of international economics at the University of London's Queen Mary Global Policy Institute.

Beijing holds massive foreign exchange reserves and a swap agreement between the Chinese and Russian central banks has been in place for years, Subacchi noted.

"When the ruble fell as a result of the sanctions during the Crimea invasion (in 2014), the swap agreement was activated and helped to pay for Russian imports," she told AFP.

"But it is not enough. It's negligible compared to what they (Russia) need in order to support their currency," she said.

Analysts also note that China is not a major importer of wheat -- a key Russian export -- and neither can it step in to provide all of the goods that Russia needs.

This week, Russian gas giant Gazprom said it had signed a contract to design a pipeline to China, taking a step towards a new supply agreement that could ease Russia's reliance on European buyers.

Chinese firms could export more to Russia and buy more Russian energy, but the gains for Moscow would be minimal considering the overall impact of the war, Julian Evans-Pritchard said in a report for Capital Economics.

- 'Won't risk violations' -

While China can in some cases provide yuan to Russia to help it buy what it needs from abroad, Beijing will likely "tiptoe" around anything more overt for now, said Leland Miller, CEO of data analytics firm China Beige Book.

Beijing will not want to appear to openly flout sanctions especially while fighting still rages, and probably "won't risk violating the more severe restrictions on SWIFT, central bank transactions, and technology exports", he added.

Violations could bring secondary sanctions on key Chinese companies that sell products to Russia containing US intellectual property, Miller said, meaning China will need to tread a fine line.

Just a month ago Chinese President Xi Jinping and Russian leader Vladimir Putin declared in Beijing that their bilateral friendship had "no limits" -- a deepening embrace driven by their mutual desire to counter US influence.

China cannot publicly oppose Putin without endangering that partnership, Chen Long, a partner at research firm Plenum, wrote in a report.

But Beijing also cannot support Russia too strongly without risking an international backlash, Chen said.

"It's just going to be business as usual," he added.

Commerce Minister Wang Wentao told reporters this week that China hoped to maintain normal trade with both Russia and Ukraine.

Beijing recently announced it was lifting restrictions on Russian wheat imports, but this merely marked the fulfilment of an earlier promise.

- No SWIFT lifeline -

There has been speculation over whether China's yuan-based Cross-Border Interbank Payment System (CIPS) could help Russia.

But experts say it will be difficult to circumvent SWIFT, which facilitates secure transactions between banks.

"CIPS can't provide a true lifeline to Russia because international transactions still run atop the SWIFT system," said Miller.

Chinese financial institutions appear to be steering clear of triggering potential US sanctions against their own operations for aiding Russian entities.

Bloomberg News reported last week that two of China's biggest state-owned banks -- Bank of China and ICBC -- were restricting financing for purchases of Russian commodities.

And the China-backed Asian Infrastructure Investment Bank said Thursday it would suspend business related to Russia and Belarus.

Russia and Ukraine: China's trade partners in numbers
Beijing (AFP) March 4, 2022 - Russia's economy has been hit by severe sanctions as the country's invasion of Ukraine escalates, and analysts point to neighbouring China -- which has yet to condemn the attack -- as an increasingly important trade partner.

Beseiged Ukraine, meanwhile, supplies China with key commodities such as corn, though trade levels remain small.

What do the numbers say?

- Largest trade partner -

China has been Russia's largest trading partner for over a decade, according to commerce ministry data, with energy and mineral products making up the bulk of Chinese imports.

But bilateral trade and investment remain small relative to China's total shipments.

China bought $79 billion in Russian products last year while selling it $68 billion of its own, according to customs figures, representing just three percent of imports and two percent of exports.

Trade with Ukraine makes up an even smaller amount.

But Ukraine primarily exports useful commodities, such as iron ore and corn, to China and is a key node in Beijing's Belt and Road Initiative -- a trillion-dollar push to boost Beijing's trade links globally.

- Energy-intensive -

China's trade with Russia is "energy-intensive and strategic", according to ANZ economists, and the ongoing supply could be at risk given financial sanctions.

On average, China bought more than 1.5 million barrels of crude oil every day from Russia last year -- making up 16 percent of China's total oil imports.

Meanwhile, Russian natural gas supplied five percent of China's overall demand.

With oil prices surging as war rages, it does not bode well for China as the world's biggest crude oil importer.

- Food security -

China's direct trade with both Russia and Ukraine is linked to concerns over food security.

About a third of China's corn imports are from Ukraine, research firm Plenum noted, and this could "pose a problem if that trade is disrupted".

Much of the corn is used for feeding pigs meant to sate Chinese consumers' huge demand for pork, a staple meat in the country.

Beijing has also recently lifted restrictions that barred shipments of wheat and barley from some areas of Russia over concerns related to a crop fungus.

However, Chen Long, partner at Beijing-based consultancy Plenum, has noted that most of China's rice and wheat is grown domestically, meaning the impact is limited.

- Financial links -

Russia is a "large investor in China's bond market", ANZ said, with state-held RMB asset holdings totalling some $140 billion, nearly a quarter of total foreign holdings.

"Only 17 percent of bilateral trade is settled in renminbi at the moment, but that could change rapidly in order to keep goods flowing," said Julian Evans-Pritchard, senior China economist at Capital Economics.

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