Friday

22nd Sep 2017

Column / Crude World

Why China and Russia will be best frenemies forever

  • Russian president Vladimir Putin (l), and Chinese president Xi Jinping (r). (Photo: en.kremlin.ru)

On 3 and 4 July, Chinese president Xi Jinping visited Russia for a two-day state visit that included his third meeting with Russian president Vladimir Putin in the space of a year.

Despite what these visits and the pledge to forge closer strategic and economic ties between the two nations suggest – and much to the chagrin of Vladimir Putin – Russia features awkwardly little in China’s major strategic plans for Eurasia.

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At any rate, few things appear to unite Russia and China more these days than their mutual disdain for what they see as Western interference in their respective "spheres of influence".

This train of thought is well illustrated by the reaction to North Korea’s latest missile test. Xi and Putin called upon Pyongyang, South Korea and the US to join a Chinese de-escalation plan. But their real concern lies elsewhere.

The Chinese plan calls for a halt to joint South-Korean-American large-scale missile exercises, and calls on the US to stop the deployment of its Terminal High Altitude Area Defense (THAAD) in South Korea.

In other words, North Korean leader Kim Jong-Un’s missile pointing behaviour, in a way, gives leverage to both Moscow and Beijing.

But beyond the anti-Western rhetoric and the shared interest of keeping the US at bay, there is little that sustainably binds Moscow and Beijing together.

Illustrative of the Russian pivot to Asia that never materialised is the so-called Power of Siberia pipeline.

When announced in May 2014, the $400-billion gas deal was heralded by Putin as an "epochal event". Fast-forward three years and the project is moving at a snail’s pace.

China drove a hard bargain, knowing that Russia needed it a lot more than the other way around, received a bottom price and, as a result, the project is gradually turning into a loss-making endeavour for the Russians.

The pipeline is another prime example of Russian state-owned natural gas company Gazprom being forced into a deal that makes little commercial sense, but was pushed by the Kremlin for political purposes.

China has plenty of alternatives, including pipeline gas coming from Central Asia and Liquefied Natural Gas (LNG) from Qatar and elsewhere. The Kremlin knew this, but stubbornly pushed on. And Beijing? They smiled and gladly profited.

Not all roads lead to Moscow

Following the summit between Russia and China at the beginning of July, Russian state development companies announced that the two countries will create a $10 billion investment fund and a $850 million innovation fund.

The two funds are designed to invest in cross-border projects as part of China’s "Belt and Road Initiative" and to further develop the Russian energy, industrial and transport sectors.

Despite all the bilateral drum rolling, the creation of these funds pale in comparison to the vast sums of money doled out throughout the region and should really be viewed as a way of easing concerns in Moscow that China’s new Silk Road is steadily encroaching upon the Central Asian former Soviet republics in Russia’s backyard.

China’s Belt and Road initiative comprises as much as sixty countries and hundreds of billions of dollars, but sadly for Russia, a string of proposed rail and pipeline networks are limited to Russia’s southern periphery, along with Moscow and St. Petersburg and new pipelines to Kazan and Irkutsk.

In the long term, Russia’s conspicuous absence spells major problems for the the country's leadership.

The issue for Moscow is that China’s investment spree in its backyard could end up costing Russia not only a sizeable share of Chinese investment, but a substantial loss of both market share in the region, as well as having to relinquish control over valuable natural resources.

Worse, the lure coming from Beijing’s deep pockets serves to undermine support for the Russia-led Eurasian Economic Union (EEU), an economic union of former Soviet states in northern Eurasia.

Putin may continuously praise and claim expanding cooperation between the EEU and the Chinese Silk Road, but the reality tells a very different story: one whereby Moscow continues to play second fiddle to Beijing’s tune. No lavish summit statement can do much to change the music.

The Crude World monthly column on Eurasian (energy) security and power politics in Europe’s eastern neighbourhood is written by Sijbren de Jong, a strategic analyst with The Hague Centre for Strategic Studies (HCSS), specialised in Eurasian (energy) security and the EU’s relations with Russia and the former Soviet Union.

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