Sweeping Indictment Shows Role of China’s Chemical Firms in Fentanyl Crisis

The Washington Post

12:33 JST, April 28, 2023

The sales team at the Chinese chemical company offered drug cartel operatives more than the key ingredients needed to make deadly fentanyl bound for the United States.

In exchange for payments in cryptocurrency, Wuhan Shuokang Biological Technology dispensed technical assistance and advice to Mexico’s notorious Sinaloa cartel, including which chemicals could be combined most effectively to make the synthetic opioid, and how to economize on “starting material,” according to a U.S. indictment unsealed April 14.

U.S. prosecutors say the Chinese company used its professional-looking website to maintain a veneer of legitimacy, but its brokers supplied chemicals and illicit substances to the cartel, helping it flood the United States with the cheap fentanyl that is killing record numbers of Americans.

Investigators describe the indictment as among the most significant attempts to link Chinese chemical companies to the Sinaloa gangsters who dominate the fentanyl trade. But if previous U.S. criminal cases against suppliers are any indication, there is little chance the Chinese suspects will be prosecuted.

Amid worsening geopolitical tensions with Washington, China is increasingly unwilling to crack down on illicit chemical shipments, experts say. “It’s important to realize that this is just a gnat on the windshield on the Chinese side of things,” said Jonathan P. Caulkins, a Carnegie Mellon University professor who researches the criminal drug trade, noting that the sale of fentanyl precursors make up only a “tiny, tiny, tiny” amount of the chemical industry’s global business.

The 23 suspects named in the indictment include four Chinese nationals, as well as Mexican cartel bosses, offering a rare window into the global supply network that is fueling the fentanyl crisis devastating communities and families across the United States. More than 70,000 Americans are dying annually from the synthetic opioid, which is up to 50 times more potent than heroin.

The two key nations in the chain – China and Mexico – have long downplayed their roles and blamed U.S. users for the demand for illegal drugs. Mexico’s president insists his country is a transit point for fentanyl, not a producer, while a Chinese official recently declared, “There is no such thing as fentanyl trafficking between China and Mexico.”

The charges unsealed in the Southern District of New York dispute those claims, describing a chemical pipeline from China’s Wuhan province that passes through ports in Germany and the United States before reaching cartel “cooks” working in mountain hideouts in northern Mexico.

The indictment is important in exposing Chinese companies’ involvement in providing precursor chemicals, rebutting the country’s claims that it has no evidence the materials are going to Mexican cartels, said Vanda Felbab-Brown, who studies the international opioid trade for the Brookings Institution, a D.C.-based think tank.

But without China’s willingness to clamp down on the country’s chemical industry, the indictment’s impact is limited, she said. At best, Chinese companies identified in the documents may change their names or websites, and defendants may avoid traveling to countries that have extradition treaties with the United States.

“I don’t think there will be broader deterrence effects across the Chinese industry,” Felbab-Brown said in an interview.

The Biden administration has responded to fentanyl’s growing death toll with greater urgency in recent months, boosting interdiction efforts along the southern border while pressuring the Mexican government to crack down on its cartels.

Not long ago, China-U.S.-collaboration on the illegal drug trade, while never extensive, appeared to be paying off. In 2019, Chinese authorities – who were tipped off by the Drug Enforcement Administration – convicted a ring of fentanyl suppliers from the northern city of Xingtai. U.S. and Chinese officials even held a joint news conference after nine men were sentenced.

But even that was calculated, said Felbab-Brown. “[China] only engaged in counter narcotics when it thought it would lead to changes in its geostrategic relationship,” she said.

That year, under pressure from the Trump administration, China also agreed to sweeping internal restrictions on “all fentanyl-related” substances, while blaming the United States for its culture of drug use. But precursor chemicals still flowed to Mexican cartels, allowing them to dominate the illicit fentanyl market.

In August 2020, China announced it was suspending cooperation with the United States on battling illegal narcotics over then-U.S. House Speaker Nancy Pelosi’s visit to Taiwan. But by then, China had already largely withdrawn from such efforts as a result of growing trade disputes, disagreements over human rights, in addition to tensions over the status of Taiwan.

“They don’t work with us at all any more,” said House Rep. David Trone (D-Md.) who co-chaired the U.S. Commission on Combating Synthetic Opioid Trafficking. “They know who [the precursor dealers] are. We know who they are. Yet they don’t do anything about it.”

A Chinese Foreign Ministry spokesperson said recently that the country had been “trying to help the U.S. as best it can,” but the recent indictments “seriously undermine” such efforts, Reuters reported.

Still, researchers have doubted how easy it would be to cut off precursor shipments from China, which make up just a small fraction of the country’s massive and poorly regulated chemical and pharmaceutical industries. Experts say small and mid-level players in China are the key actors exporting precursor chemicals, which thanks to advances in synthetic chemistry can be easily manufactured into fentanyl by the cartels.

A study last year estimated that the amount of fentanyl consumed in 2021 was only in the single-digit metric tons, underscoring the potency of the drug and the ease of smuggling it into the United States.

“There’s no universal agreement on whether the Chinese could stop this even if they wanted to,” Caulkins said.

And even if China were to act, other countries with large chemical industries, such as India, are well positioned to supply precursors and illegal synthetic drugs to criminal organizations, say experts.

The White House’s senior official overseeing drug control policy said Tuesday that China needs to strengthen regulations that would allow it to know who is actually purchasing the chemicals. “China has a choice to make. It can be part of the global community to demonstrate its leadership on the global stage on this issue, or it can do nothing,” said Rahul Gupta, director of the Office of National Drug Control Policy.

Previous U.S. indictments of Chinese suppliers have had minimal effect on the fentanyl trade and resulted in few prosecutions.

In August 2018, the Justice Department secured an indictment against a Shanghai father and son alleged to have exported deadly fentanyl analogues and other drugs to 25 countries and 37 states. Federal prosecutors alleged the drugs led to the overdose deaths of two people in Ohio. But the men, Fujing Zheng and his father, Guanghua Zheng, labeled “significant” narcotics traffickers under the Foreign Narcotics Kingpin Designation Act, remain outside of the reach of U.S. law, presumably in China.

More recently, in December 2021, the Treasury Department issued sanctions against four Chinese chemical companies for trafficking in synthetic drugs, including ones believed to have sent fentanyl precursors to Mexican cartels. One suspect, Chuen Fat Yip, remains a fugitive despite a $5 million reward for information leading to his arrest.

China remains the “source of the vast majority” of precursor chemicals used by the Sinaloa cartel to make fentanyl, according to the New York indictment. It names several leaders of the “Chapitos” network, a faction of the Sinaloa drug cartel, including alleged kingpin Ovidio Guzmán Lopez, who was arrested by Mexican security forces in January, and three brothers, who remain fugitives. They are the sons of former Sinaloa boss Joaquín “El Chapo” Guzmán, who is serving life in prison in the United States.

The large Chinese chemical companies manufacturing fentanyl precursors avoid scrutiny by selling to middlemen inside China, according to the indictment. Two of the defendants are Kun Jiang, owner of Suzhou Xiaoli Pharmatech Co., and Huatao Yao, owner of Wuhan Shuokang Biological Technology, or SK Biotech. Both were charged, along with Yao’s associates, Yaqin Wu and Yonghao Wu.

The Treasury Department also brought sanctions against the companies and the defendants, barring anyone in the United States from doing business with them, measures that may be of limited practical value. Chinese chemical companies “are nimble” and often change their names to avoid law enforcement scrutiny, the indictment notes.

Repeated calls to phone numbers listed on SK Biotech’s website went unanswered. Someone who answered at Xiaoli hung up on a reporter. Contact numbers for employees have been scrubbed from the website in recent days.

Both companies sold fentanyl precursors through a Guatemala-based broker, Ana Gabriela Rubio Zea, who bragged that the cartel operation was “the biggest in Mexico so we can purchase a lot,” according to the indictment. Rubio Zea was also indicted, and U.S. authorities offered up to $1 million for information leading to her arrest or conviction.

Rubio Zea arranged for the chemicals to be disguised – sometimes in food containers or packaged alongside legal chemicals – to avoid detection by law enforcement, the indictment said. She also relied on “corruption at the border” to get the chemicals into Mexico, prosecutors said.

One alleged broker, Yaqin Wu, also acknowledged the need to “carefully disguise” shipments in a message to a Sinaloa operative, according to the indictment.

Not all of the shipments went straight to Mexico, illustrating the circuitous routes sometimes taken.

In August 2020, the DEA seized three packages of fentanyl precursor chemicals, totaling 53 kilos, aboard a cargo plane that flew from Hong Kong to Anchorage. According to the indictment, the chemicals belonged to cartel members and were bound for Mexico City and then Sinaloa.

The indictment also reveals that SK Biotech sent at least two shipments to New York City, one in September 2022, and another this past March, although Yao noted “he more typically sent chemicals to Mexico through Germany.” The DEA seized both packages in New York City.