Chinese drone giant DJI suspends business in Russia, Ukraine

Shenzhen-based firm says it is “reassessing compliance requirements” following controversy over role in Ukraine war.

DJI office building.
Chinese drone maker DJI has halted business in Russia and Ukraine [File: Carlos Garcia Rawlins/Reutrers]

DJI, the world’s largest drone manufacturer, has announced it is temporarily halting operations in Russia and Ukraine, in a rare example of a Chinese firm suspending business in response to the war in Ukraine.

The Shenzhen-headquartered company said on Wednesday it would suspend its business in the two countries while “internally reassessing compliance requirements in various jurisdictions”.

DJI, which was founded in Hong Kong in 2006 and is not publicly listed, added it was “engaging with customers, partners and other stakeholders regarding the temporary suspension,” according to a company statement.

Adam Lisberg, DJI’s director of corporate communications for North America, told Al Jazeera the company had taken the action “not to make a statement about any country, but to make a statement about our principles”.

“DJI abhors any use of our drones to cause harm, and we are temporarily suspending sales in these countries in order to help ensure no one uses our drones in combat,” Lisberg said.

DJI’s announcement comes after the company last month denied claims it had been leaking Ukrainian military information to Russia, saying that a German retailer that pulled its products from the shelves had been “subject to what appeared to be a coordinated campaign making false allegations”.

DJI had last week reiterated that its products were intended for purely civilian use, saying its partners agree not to sell its products to “customers who clearly plan to use them for military purposes, or help modify our products for military use”.

“We will never accept any use of our products to cause harm, and we will continue striving to improve the world with our work,” the company said in a statement.

Ukraine’s military has used DJI drones extensively for reconnaissance during the conflict, while battlefield pictures and footage suggest Russia has also deployed drones manufactured by the company.

DJI drones have been used by both sides in the Ukraine war [File: Edgar Su/Reuters]

Charles Rollet, an analyst at surveillance research group IPVM, said DJI’s move likely reflects the consumer pressure the firm has faced in Europe over claims it has been assisting Moscow’s war effort.

“DJI is a Chinese state-backed company but it wants to be seen as a neutral global manufacturer so the Russian invasion has brought unprecedented scrutiny against it and I think DJI is incredibly concerned about being perceived as an agent of Beijing,” Rollet, who has studied DJI’s links to several Chinese state investment bodies, told Al Jazeera.

“But they’re also doing this without concretely supporting Ukraine either. So in that way, they are in line with the Chinese government’s stance as well. And if you look at their statement, it’s very terse. It used the word ‘hostilities’ rather than war or invasion.”

Rollet said DJI’s announcement could provide an example to other Chinese companies concerned about the reputational cost of dealing with Russia.

“I think other firms may follow and they will probably use this template, instead of condemning the invasion and pulling out of Russia only, they will probably condemn ‘hostilities’ generically despite Russia being the clear aggressor and pull out of both markets,” he said.

James Char, an expert in Chinese civil-military relations at the S. Rajaratnam School of International Studies in Singapore, described DJI’s move as a “pragmatic decision” driven by commercial concerns.

“By disassociating itself with Russia’s illegitimate invasion of Ukraine and pulling out of the Russian market, DJI is not unlike other western companies in making sure that its reputation and commercial interests in other parts of the world will not suffer blowback,” Char told Al Jazeera.

While hundreds of firms have suspended or scaled back operations in Russia amid Western-led sanctions and censure, leading Chinese companies including Alibaba, Didi, Huawei, Lenovo and Tencent have continued to do business in the country. Three China-based banks – the Bank of China, ICBC and the Asian Infrastructure Investment Bank – are the only Chinese entities among the 466 firms that have distanced themselves from the country since the February 24 invasion, according to a recent analysis by Investment Monitor.

Last week, Russian media outlet RBC reported that China’s UnionPay had also stopped cooperating with major Russian banks out of concern it could be pinpointed by secondary sanctions.

China-Russia ties

Beijing has declined to explicitly condemn Moscow’s invasion, opposed sanctions against Russia, and expressed sympathy for Russian President Vladimir Putin’s claimed security concerns, while also calling for “maximum restraint” and peace talks between the sides.

While Chinese President Xi Jinping and Putin have forged close ties and declared their countries’ friendship to have “no limits”, analysts say Beijing remains wary of openly violating sanctions to assist its strategic partner.

Alicia García Herrero, chief Asia Pacific economist at Natixis in Hong Kong, said DJI’s decision to suspend business in Russia may reflect concerns about falling afoul of secondary sanctions focusing on dual-use technology, which could potentially cover the use of components such as semiconductors from South Korea or Taiwan, or transactions carried out in US dollars.

DJI is itself under US sanctions, after Washington accused the firm of posing national security risks and supplying drones used to monitor ethnic minority Uyghurs in China’s Xinjiang region.

“There are all these possibilities that make any export of drones to Russia a big risk,” García Herrero told Al Jazeera, adding that China “can’t afford” to run afoul of sanctions at a time when its economy is slowing down and foreign investors are pulling out in large numbers.

“And actually, out of the different sanctions-related risks, I would argue this is really the largest. Exports from China to Russia of fusion military-civil technology. That’s the easiest way to catch them.”

Benjamin Kostrzewa, a foreign legal consultant at Hogan Lovells in Hong Kong, said that while he could not comment on DJI’s decision, sanctions and export controls are a significant concern for all Chinese companies.

“Of particular concern are secondary sanctions, which do not require a US nexus,” Kostrzewa told Al Jazeera.

“Given the number of sanctioned parties in Russia, as well as the number of Russian banks that are sanctioned, it makes it more difficult for any company to do business there,” he added.

Source: Al Jazeera