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Foreign companies have been complicit in evading arms sanctions against China

Hong Kong, May 9 (ANI): After 1989, China fell out of favour with Western defence companies selling military equipment to China and the People's Liberation Army (PLA), which was culpable in the deaths of hundreds of peaceful protestors in the Tiananmen Square massacre.

However, a number of Western companies have found ways around sanctions imposed by the USA and European Union (EU). This has often been under the claim that equipment was "dual use" (i.e. that it could be used for civilian use) and was not being sold directly to the PLA. This murky world of arms sales has been exposed from time to time, but one of the more interesting cases is Thailand's acquisition of an S26T submarine from China in 2017.

The S26T is based on the PLA Navy's (PLAN) Type 039 Yuan-class submarine, and originally the seller and buyer had specified that the submarine would use 12V 396 SE84 diesel engines from German firm MTU. These engines run the electric generator set in submarines. However, Germany refused to sell the power plants to the China Shipbuilding and Offshore International Company (CSOC), citing an EU arms embargo. Philipp Doert, Germany's defence attache in Thailand, confirmed this last year. He stated no export license could be issued for the engines because the submarine was intended for a Chinese military item.

Doert added: "China did not ask/coordinate with Germany before signing the Thai-China contract, offering German MTU engines as part of their product."Obviously, neither China nor Thailand paid due diligence in their contract negotiations, and the two sides are now scrambling to find a solution. CSOC, acknowledging it cannot fulfil the Thai contract as conceived, is reportedly offering a Chinese-built CHD620 engine as an alternative.

However, Thailand is not impressed, since the CHD620 is not used on PLAN submarines. The technical department of the Royal Thai Naval Dockyard prepared a report summarizing the merits and disadvantages of the CHD620 compared to the MTU engine, and this has been considered by the navy's hierarchy. Then, from 13-15 December 2022, Admiral Chonlatis Nawanukroh - who chairs the submarine program's executive committee - met with the CSOC and China's military attache. Subsequently, Thailand was expected to send a delegation to the manufacturer's factory in China, sometime by April, to witness a demonstration. Thailand demanded that the engine offered must be certified to military standards by the PLAN. The process must be completed by June, at which time the Thai Navy will pass its deliberations to the government.

All this background is important, for it reveals some important aspects of China's submarine programs. Firstly, when it signed the contract with Thailand, China blithely assumed it would be able to procure MTU engines. Now it cannot. The reason is obvious - Russia invaded Ukraine in early 2022, and suddenly arms exports came under far stricter scrutiny by Germany's government. Secondly, why is Thailand so wary of the Chinese-built engine? Again, the answer is clear. Because this engine is not installed in export submarines, nor even in submarines destined for the PLAN. This is why Bangkok is so insistent that the CHD620 be properly certified, demonstrated and guaranteed.

Thirdly, this leads to the question of what engines have been powering Chinese diesel- electric submarines to date? It has long been an "open secret" among defence analysts that MTU has been supplying them direct to China. ANI has sought to clarify this with MTU, a business unit of Rolls-Royce Power Systems, through e-mails and in person on multiple occasions. Unfortunately, ANI has failed to receive any response.

In fact, the only reaction to the question of whether MTU was supplying submarine engines to China was one representative who said several years ago, "That's a sensitive topic. I cannot answer that." Such a response was a deflection, not an outright denial. Without listing customers, MTU says on its website: "In fact, most conventional submarines around the world use MTU engines." It added that this includes 600 submarines from more than 20 nations.

Although it has not admitted to selling engines to China, it is impossible that a company like MTU could claim such engines are dual-use items. This engine is designed specifically for submarines, including mounting for shock and acoustics, as well as magnetic signature reduction.

It is estimated that MTU has delivered 56 engines to the PLAN for Song- and Yuan-class submarines. Such engines are literally the heartbeat of Chinese underwater warriors that now threaten American and allied navies in the event of war. It is simply stunning that the West has been allowed to supply these critical engines for decades.

Data from the Stockholm International Peace Research Institute (SIPRI) supports the contention that MTU has deliberately been breaking an EU embargo imposed after the events of 1989. SIPRI listed 52 MTU 16V 396SE diesel engines for a dozen Type 039G Song-class submarines from 1999-2006. This was on top of four MTU 12V 493 engines delivered in 1999.

As well as submarine engines, SIPRI reported that MTU supplied 18 units of 12V1163 diesel engines from 1993-2007 (for Type 051 and 052 destroyers), "probably including assembly or production under license in China". From 2013-15 it delivered eight more identical engines for Type 051C destroyers. More recently, 44 MTU 20V 956 TB-33 diesel were licensed-built in China for Type 052D destroyers from 2014-22. Norinco has been making MTU engines under license since 1986, plus Shaanxi Diesel Engine Heavy Industry makes them too.

MTU is not the only culprit. The former SEMT Pielstick in France, purchased by MAN Diesel in 2006, has also been a routine supplier of ship engines to the PLAN. For example, SIPRI lists 356 engines for China from 1991-2022. These power capital naval assets like Type 056 corvettes, Type 054A frigates, Type 071 amphibious warfare vessels and Fuchi-class replenishment vessels. These engines are manufactured under license in China, and MAN Diesel claimed all business with China complied with export controls or embargo regulations set by Germany and the EU, because these engines were not strictly naval in purpose.

Airbus Helicopters and Safran are other entities to have taken advantage of the blurred lines between breaking and maintaining an EU arms embargo that does not forbid export of dual-use items. The PLA's Z-9 helicopters are undeniably based on the Airbus AS365 Dauphin, while the Z-11 light helicopter is based on the European company's AS350. The Z-9 and Z-11 are manufactured by the Aviation Corporation of China (AVIC).

When quizzed about the PLA's assembly and operation of Airbus-derived helicopters, company's executives have washed their hands of any responsibility for breaking EU sanctions, saying it has "no involvement" in production. If that were the case, one would expect Airbus Helicopters to have taken AVIC to court and broken off commercial cooperation because China was reverse engineering its products. Instead, the two parties have continued to work closely, with their latest joint project being the AC352/H175 helicopter.

Elsewhere, the PLA apparently uses military radios designed by Thales. These include the mainstay TBR171-2 vehicular radio of the PLA that is based on the Thales TRC 9310B/C. The latter is a member of the PR4G [email protected] family, and it remains unclear whether China procured, stole or reverse-engineered these radios. Certainly, it is inconceivable that EU would knowingly approve the export of VHF combat radios to China.

In March, the Belgian newspaper De Standaard reported, using data from the European External Action Service arms export database, that EU countries issued an average of 188 licenses a year for the export of military goods to China from 2013-21. Items included small arms, chemical components, software and parts for missile systems.

All this illustrates how, for years, European firms in particular have been unable to resist the allure of Chinese money. They have forged cooperative agreements, supported local assembly and transfer of technology, and then brazenly denied any responsibility when their products appeared in the ranks of the PLA. This mercantile approach to China was amply demonstrated by French President Emmanuel Macron's visit to China last month.

While companies should be called to account for deliberately avoiding sanctions, the other question that needs to be asked is why governments allowed this to happen. France and Germany are the worst offenders, but Italy and the UK are also guilty of lax enforcement. The EU embargo has been only loosely interpreted, typically only being applied to lethal weapons or the highest technologies. Dual-use technologies do not require licenses, so it is unclear how much equipment has been transferred to China.

In fact, it is likely that dual-use items like engines have been more important to China's military than licensed exports have. For years, Europe was sucked into thinking that China was not a direct threat to it, and so it remained ambivalent to such exports. However, Europe has belatedly begun waking up to the rapid rise of Chinese military power and Chairman Xi Jinping's saber rattling in places like the South China Sea and his coercion against Taiwan.

Throughout the past 30 years, China must have been laughing all the way as Western companies helped bolster the PLA's armed forces and deliberately broke sanctions as they chased profits. The USA has always been stricter than the EU in imposing sanctions on arms transfers to China, but it too is guilty of breaches. One example is Cummins engines that power many PLA trucks.

Russia's invasion of Ukraine has abruptly brought into light the lucrative but shady arms trade to places like Russia and China. In 2017, the USA enacted the Countering America's Adversaries Through Sanctions Act (CAATSA) after Russia's annexation of Crimea three years earlier. Since then, the USA has enforced sanctions against China for buying Russian-made Su-35 fighters and S-400 air defence missile systems. CAATSA was originally designed to target Iran, North Korea and Russia.

Any Chinese role in supplying weapons or equipment to Russia to support its war in Ukraine is being closely observed too. However, it is difficult to monitor and police the transfer of dual-use items to Russia. From March-December 2022, for example, China and Hong Kong accounted for 90% of global microchip exports to Russia by value. China is adept at using front companies, often based in Hong Kong, to circumvent import and export controls of military and dual-use items. If China actually invaded Taiwan, what sanctions would occur?David Wolber of Gibson, DunnCrutcher in Hong Kong told a webinar hosted by European Sanctions: "I actually am of the view that it's unlikely China will initiate action against Taiwan in coming years. I think there's so much downside for China right now and not a lot of upside, barring the US or potentially Taiwan forcing their hand. You know, if they do, I think we're largely approaching a sort of Armageddon situation from the sanctions perspective ... Nothing is off the table, in that case. You know, I think, yes, we would definitely see a ratcheting up of export controls, probably anything touching the military."Wolber said that sanctions currently in place are very limited, and they generally do not target China's financial and economic sector. "There really aren't any significant US sanctions against China per se, and I think that may come as a bit of a surprise to some people." Wolber added: "I don't want to come across that I think US sanctions are doing nothing. I think they are having a tremendous impact in the deterrence and the de-risking of events, and putting pressure on Beijing and Chinese companies and financial institutions. I mean, what we're seeing in the market again, despite the political rhetoric on the other side, is that China and its large institutions are very nervous about running afoul of US sanctions and being put on the list; we're not seeing anybody going near Russia, or big corporations doing that ... I think China's abit nervous after seeing how the West reacted with Russia, and in general, it's very nervous about having its large corporates and institutions sanctioned. So even though the US hasn't really done that yet, it's there, right? It's building and I think that's having a tremendous effect."Indeed, China knows it would harm itself if it invaded Taiwan, especially in a protracted conflict. This helps explain why Xi is so insistent on advancing Chinese technological know-how and maximizing self-reliance. However, China's slippery evasion of sanctions imposed after Tiananmen Square, and willing unprincipled accomplices in the West, might leave Xi thinking that China could weather and defeat them in the future again. (ANI)