In an English post last week on LinkedIn, which no longer has a presence in China, the company appeared to convey a message of compliance to the Western world – as it came just weeks after one of the other four entities named two years ago, the Shandong-based Penglai Jutal Offshore Engineering Heavy Industries, was blacklisted by the US Treasury Department for dealings with Russia.

“We appreciate the good relations we have built with our Russian partners in the past and value the work we have done together,” the Wison statement says. “However, in view of the strategic future of the company, we have to make this difficult decision.”

Analysts say the trend illustrates how Chinese companies have become collateral damage as the West steps up efforts to penalise Russia for its war in Ukraine, and as sanctions disincentivise business with Russia.

They say Chinese shipbuilders should diversify their client bases to navigate the geopolitical maelstrom – a tactic that Wison appears to be employing as the 27-year-old firm “actively seeks new development opportunities”.

Wison also said it had decided to sell its equity interest in Zhoushan Wison Offshore & Marine, a firm in neighbouring Zhejiang province that helped build modules for the massive Arctic-LNG 2 liquefied natural gas project overseen by Russia’s second-largest natural gas producer, Novatek.

The West’s sanctions imposed since the Ukraine war began in 2022 have complicated deals between Chinese and Russian firms.

On Monday, the Ministry of Commerce protested the European Union’s listing of Chinese companies in its 14th round of sanctions against Russia.

The June 24 sanctions package adds 69 individuals and 47 entities subject to asset freezes and travel bans. Nineteen of those are Chinese companies. One EU target this time is liquefied natural gas (LNG).

“These are unilateral sanctions and constitute long-arm jurisdiction,” the ministry said in response to a reporter’s question. The ministry urged the EU to “unconditionally stop listing Chinese companies”.

“China will resolutely safeguard the rights of Chinese companies’ legitimate interests.”

Xu Tianchen, senior economist with the Economist Intelligence Unit market research firm in Beijing, said Russia has emerged as a huge market for Chinese shipbuilders but that a market bonanza is being scuppered by sanctions.

“Bilateral trade in shipbuilding has been very lopsided for years,” Xu said. “China’s ship-related export value to Russia is more than 100 times the other way round, and it has been the case for many years – not just after the outbreak of the war in Ukraine.

“This reflects China’s enormous shipbuilding capacity and its growing global market share.

“Russia, on the other hand, is a minuscule player in shipbuilding, lagging far behind countries like China, South Korea, Japan and Greece.”

Russia’s reliance on Chinese ships and parts has probably grown since 2022 because the cut-off of supplies affects the construction and maintenance of ships in Russia, Xu added.

“[But] tightening Western sanctions pose an immediate risk to Chinese firms because ships can be easily classified as dual-use goods, which are being scrutinised more closely than before,” he said. “In fact, many companies and banks are already self-sanctioning to avoid such risks, or exploring alternative payment systems to circumvent potential sanctions.”

For some shipyards, cutting ties with Russia may put them in financial straits and without other options.

Zeng Ji, a professor of ocean engineering with Shanghai Maritime University, said orders from Russia were hard to replace for some Chinese shipbuilders, given that many are running excess capacity.

“Big orders used to flow from Russia because the country lacks capabilities to build large commercial vessels. A number of shipyards in Liaoning and Shandong in northern China, and Zhejiang in eastern China, rely on deals with Russia to stay afloat,” said Zeng, who added that Russian buyers find Chinese shipyards offer value-for-money products and services.

“Chinese shipbuilders making components for Russia who also receive orders from clients in the West or source parts elsewhere now have to weigh which side is more important and make difficult decisions. They now need to diversify their business and clients.”

Shipbuilding cooperation was among the focal points, along with the space and aviation industries, featured in a joint statement signed during Russian President Vladimir Putin’s May visit to China to mark 75 years of diplomatic ties.

And earlier this month, China’s state-backed Economic Daily quoted Alexey Likhachev, chief of Russia’s Rosatom, a state-owned atomic energy conglomerate, as saying that he had recently briefed Putin on jointly developing Arctic shipping routes with China, and that Russia would attract partners there in shipbuilding, port construction and logistics cooperation.

“This will be a joint project that truly meets the interests of the two countries,” the newspaper quoted Likhachev as saying.

Xinhua also reported this month that, at a bilateral cooperation forum held in Saint Petersburg, the Shanghai-based NewNew Shipping Line entered into a deal with Russia’s State Atomic Energy Corporation Rosatom for a joint venture to design and construct high-ice-class container ships and to jointly operate Arctic routes connecting the ports of China and Russia.

NewNew Shipping Line’s parent, Torgmull, a logistics company, said in a phone interview that cooperation programmes with Russia were “progressing well for now” but that they would monitor the evolving situation.

Lu Xiang, a research fellow in US studies at the Chinese Academy of Social Sciences, said some Chinese investments in Russia may remain “low-key” due to a lack of publicity.

“In principle, the sanctions will have some impact on shipbuilders who are there,” Lu said, adding that some still will not be deterred.

“If there’s a commercial need, then of course there’s a need for investments,” he said. “I don’t believe the EU’s sanctions will cause a shrinking of investments, and we’ll actually see growth. Any enterprise in any location will consider the other location’s laws and reactions, then the risk and returns will be weighed. Decisions on risk versus return will vary from company to company.”

In 2023, global shipbuilding output grew by 10 per cent, year on year, to 35 million compensated gross tonnes, and China emerged as a frontrunner, contributing 50 per cent of the total output for the first time, eclipsing South Korea at 26 per cent and Japan at 14 per cent, according to shipbuilding-data-cruncher Clarksons.

South Korean shipbuilders could commiserate with their arch-rivals in China as both are nursing losses due to Russian clients being unable to pay to take delivery of vessels.

Samsung Heavy Industries is in a legal dispute with a Russian client involving LNG ships, and their case will be heard at the Singapore Arbitration Court.

HD Hyundai has resold ships it originally built for Russian clients, but Hanwha Ocean is still looking for new buyers.

“Since these cancelled projects were already in progress, shipyards are faced with the challenge of finding other uses for the hull blocks. Even though LNG carriers are in high demand from Korean shipbuilders at the moment, other customers will likely have different requirements and specifications for their orders,” said Carl Martin, a technical researcher with MRC Inc, a Busan-based maker of hi-tech navigation and communications equipment for various sea vessels.

“[Finding new buyers] could take a while, and during that time the ships and hull blocks are taking up valuable space that shipyards could be using for other orders in their backlog,” he explained.