Allegations have surfaced regarding the involvement of Russian Copper Company (RCC) and Chinese companies in deceptive practices aimed at circumventing taxes and sidestepping the impact of Western sanctions through the trade of copper products. The strategy involves processing copper wire rod in a manner that makes it challenging to differentiate it from scrap metal. By converting the wire rod into a shredded form in Xinjiang Uyghur region, it becomes challenging for authorities to distinguish between scrap and new metal, thereby enabling both exporting and importing entities to benefit from variations in tariffs applied to these commodities.
The trade manipulation tactics reportedly started in December, leading to discrepancies between Chinese and Russian trade data. Chinese customs data indicated a significant increase in copper scrap imports from Russia since December, whereas Russian data suggested minimal exports of scrap to China. This situation has raised questions about the transparency and accuracy of trade information, particularly as Russian customs have temporarily withheld foreign trade data post the invasion of Ukraine, relying on commercial data providers instead.
The practice of disguising new copper wire rod as scrap not only offers financial advantages by avoiding taxes but also presents challenges in terms of identification and tracking. The shredded metal, which resembles scrap but is actually high-purity copper rod, complicates regulatory oversight, making it easier to sell to Chinese manufacturers. The evolving dynamics in the Russian-Chinese copper trade highlight the complex interplay of economic interests, sanctions evasion strategies, and the implications of geopolitical tensions on international commerce.