Under international agreements, North Korea isn’t supposed to be able to export its coal. That its smugglers have been doing so right under China’s nose is one reason Beijing is in focus as sanctions bear down on Russia.

       Chinese companies have repeatedly dodged restrictions on trading with countries like North Korea, Iran and Venezuela, according to sanctions investigators from United Nations panels of experts, the U.S. Treasury Department’s Office of Foreign Assets Control and other monitors. A UN panel’s report six months ago, for example, documented how North Korea-connected vessels illegally made 41 coal transfers in about four months just offshore from China’s busiest port.

       Western actions to sever many of Russia’s ties to the global economy as punishment for its war on Ukraine could be less effective if China offers Moscow access to what some see as the bazaar of choice for rogue nations.

       Sanctions-busting on Russia’s behalf would be large-scale, requiring forthright state involvement such as deals with big government-run firms or the application of laws designed to undermine foreign sanctions. It is typically small-time traders who get involved with North Korea, monitors say.

       As the world’s second-biggest economy and its top trading nation, China has the wherewithal to set its own course on sanctions, and its government is reflexively distrustful of U.S.-led rule making. The size and fragmentation of China’s market, with over 5,800 merchant ships, seven of the world’s 10 busiest shipping ports and tens of thousands of bank branches can help hide nefarious activity.

       China is also at the cutting edge of developing technology designed as alternatives to Western-backed systems, like a bank money-transfer service modeled on the Swift network and a digital version of its currency, as well as undersea- and satellite-telecommunication links it controls.

       Sanctions monitors say evidence suggests Chinese officials sometimes turn a blind eye to evasion. How else, they ask, do North Korean smugglers manage to dodge controls in one of the world’s most efficient surveillance states.

       Business licenses, satellite photographs and other documentation in the U.N. panel’s 261-page report support its conclusions that North Korean-flagged and -controlled vessels in waters near the Chinese port of Ningbo between February and May last year illegally unloaded 364,000 metric tons of their nation’s coal onto other ships, including some sailing under Chinese flags.

       “China has always earnestly implemented the Security Council resolutions on North Korea and fulfilled its due international obligations," its Ministry of Foreign Affairs said in a statement. It said China had responded to the U.N. panel in a responsible manner and drew attention to the group’s references to the negative impact of sanctions on the livelihoods of North Koreans. The U.N. report quotes China’s government as saying the suspect vessels hadn’t called on its ports and it notes sanctions would continue to have negative humanitarian consequences.

       China opposes economic sanctions in part because its officials and companies are frequently targeted, from the Tiananmen Square crackdown in 1989 to U.S.-led efforts to impede Huawei Technologies Co. Research by the Center for a New American Security, a Washington-based think tank, shows that 70 of the 765 sanction measures adopted by the Biden administration during 2021, including reissues of Trump-era sanctions, had a China dimension.

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       “If they don’t believe the sanctions are legal and legitimate, there’s no incentive for them to enforce them," said Jason Bartlett, who monitors sanctions for CNAS.

       While China wants to register its distaste for sanctions, Beijing also benefits when North Korea earns cash to stave off a collapse—a crisis China wouldn’t want on its border—while deals with Iran and Venezuela provide China much-needed crude oil, he said.

       Trading arrangements aren’t the only tool Beijing has to undermine a proliferation of Western sanctions.

       To challenge Western sanctions, Beijing is also baring its teeth against what it calls interference and long-arm jurisdiction. Former U.S. Secretary of State Mike Pompeo was sanctioned by Beijing last year along with think tanks and companies that China’s government says interfered in its domestic affairs.

       Corporate executives who deal with China await nervously a time when Beijing deploys a bevy of new but so-far-unused regulations analysts call antisanction sanction laws. The regulations give Beijing authority to punish individuals and companies for adhering to a foreign government order, such as a technology producer that halts exports to a sanctioned buyer.

       Such rules could come in handy if Chinese companies get caught in the crossfire over Russian sanctions.

       “We’re just waiting for the moment where some foreign company…gets stuck in the middle of this sanctions antisanctions regime and is put in a place where it’s breaking either Chinese or U.S. law," said Andrew Polk, co-founder of research firm Trivium China.

       Russia and China are neighbors with nearly $150 billion in trade, and both are led by autocratic leaders facing U.S. opposition to their governance policies. Twenty days before Russia’s invasion, Chinese President Xi Jinping and Russian President Vladimir Putin signed a statement that blasted as “power politics…bullying, unilateral sanctions, and extraterritorial application of jurisdiction, as well as the abuse of export control policies."

       Asked about sanctions being applied to Moscow, Beijing officials have repeated their opposition.

       “China and Russia will continue to conduct normal trade cooperation in the spirit of mutual respect, equality and mutual benefit," Foreign Ministry spokesman Wang Wenbin said. The country’s top banking regulator asserted China “will not participate in such sanctions."

       Though they don’t carry an international imprimatur like U.N. sanctions against North Korea, the scope of measures aimed at Moscow by the U.S. and Western allies is unprecedented for a major country.

       The U.S. and other nations have frozen assets controlled by Mr. Putin, some of his top aides, leading tycoons and companies, as well as government agencies; blocked Russia’s biggest commercial banks from the global financial system; and forbidden trade in key goods and services.

       China faces a different calculus in this crisis. Russia isn’t North Korea, an economy so small and isolated that clandestine one-off shipments offer a material benefit.

       Russia is a Group of 20 member and the world’s 11th biggest economy. Meaningfully dulling the pain of Western sanctions would require cooperation by banks, shippers and other business groups that in China are generally government-controlled. Each entity taking part risks being sanctioned itself.

       “I predict it’ll be deeply effective, including with respect to Chinese companies," said Ryan Fayhee, a partner at Washington law firm Hughes Hubbard & Reed LLP and a former sanctions expert at the Justice Department. Even if individual Chinese players may be willing to forge workarounds to the restrictions on Russia, Mr. Fayhee said it isn’t clear their bankers, insurers, shippers and other counterparties would go along.

       “It’s very difficult to do business alone," he said.

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