Chinese energy firm Sinopec Group cancels £380m investment in Russia due to Ukraine sanction fears

A Chinese state oil and gas company has pulled half a billion worth of investment from Russia in a bid to avoid Western sanctions.

Sinopec Group, formerly China Petroleum and Chemical Corp, has suspended discussions to invest up to $ 500million (£ 380million) in the new gas chemical plant in Russia.

It came after the Chinese firm realized a senior executive at Russia’s largest petrochemical producer Sibur, a firm they were working with, was an ally of alleged war criminal Vladimir Putin.

Sinopec hit pause after realizing Sibur minority shareholder and board member Gennady Timchenko, 69, had been sanctioned by the West.

The 69-year-old is the billionaire founder of the Volga Group investment firm and a major ice hockey fan.

The sixth richest person in Russia the Armenian-born financier is president of SKA Saint Petersburg ice hockey team.

He is also believed to be another former judo partner of Putin.

Timchenko has known Putin for more than 20 years and was an important contact for the Russian president’s former son-in-law Kirill Shamalov, an oil-trading magnate who became a large shareholder in Sibur.

A Chinese state oil and gas company has pulled half a billion worth of investment from Russia in a bid to avoid Western sanctions after realizing a board member, Gennady Timchenko, 69, (pictured) of a firm they were working with had been sanctioned by the West

Russian President Vladimir Putin greets Billionaire businessman Gennady Timchenko greets his friend of 20 years, alleged war criminal Vladimir Putin, during a gala match of the Night Hockey League at Bolshoi Ice Dome on May 10, 2019, in Sochi, Russia

Russian President Vladimir Putin greets Billionaire businessman Gennady Timchenko greets his friend of 20 years, alleged war criminal Vladimir Putin, during a gala match of the Night Hockey League at Bolshoi Ice Dome on May 10, 2019, in Sochi, Russia

Beijing has continued trading with Moscow since the outbreak of war but Chinese President Xi Jinping's government is said to be worried about potential sanctions they may face from the West if they support Putin.  Pictured: Putin and Xi in Beijing in February

Beijing has continued trading with Moscow since the outbreak of war but Chinese President Xi Jinping’s government is said to be worried about potential sanctions they may face from the West if they support Putin. Pictured: Putin and Xi in Beijing in February

In the 1990s, Timchenko began oil trading from St Petersburg, when Putin was a rising politician there, and went on to co-found Gunvor, a company that grew to be one of the largest traders of Russian oil.

In 2014, the US government alleged that Putin had a personal stake in Gunvor, though it offered no evidence of this. Gunvor denied the allegation.

He holds Russian, Finnish and Armenian citizenship, and lives in Moscow while the rest of his family – he has three children – live in Switzerland.

His youngest daughter Ksenia is married to Gleb Frank, the son of Putin’s former transport minister Sergei Frank.

After it sanctioned him, the Foreign Office said: ‘Timchenko is a major shareholder in Bank Rossiya. Bank Rossiya is a key stakeholder in the National Media Group which supports Russian policy which is destabilizing Ukraine.

Russian President Vladimir Putin listens to billionaire and businessman Gennady Timchenko during an ice hockey match

Russian President Vladimir Putin listens to billionaire and businessman Gennady Timchenko during an ice hockey match

‘Following the annexation of Crimea, Bank Rossiya has expanded its bank branches and provision of insurance and investment throughout Crimea and Sevastopol; and offers support to military activities and the formation of major transport links and cards that allow the public to travel easily around the peninsula. ‘

‘Bank Rossiya has supported the consolidation of Crimea into the Russian Federation by integrating the financial system following the annexation of Crimea.

‘Timchenko therefore is or has been involved in engaging in, providing support for, or promoting any policy or action which destabilises Ukraine or undermines or threatens the territorial integrity, sovereignty or independence of Ukraine.’

The plan at Chinese firm Sinopec had been to team up with Sibur, Russia’s largest petrochemical producer, for a project similar to the $ 10billion Amur Gas Chemical Complex in East Siberia, 40 per cent owned by Sinopec and 60 per cent by Sibur, set to as online in 2024.

The plan at Chinese firm Sinopec had been to team up with Sibur, Russia's largest petrochemical producer, for a project similar to the $ 10billion Amur Gas Chemical Complex in East Siberia (pictured)

The plan at Chinese firm Sinopec had been to team up with Sibur, Russia’s largest petrochemical producer, for a project similar to the $ 10billion Amur Gas Chemical Complex in East Siberia (pictured)

‘The companies wanted to replicate the Amur venture by building another one and were in the middle of site selection,’ said a Beijing-based industry executive with direct knowledge of the matter.

It signals a hardening of China’s position with Russia after their invasion of Ukraine.

Beijing has continued trading with Moscow since the outbreak of war but Chinese President Xi Jinping’s government is said to be worried about potential sanctions they may face from the West if they support Putin.

China has remained neutral on the war in Ukraine but manufacturers have already started to stop shipments to Russia.

Putin (right) and billionaire businessman Timchenko fight for control of the puck.  The pair have known each other for two decades

Putin (right) and billionaire businessman Timchenko fight for control of the puck. The pair have known each other for two decades

US President Joe Biden said on Thursday that China knows its economic future is tied to the West, after warning Chinese leader Xi Jinping that Beijing could regret it if they sided with Russia over the invasion of Ukraine.

After Apple and Samsung stopped selling their products in Russia, Chinese smartphone companies Xiaomi, Oppo and Huawei allegedly halted shipping as well.

Meanwhile, the Chinese Ministry of Foreign Affairs ordered the three largest energy companies in China – Sinopec, China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOC) – to reveal any possible connections to Russia.

‘Companies will rigidly follow Beijing’s foreign policy in this crisis,’ an executive at a state oil company said.

‘There’s no room whatsoever for companies to take any initiatives in terms of new investment.’

Sibur did not comment on the suspension of the talks for the new chemical plant but said it continues to cooperate with Sinopec.

Timchenko holds Russian, Finnish and Armenian citizenship, and lives in Moscow while the rest of his family - he has three children - live in Switzerland.  Pictured: Timchenko and Roman Abramovich (left) attend a meeting together

Timchenko holds Russian, Finnish and Armenian citizenship, and lives in Moscow while the rest of his family – he has three children – live in Switzerland. Pictured: Timchenko and Roman Abramovich (left) attend a meeting together

After it sanctioned him, the Foreign Office said: 'Timchenko is or has been involved in providing support for action which destabilises Ukraine'

After it sanctioned him, the Foreign Office said: ‘Timchenko is or has been involved in providing support for action which destabilises Ukraine’

It said the two companies continue to work jointly on implementing the Amur plant.

‘Sinopec is actively participating in the issues of the project’s construction management, including equipment supplies, work with suppliers and contractors. We are also jointly working on the issues of project financing, ‘Sibur said.

Sinopec also suspended talks over the gas marketing venture with Russian gas producer Novatek over concerns that Russian majority state-owned bank Sberbank, one of Novatek’s shareholders, is on the latest US sanctions list, said one source with direct knowledge of the matter.

Timchenko resigned from Novatek’s board on Monday, in the wake of the sanctions. Both he and Novatek declined to comment.

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