Views from the Ground: The Sino-Russian Relationship

Editor’s Note: Earlier this month, Chinese President Xi Jinping and Russian President Vladimir Putin met for a two-day state visit in Russia. This was the third such meeting between the two leaders this year, significantly timed for the eve of the G20 summit in Hamburg, where the world’s biggest economies hashed out free trade and globalization, international security threats, and climate change. Ahead of the summit, Xi declared that China and Russia were “山水相连的好邻居、守望相助的好朋友、精诚协作的好伙伴 (good neighbors connected like mountains to water, good friends watching over and defending one another, and good partners cooperating with sincerity).” In a new series from YCW, we surveyed three of our global chapters for their views on the Sino-Russian relationship—and what may have been left out of public statements.

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View from YCW Berlin

On April 24, 2017, YCW Berlin hosted an event to discuss Russia’s reputed pivot to Asia featuring remarks from Gustav Gressel, Senior Policy Fellow at the European Council on Foreign Relations (ECFR), and Thomas Eder, Research Associate at Mercator Institute for China Studies (MERICS, a YCW Partner). Both speakers agreed that Moscow’s pivot to Asia is progressing slowly and has thus far failed to benefit Russia. Moscow initially publicized a pivot to Asia in its 2010 “Turn to the East” announcement, but Western sanctions following Russia’s 2014 annexation of Crimea and subsequent conflict in Ukraine have accelerated Russia’s desire to strengthen its ties with Asian countries.

Russia has been trying to strike a delicate economic balance between the East and the West: It wants to replace the West as a major market for Russian exports and source of capital and investment, but it has also been trying to diversify trade with Asian countries to become less dependent on China. Moscow tried to play a more proactive role in ASEAN and develop relations with other Asian powers, including India, Japan, and Vietnam. However, as Gressel and Eder pointed out, Moscow has so far only managed to strengthen political and economic ties with its traditional and largest partner in Asia: China.

Russia’s frustrated efforts

Even though Sino-Russian cooperation falls short of a “strategic partnership” due to long-standing mutual suspicion, relations have nevertheless been strengthening in recent years. Both countries have agreed on a natural gas deal and a related pipeline project, so far the only Russian pipeline venture in Asia. More than 70 percent of Russian oil shipped through Vladivostok is sold to China. Furthermore, China and Russia pledged to pursue joint development projects between the Eurasian Economic Union (EEU) and China’s “New Silk Road.” On security issues, Russia supported China’s rejection of the 2016 South China Sea ruling by the Permanent Court of Arbitration, and both countries conducted joint military exercises in the South China Sea last year.

Even though Sino-Russian cooperation falls short of a “strategic partnership,” due to long-standing mutual suspicion, relations have nevertheless been strengthening in recent years.

Gressel and Eder agreed that Russia has not significantly expanded its relationship with China. It has also failed to spread foreign trade to other Asian countries. This is partly due to the fact that Russia’s economic strength is still restricted to its traditional sectors: energy production, gas exports, and the arms trade. Apart from trade relations, Moscow has not been able to form meaningful political alliances in Asia. Therefore, our speakers agreed that despite Russia’s efforts to reach out to other Asian powers, Moscow appears to lack a coherent strategy for the region. Russia has only pivoted further to China, not to Asia as a whole.

— Angela Stanzel

View from YCW London

Ahead of Xi’s state visit to Moscow this month, senior officials in London were considering what closer—or indeed more distant—relations between China and Russia might mean for the UK.

YCW London recently considered the trilateral relationship between the U.S., China, and Russia with James Miles, China Editor at The Economist, and Dr. Natasha Kuhrt, Professor of War Studies at King’s College London. The discussion focused on two aspects: the broader context of the U.S.-China relationship, which remains Beijing’s dominant preoccupation; and Russia’s pivot to East Asia.

In the U.S.-China context, questions around currency manipulation, a potential trade war, adherence to the “One China” policy and security questions dominated with a high potential for miscalculation in the trilateral relationship. Both Presidents Xi and Trump are strong leaders with dominant personalities, creating the potential for a major clash with global ramifications.

We then discussed Russia’s pivot to East Asia in the context of Moscow’s relations with Washington. Russia continues to balance its complex and important relationship with the U.S. with its fears of long-term Chinese economic dominance, while also considering to what extent Sino-Russian relations are built on a shared agenda. Although the relationship between Beijing and Moscow is portrayed as one of “eternal friendship” in the media, the story may be far more complicated than it appears.

Russia continues to balance its complex and important relationship with the U.S. with its fears of long-term Chinese economic dominance, while also considering to what extent Sino-Russian relations are built on a shared agenda.

There was a feeling among the YCW London membership that the deployment of the Terminal High Altitude Area Defense (THAAD) anti-ballistic missile system to South Korea, in the context of an increasingly belligerent Pyongyang, would complicate relations between Moscow and Beijing. Furthermore, China’s pursuit of hegemony in Central Asia—Russia’s so-called “backyard”—through the Belt and Road Initiative (BRI) would also be a key point of contention.

Greater Sino-Russian cooperation

From a UK perspective, Sino-Russian cooperation raises more questions than answers. The UK is still a focus for many Chinese and Russia investments and interests, and Brexit has heavily impacted investor confidence. Given the recent changes, it is hard to definitively state how greater alignment between Russia and China will impact the UK’s long-term interests.

Prime Minister Theresa May has departed from her predecessor’s embrace of China, adopting a more protectionist stance on Chinese investment, particularly in regard to critical infrastructure projects. Foreign Secretary Boris Johnson has expressed a desire to normalize relations between the UK and Russia.

Allegations of Russian meddling in U.S. and European elections, coupled with the recent NHS malware attack, raises fears of cyber espionage should there be greater cooperation between Beijing and Moscow. Certainly, on the issue of data privacy, the Russians are looking at how China’s Internet censorship guidelines—which could mean Russia moves more towards an even more authoritarian system of governance.

As well, closer collaboration between China and Russia could mean the U.S. tightens its own relationship with the UK—which may have the knock-on effect of hampering the potential for Chinese and Russians investments in the UK.

Sino-Russia competition means greater opportunities for the UK

The Sino-Russian relationship is generally regarded in the UK as more of an “axis of convenience,” and greater competition between the two may positively impact the UK. Due to the restraints on Russian foreign policy in Central and East Asia as a result of One Belt One Road (OBOR), Moscow is likely to embrace opportunities to work with the UK in the long-term seriously, particularly in the maritime arena. The UK offers a number of advantages in infrastructure, energy, and financing. In the post-Brexit era, London will have more geopolitical flexibility in brokering win-win situations.

Whatever happens, the UK will be also be keen to maintain stability given the volatility around Brexit. Despite the hopes of many in Whitehall, any potential of a quadrangular partnership between the U.S., UK, Russia, and China is increasingly unlikely.

View from YCW Brussels

On June 6, 2017, YCW Brussels hosted Michal Makocki, Senior Associate Analyst at the European Union Institute for Security Studies (EUISS), to discuss Sino-Russian relations. Makocki presented a paper he co-authored with Nicu Popescu, Senior Associate Analyst at EUISS, based on factors including military, politics, trade, finance, and infrastructure. Their analysis concludes that the Sino-Russian relationship may seems strong on the surface, but has not progressed as well as anticipated, especially for Russia. Russia has relied on China to become one of its primary trading partners in an effort to reduce reliance on the West, but just barely registers among China’s top 15 export markets.

Behind the headlines lie geopolitical concerns

During recent years, Beijing and Moscow have increased their rhetoric about the importance and strength of their relationship, labelling it an “overall comprehensive strategic” partnership in 2014. This translated into a higher number of Track I meetings, joint military exercises and support for key domestic issues and foreign policy goals (for example, coordination on Ukraine, the UN Security Council and South China Sea). Much has been said about the good chemistry between Xi and Putin—the relaxed atmosphere of their meetings is itself an indicator of the improving partnership.

Despite the headlines, the reality is quite different. China was reluctant to take a stance on Crimea, opting to quietly support Russia (especially in view of a possible future “reunification” of Taiwan) while keeping contact with Ukraine, particularly on trade matters. China has reportedly built infrastructure between Russia and Ukraine, but Beijing publicly denied those reports.

China was reluctant to take a stance on Crimea, opting to quietly support Russia (especially in view of a possible future “reunification” of Taiwan) while keeping contact with Ukraine, particularly on trade matters.

In the South China Sea, Russia supported China’s opposition to resolving conflicts using an international framework—like China, it prefers bilateral solutions over multilateral or international ones. Despite lending its support to this case, Moscow does not want to get involved in future arbitration cases. Russia was explicit in its public statement one year ago, following The Hague’s Permanent Court of Arbitration ruling on South China Sea claims, that it does not side with any of the claimants and opposed extra-regional involvement.

Makocki pointed out that a shared dislike of American hegemony in the international order has brought China and Russia closer together—mutual appreciation is a much less important factor.

Economic aspect of the relationship

Despite announcements of increased cooperation, trade between the two countries has dropped in the past years, mainly due to the recession in Russia. According to Makocki and Popescu’s research, although China’s foreign direct investment (FDI) into Russia has doubled in recent years, that amount makes up only 5 percent of China’s total FDI. The remainder of FDI into Russia still comes from Western sources. Even though China was the largest lender to Russia as of last year, that amount is only equal to how much Luxembourg lent Russia in 2013.

When Western sanctions hit Russia in 2014, China and Russia sealed—and announced with great fanfare—the Gazprom mega-deal. This generated great concern in Europe as it raised doubts over the EU’s capability to ensure sufficient gas supplies. There has been little progress in the three years since the deal was signed, with only 200 km of pipeline built. Despite the tense political situation, the pipeline between Russia and Europe is actually proceeding more quickly than the Chinese one. This demonstrates that for Russia, the European energy market remains paramount. In this context, the 2014 Gazprom agreement was more of a message to the West than a real commitment to China.

Central Asia: Whose backyard is it?

Central Asia remains a potential source of conflict between Russia and China. The region is traditionally seen as Russia’s “backyard,” but China has recent increased its presence through trade and OBOR, in effect, forcing Russia to accept its increased presence in Central Asia and highlighting common points between China’s OBOR and Russia’s Eurasia Economic Union. While China has not traditionally shown interest in assuming Russia’s security and defense role in Central Asia, it recently signed such agreements with Kazakhstan. As a result, Central Asia could become an area of increasing tension between China and Russia.

Implications for the EU

Despite the EU’s issues with Russia, the relationship’s 2014 nadir, and Russia’s subsequent “pivot to Asia,” China has not been able to replace the West’s role in the Russian economy.

Despite the EU’s issues with Russia, the relationship’s 2014 nadir, and Russia’s subsequent “pivot to Asia,” China has not been able to replace the West’s role in the Russian economy.

Although China has continued to support Russia with rhetoric and signed new cooperation agreements, it has ultimately complied with the sanctions regime against Russia and frequently refuses to finance Russian projects to avoid compromising links with the West.

Trump’s role in the China-Russia-EU triangle is still uncertain. On the one hand, Trump’s atypical stance on Russia and his disengagement from international organizations might reduce the hostility towards the U.S. that traditionally aligned China and Russia. On the other hand, the way in which he has handled allegations of collusion with Russia has placed any slightly pro-Russian move under heightened scrutiny. Furthermore, Trump’s relationship with Xi is ambiguous—moving from denying the one-China policy and threatening to label China a currency manipulator to adopting a more conciliatory, and even admiring, attitude towards Xi.

The EU seems to be observing how the situation will evolve. While its Russia policy remains unaltered, it is also preparing to rely less on the U.S. Meanwhile, Brussels is considering a new strategy for enhanced engagement with China and Central Asia, in line with the EU’s global strategy.

 

— Edited by Tom Hoffecker