Chen Aizhu. Julie Zhu. Muyu.

(Reuters) –China’s Sinopec (NYSE) Group suspended negotiations for a large petrochemical investment in Russia. Sources told Reuters that this was due to a call by the government for cautiousness as sanctions continue to mount against Ukraine.

Asia’s largest oil refiner has halted a potential half-billion dollar investment in a gas chemical facility and venture to sell Russian gas to China. This highlights the dangers, even for Russia’s most important diplomatic partner.

Beijing has consistently voiced its opposition to sanctions. Beijing insists it will continue normal economic and commercial exchanges with Russia. However, Beijing refused to condemn Moscow’s actions in Ukraine nor call them an invasion.

However, behind the scenes the government is concerned about Chinese companies violating sanctions. It is urging companies to be cautious with their investments in Russia as it is its second largest oil supplier and third largest gas provider.

Three Chinese state energy giants, Sinopec and China National Petroleum Corp (CNPC), have been assessing how sanctions will affect their multi-billion dollar Russian investments since Russia entered a month earlier, according to sources who are familiar with the matter.

An executive from a state-owned oil company stated that companies will follow Beijing’s foreign policies in the current crisis. Companies are not allowed to make any new investments.

According to two people familiar with the situation, the Ministry of Foreign Affairs called the officials of three of the energy companies for a review of their relations with Russian partners. The ministry advised them to not make any sudden purchases of Russian assets, according to one source.

According to sources, the task force was set up by companies and is working on plans for contingency in case of business disruptions.

Due to the sensitive nature of the issue, the sources requested not to be identified. Sinopec, and other companies did not respond to our request.

According to the ministry, China does not need to inform other parties “whether internal meetings are taking place or not”.

China is an independent, large country. “We have the right of normal economic cooperation in different fields with countries throughout the world,” the statement was faxed.

U.S. President Joe Biden declared on Thursday China’s economic future was tied to the West after warning Xi Jinping about Beijing’s possible regret of supporting Russia’s invasion Ukraine.

Shell (LON) and BP(NYSE:), global oil companies, and Equinor Norway pledged that they would end all Russian operations soon after Russia invaded on February 24, 2014. Moscow states that its “special operations” is not designed to invade territory, but rather to degrade Ukraine’s military and to capture the dangerous nationalists it considers to be enemies.

Talks on Hold

According to one source, Sinopec has reportedly stopped discussions about investing up to $500 million into the Russian new gas-chemical plant.

Sibur is Russia’s most important petrochemical manufacturer. They plan to collaborate on a similar project as the $10 billion Amur Gas Chemical Complex (East Siberia), 40% owned by Sinopec and 60 percent by Sibur. It will be completed in 2024.

Source said that the companies were trying to duplicate the Amur venture and wanted another one. They are currently in the process of selecting a site.

Sinopec had to stop after it became clear that Gennady Tichenko, Sibur’s minority shareholder, and member of its board was being sanctioned by Western countries. Last month, the European Union and Britain imposed sanctions against Timchenko. He is a longtime friend of Russian President Vladimir Putin and was also associated with other billionaires who have ties to Putin.

The spokesperson for Timchenko declined to speak on the subject of sanctions.

According to two sources, the Amur project is facing funding problems as well. Sanctions threaten to stop financing from major lenders like Russia’s Sberbank, which is controlled by Russia, and European credit institutions.

It’s an investment that is already in place. A Beijing-based executive in the industry with direct knowledge said that Sinopec was trying to solve the financing difficulties.

Sibur didn’t comment on the suspension but it said that they continue to collaborate with Sinopec. Sibur stated that both companies will continue to cooperate in the development of Amur’s plant.

Sinopec participates actively in project management issues, such as equipment supplies and work with contractors. Sibur shared that they are working together on issues related to project financing.

According to one person with direct knowledge, Sinopec has also stopped talks with Novatek regarding the gas marketing project. This was due to concerns that Novatek’s shareholder, Sberbank is currently on the U.S. sanctions lists.

On Monday, Timchenko was forced to resign from Novatek’s board in protest of the Sanctions. Novatek refused to comment.

Novatek is Russia’s most important independent producer of gas. In 2019, Novatek entered into an agreement with Sinopec & Gazprombank in order to establish a joint venture that will market and distribute liquefied natural gas in China.

Beyond Sinopec’s Amur planned plant, CNPC, and CNOOC are among Russia’s latest investors in Russia’s natural-gas sector. They took minority stakes at major Russian export projects Arctic LNG 2 and Yamal LNG, both in 2019.