Sinopec pauses Russia projects as Beijing urges caution amid sanctions

BEIJING • The state-run Sinopec Group in China has suspended talks on 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 businesses running afoul of sanctions - it is pressing companies to tread carefully over investments in Russia, its second-largest oil supplier and third-largest gas provider.

Since Russia invaded Ukraine a month ago, China's three state energy giants - Sinopec, China National Petroleum Corp and China National Offshore Oil Corp - have been assessing the impact of the sanctions on their multibillion-dollar investments in Russia, according to sources.

"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 said there is no need for China to report to other parties about "whether there are internal meetings or not".

REUTERS