(Bloomberg) -- The US is urging the European Union and other allies to sanction a Chinese satellite company for allegedly supporting Russia’s military operations in Ukraine, according to people familiar with the matter.

Spacety China was hit with US sanctions in January over claims it provided satellite images of locations in Ukraine that enabled the combat operations of Wagner Group mercenaries, led by a longtime ally of Russian President Vladimir Putin. The imagery was sent to Russian technology firm Terra Tech before being transferred to the mercenary group, according to the US filing. 

While the EU has aligned in coordination many of its Russia-related sanctions with the US, two months later it has yet to sanction the Chinese satellite firm.

“If a company is not currently sanctioned, it means either there is no willingness, no need or not enough evidence for the EU’s 27 member states to agree to sanction a person or an entity,” said Peter Stano, a spokesman for the EU’s foreign policy arm. He added that if a company isn’t sanctioned today, that doesn’t mean it couldn’t be listed in the future. 

Stano said that EU sanctions need to have open-source evidence so that anyone hit with penalties could challenge them in court. It’s not clear whether the evidence the US relied on for its decision is open to the public. 

The reason that Spacety has so far escaped sanctions is more likely due to technical or legal reasons, rather than due to a lack of political will, one of the people said.

Spacety didn’t immediately reply to a request for comment.

Real Time

A lot of satellite imagery is available to the public for free but the so-called synthetic aperture radar satellite imagery that Spacety allegedly transferred to Russia allows for areas of interest to be monitored at a very high resolution — and potentially in real time — giving forces the means to collect intelligence or pinpoint targets.

“Satellite images are a key part of building any intelligence picture,” said Joseph Dempsey, a research associate for defense and military analysis at the International Institute for Strategic Studies think tank. While it’s unclear how forces in Russia used the imagery, it would factor into their understanding of the environment they’re going into, it could help identify targets, like air bases, they want to take out and help assess any damage, he said.

“The real advantage of synthetic aperture radar is essentially you’re not reliant on conditions, on the weather or the time of day,” Dempsey said, adding it allows for visibility in the dark and through cloud cover, an important element in Ukraine during the winter.

It’s unclear to what extent the Chinese government was aware of the alleged transfers of satellite imagery by Spacety, also known as Changsha Tianyi Space Science and Technology Research Institute Co. Ltd. Asked about the US sanctions on Spacety at a press conference on March 1, China’s Foreign Ministry spokesperson Mao Ning said, “China is firmly opposed to US illegal unilateral sanctions,” according to a transcript of the remarks.  

Watching Beijing

The US and NATO have previously warned that China was considering sending lethal support to Russia but there have been no signs of direct military support from Beijing to Moscow, one of the people familiar with the matter said. Allies are confident they would be able to see any movement of significant military equipment from China, the person said. Chinese companies have, however, provided Russia with chips and other components. 

At a news conference last week, NATO Secretary General Jens Stoltenberg said allies still haven’t seen any proof China is delivering lethal weapons to Russia but have seen signs Russia has requested them and that Beijing has considered the demands. The US has also warned companies in China they would be punished if they help Russia get around sanctions and continue to do business with Russia. 

Read More: US Targets Chinese Company in Broader Russia Sanctions Push

As part of the US measures in January, the US also sanctioned Spacety’s Luxembourg entity “for being owned or controlled by, or for having acted or purported to act for or on behalf of, directly or indirectly, Spacety China.” Spacety Luxembourg issued a statement at the time saying it had no ties with Russia after international sanctions were imposed, nor had any commercial relationship or deal with the Wagner Group.

Adding the firm to the EU’s sanctions list would see its assets in the bloc frozen and it would essentially be barred from doing business in Europe.

A spokesperson for Luxembourg’s foreign ministry said the government is in close contact with the US following the sanctions on Spacety. The spokesperson said the government has taken steps to prevent any direct or indirect support by Spacety Luxembourg to the Russian war effort.

As part of those steps, Luxembourg foreign minister Jean Asselborn and economy minister Franz Fayot issued a formal accusation to the state prosecutor of a possible violation by Spacety Luxembourg of EU restrictive measures and export controls laws, said the spokesperson. The business incubator Technoport SA, which counts the government of Luxembourg as a shareholder, has also terminated a collaboration contract it had with Spacety Luxembourg, the spokesperson added.

The US estimated at the time the sanctions were introduced that the Wagner Group had about 50,000 personnel deployed in Ukraine, with thousands of convicts recruited from prisons to fight in the war. Still, Wagner Group forces so far have failed to take their main target — the Ukrainian city of Bakhmut — despite months of trying and staggering losses. The mercenary group is now struggling with a manpower and ammunition shortage.

With the exception of measures targeting Iranian individuals and entities for supplying Russia with drones, the EU has mostly shied away from sanctioning third-country firms, in part because it lacks a clear legal basis to do so. The EU’s next package of sanctions is expected to focus on closing loopholes and strengthening the bloc’s ability to tackle the circumvention of sanctions.

White House National Security Council spokesperson Adrienne Watson said: “Just in the last month, G-7 members have imposed a number of sanctions on third-country actors who have evaded our sanctions in an attempt to support Putin’s war. We applaud the EU’s efforts in this space and will continue to work closely with our allies and partners to continue aligning our measures to counter circumvention.”

--With assistance from Stephanie Bodoni.

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