Putinistan and China trade new copper disguised as scrap to skirt taxes, and sanctions. A Reuters report
Russian Copper Company (RCC) and Chinese firms have avoided taxes and skirted the impact of Western sanctions by trading in new copper wire rod disguised as scrap, three sources familiar with the matter told Reuters.
Copper wire rod was shredded in the remote Xinjiang Uyghur region by an intermediary to make it hard to distinguish from scrap, the sources said, allowing both exporters and importers to profit from differences in tariffs applied to scrap and new metal.
Russia's export duty on copper rod was 7% in December, lower than the 10% levy on scrap. Imports of copper rod into China are taxed at 4%, and there is no duty on russian scrap imports.
The sales of new metal disguised as scrap, which started in December, are reflected in a discrepancy between Chinese and russian data.
Chinese customs data showed China has bought significantly more copper scrap from Russia since December. In December it bought 6.607 tons, while russian figures showed the amount of scrap exported to China was negligible, for December 73 tons.
Shredding newly-made copper wire rod is an effective way to disguise new material that looks very different to scrap.
The new, high-purity copper long, thin rods, mainly used for making power cables, are typically coiled for ease of transport. Copper scrap, by contrast, is a mix of wires, tubes and pipes that have already been used. They are chopped into grain-sized pieces or coiled and pressed, like packs of noodles, for transport. The shredding had escaped notice as China has restricted access to the Xinjiang region in response to international condemnation of Uyghur repression.
Last December, Chinese companies made a total of five purchases of products labelled as "copper rod" from RCC's plant (under sanction) in the Urals region. Purchases went through a United Arab Emirates-based entity called Modern Commodity Trading DMCC, and generated revenues of roughly $65 million.
In 2021 and 2022, an average of 95.3 tons and 125 tons of russian copper scrap were sold to China each month. Volumes rose sharply over the last few months with monthly imports reaching 11,599 tons by February 2024.
Theoretically, there are no legal obstacles to prevent China from buying metal from russian firms under Western sanctions, but manufacturers may still be wary of losing export business to buyers seeking to avoid providing any funds to ruZZia.
Sanctions can also mean difficulties with processing payments and borrowing money.
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Just underlining why the West shouldn't buy from China and apply secondary sanctions on all trade.
@freerussia_report
