Hong Kong has become a significant global trade hub for some of the world’s most brutal regimes, according to a recent report by the Committee for Freedom in Hong Kong Foundation. This campaign group examined Hong Kong’s role in facilitating the flow of goods to countries under Western sanctions, including Russia, Iran, and North Korea.
Surging Exports to Russia
The report highlights a substantial increase in exports from Hong Kong to Russia, particularly in semiconductors, which are crucial for Russia’s military capabilities. Between 2021 and 2022, semiconductor exports from Hong Kong to Russia doubled to $400 million, second only to those from mainland China. These components are vital for weaponry, such as drones and cruise missiles, which are central to Russia’s war efforts.
Analysis of High-Priority Goods
Focusing on a five-month period in 2023, the report scrutinized Hong Kong’s exports, especially those from the Common High Priority List (CHPL) developed by the US government to identify items sought by Russia for its weapons program. From August to December 2023, Hong Kong exporters shipped nearly $2 billion worth of goods to Russia, with nearly 40% of these exports comprising CHPL items, including various semiconductors.
Involvement of Specific Companies
The report also spotlighted companies involved in these transactions. For instance, Piraclinos Limited, primarily a supplier of charcoal and fertilizer, shipped over $2.5 million worth of electronic integrated circuits and other CHPL items to VMK, a Russian company under US sanctions, in December 2023. Piraclinos has been contacted for comment but has yet to respond.
Ease of Business and Sanctions Evasion
Hong Kong’s long-standing reputation as a hub for international business, both legitimate and illicit, is facilitated by the ease of setting up companies. This process, which takes just a few days, allows individuals to create new avenues for transferring goods and payments and to mask their identities through shell companies, even when targeted by Western authorities.
The report details instances like Arttronix, a Hong Kong-based company dissolved shortly after being targeted by US sanctions for supplying electronic components to Iran. Within a year, Arttronix’s owner had established a new company under a different name, highlighting the challenges in preventing sanctioned entities from continuing their activities.
Impact of Beijing’s Influence
The Carnegie Endowment for International Peace’s report last year underscores that Hong Kong’s role in sanctions evasion is partly due to it being one of the busiest shipping hubs globally and a direct consequence of Hong Kong’s increased subservience to China. The report’s author, Samuel Bickett, points out that companies in Hong Kong “openly flout the sanctions and show no interest in even paying lip service to them.”
Rising China-Russia Trade
Trade between China and Russia has surged since the onset of the Ukraine war, with bilateral trade reaching a record high of $240 billion last year. The report concludes that US and allied efforts have been “inadequate to halt the flow of prohibited Western goods from Hong Kong to Russia,” emphasizing the ease and difficulty of tracking the creation and replacement of corporate identities.
In summary, the report by the Committee for Freedom in Hong Kong Foundation reveals the complex and troubling role Hong Kong plays in global trade, particularly in facilitating the activities of sanctioned regimes through its business-friendly environment and strategic geopolitical positioning.
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