Russian companies, including large state-owned ones, are considering using Hong Kong as a base jurisdiction to circumvent Western sanctions. Businessmen are looking for options to attract financing, loans, as well as re-register a business in a "friendly jurisdiction" in order to continue international work. This was reported by Bloomberg with reference to interviewed Hong Kong lawyers who advised Russian companies.
The influx of Russian companies to Hong Kong was confirmed by the manager of the local law firm ONC Lawyers Sherman Yang. The agency also managed to find at least two more Chinese companies that Russian representatives turned to for help and services. Representatives of the companies asked not to disclose their names, noting that the negotiations were "private".
“The interest of Russian companies in moving certain types of activities to Hong Kong is certainly growing. Some companies want to re-register their business in Hong Kong but keep their core business in Russia,” said Yang, whose firm has already held initial talks with Russian clients.
The publication notes that Hong Kong could become an alternative financial hub for Russian big business instead of New York and London, but local business representatives are still afraid of the consequences, as cooperation with sanctioned companies may entail secondary sanctions. As an example, the publication cites the situation with Chinese officials who were sanctioned for violating rights and freedoms during mass protests in Hong Kong in 2019. Since then, not only Hong Kong, but also Chinese banks do not want to work with officials who fell under Western sanctions.
The US State Department has previously expressed concern that Hong Kong could be used to circumvent sanctions. The official statement said that the reputation of the Special Administrative Region of China directly depends on compliance with international laws and standards, and assistance in circumventing sanctions will not benefit the jurisdiction.
“The possible use of Hong Kong as a safe haven by multi-jurisdictional sanctions evaders further calls into question the transparency of the business environment,” the State Department said in a warning.
The Hong Kong authorities, in turn, do not take responsibility for the enforcement of foreign restrictions. In response to the agency from the official representative of the Monetary Authority of Hong Kong, it is said that local financial institutions have the right to independently make decisions about the risks of cooperation with a particular organization. The authorities also stressed that they do not support the introduction of unilateral sanctions, however, the implementation of restrictions is the prerogative of local companies, not the authorities.
At the same time, total assets in local banks associated with Russia have decreased three times since the beginning of the war: from 2.6 billion Hong Kong dollars ($331 million) at the end of February to 800 million Hong Kong dollars ($102 million) at the end of June. The United States and the European Union have already put pressure on several jurisdictions, in particular, on Turkey for cooperation with Russia and assistance in circumventing sanctions. After consultations with US officials, Turkish banks completely stopped accepting plastic cards of the Russian payment system Mir.