Russia could become an ‘economic colony’ of China, according to CIA director

 Russia is becoming more and more dependent on China, and in some respects it risks becoming an economic colony of China over time

Tristan Bove

Thu, April 13, 2023 at 2:08 AM GMT+8·5 min read

VLADIMIR ASTAPKOVICH—SPUTNIK/AFP/Getty Images

As many Western countries have weaned themselves off their reliance on Russian materials and imports since the invasion of Ukraine, China has remained Vladimir Putin’s closest major ally, continuing to buy Russian fuel and largely refusing to join the international chorus of condemnation against his invasion of Ukraine. But with Russia struggling to gain ground in Ukraine, a major intelligence chief in the United States called Putin’s efforts a “huge strategic failure for Russia” that has helped cement a Western coalition in support of Ukraine and may eventually make Russia economically subservient to another major power.

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China has toed the line between respecting Ukraine’s sovereignty and abstaining from criticizing Russia for starting the war over the past year. Chinese leaders have recently positioned themselves as peacemakers in the conflict, even deflecting blame to the U.S. for prioritizing its own economic interests and aggravating the crisis through sanctions on Russia. But this could all turn out to support China’s economic interests.

“If you look at the reality, Russia is becoming more and more dependent on China, and in some respects it risks becoming an economic colony of China over time,” William Burns, director of the Central Intelligence Agency, said Tuesday during an event at Rice University, in Houston.

Between Western companies leaving the country and multiple waves of unprecedented international sanctions, the Ukraine war has dealt a body blow to Russia’s economy. Russian GDP fell by 2.2% to 5.9% last year, according to estimates from the World Bank, the IMF, and the OECD. Its economy could shrink by a further 2.5% this year in a scenario calculated by the OECD.

Russia was forecasted to fare much worse in the early days of the war, but its economy was temporarily spared by a surge in oil and natural gas prices, which had yet to be targeted by Western sanctions. Russia earned a record 93 billion euros, or $102 billion, in fossil fuel exports during the first 100 days of the war alone, according to a June study.

But 2023 promises to be a different story. With European embargos on Russian coal and refined oil products now in place and European natural gas prices falling 86% from their peak last August, one of Russia’s remaining economic lifelines has been cut. China has stepped in over the past year to support Russia’s floundering energy export economy, which in 2021 accounted for 45% of the country’s federal budget. Soaring purchase volumes for Russian fossil fuels have been a bargain for China, which was able to acquire oil at a nearly 40% discount and gas at 50%, but keeping the relationship alive is quickly becoming a matter of survival for Russia.

Burns said Russia is becoming dependent on China for exports of “energy resources and raw materials,” in an alliance that is becoming rapidly unbalanced and a potential geopolitical concern for Putin, who risks become overreliant on a foreign actor.

“That all adds up in my view to a huge own goal for Putin’s Russia right now,” he said, with Putin’s reliance on Chinese President Xi Jinping as an export partner representing a strategic failure that will leave Russia with a short list of tenuous economic allies for the foreseeable future.

In some ways, Russia’s reliance on China has been set in stone since the invasion over a year ago. With Europe no longer a reliable gas export partner, Xi and Putin jointly announced plans in March for a new gas pipeline: The Power of Siberia 2, which will export natural gas to China via Mongolia, is slated to deliver at least 98 billion cubic meters of gas a year by 2030. Last year, Russia supplied China with 15.5 billion cubic meters of gas.

Russia’s material dependence on Chinese buyers has not been lost on Moscow officials, who see trade between the two countries as a cornerstone of Russia’s strategy to win the war in Ukraine and weather sanctions, the Financial Times reported last month, citing an unnamed source close to the Kremlin.

“The logic of events dictates that we fully become a Chinese resource colony,” the person said. “Our servers will be from Huawei. We will be China’s major suppliers of everything. They will get gas from Power of Siberia. By the end of 2023 the yuan [renminbi] will be our main trade currency.”

To be sure, Russia’s war in Ukraine is not entirely in China’s political interests. While an economically beneficial relationship, Russia may have also become a “burden” to China, Antonio Fatas, an economist and professor at the Insead business school in France, told CNBC Monday, adding that China wants to be seen as “leaders of the world, not leaders of the world that is causing war in Europe.”

Xi continued to play peacemaker earlier this month when top European leaders visited Beijing, and China is currently steering clear of turning its economic alliance with Russia into a military one by supplying Putin with Chinese arms, a move U.S. officials have actively discouraged.

Weeks before Russia invaded Ukraine, Putin and Xi declared a “no limits” friendship, but the long war has tested that relationship. Burns said that while the partnership between Xi and Putin today is a “strong one,” an overt military engagement with the West, or an escalation of nuclear warfare rhetoric from Putin, might still represent a limitation to how far China is willing to go. “To the best of our intelligence, Xi’s China has not yet provided weapons and ammunitions to Russia,” he said.

“It’s an important partnership. I think both leaders are committed to it. But it’s so far at least not a friendship without limits.”

This story was originally featured on Fortune.com

https://finance.yahoo.com/news/russia-could-become-economic-colony-180826282.html

China will be the big winner from Russia’s invasion of Ukraine

  The upside for China will be that as Russia becomes more economically and politically isolated, Beijing will seek to profit from its dilemma, walking a fine line to skirt international condemnation.

John Dobson

• Published
 
• :
 
• April 2, 2022,
 
• 8:29 pm
 
• |
 
• Updated
 
• :
 
• April 2, 2022,
 
• 8:29 PM
https://www.sundayguardianlive.com/world/china-will-big-winner-russias-invasion-ukraine





A local resident drives past a destroyed Russian armoured personal carrier, as Russia’s attack on Ukraine continues, in the village of Nova Basan, in Chernihiv region, Ukraine. REUTERS

London: If you want to find the most cynical and risible statement made in recent times, look no further than the “Joint Statement of the Russian Federation and the People’s Republic of China on the International Relations…” issued on 4 February this year, the start of the 24th Olympic Winter Games in Beijing. Presidents Putin and Xi Jinping met in closed session just prior to the Games, when Putin assured Xi that he would not attack Ukraine whilst the Games were in progress, so as not to deflect from Xi’s glory in holding the event. Sure enough, just days after the closing ceremony, Russian forces entered the sovereign territory of a neighbour and started an unprovoked war that continues to the present day, with no end in sight.

But back to the Statement. It’s abundantly clear to any neutral observer that Russia and China are two of the most autocratic nations on the planet, yet here’s what they claimed in the document: “The sides (Russia and China) share the understanding that democracy is a universal human value, rather than a privilege of a limited number of States, and that its promotion and protection is a common responsibility of the entire world community”. It then goes on to claim that Russia and China have a “rich cultural and historical heritage in democracy, guaranteeing their people to take part through various means”. If you haven’t felt sick by the hypocrisy so far, this will do it: “The sides believe that the advocacy of democracy and human rights must not be used to put pressure on other countries. They oppose the abuse of democratic values and interference (sic) in the internal affairs of sovereign states under the pretext of protecting democracy and human rights”. So, before even the ink was dry, Russia attacked Ukraine under the pretext that it was protecting democracy and human rights from the “neo-Nazis” that were running the country. So much for the principle of non-interference signed by Vladimir Putin, living in his topsy-turvy world of contradictions.

But China, too, is culpable. The invasion was probably not Beijing’s preferred outcome, but now that it’s happened, China has decided to support Russia while leveraging the crisis for its own benefit. The two countries appear to genuinely share a perverted view that the West is the aggressor and that China and Russia are the victims. Just before the invasion, China’s Foreign Ministry Spokesperson, Hua Chunying, sought to shift the focus from Russian action to American policy, claiming that the US was “the culprit of current tensions surrounding Ukraine”, and that China would not sanction Russia. In using the word “culprit”, Hua illustrated the gradual change over the past twenty years in China’s position on its core principles of sovereignty, territorial integrity and non-interference. By fudging the choice in a haze of sly diplomatic language, Beijing has made it clear that the most decisive element of Chinese policy now is its lean towards Moscow. In making this choice, China appears to have accepted a potential cost in its transatlantic relationships in lieu of the clear cost of breaking with Moscow.

The upside for China will be that as Russia becomes more economically and politically isolated, Beijing will seek to profit from its dilemma, walking a fine line to skirt international condemnation. China relishes being the more powerful state in a lopsided relationship with Russia, one which turns their early Cold War experience on its head. Three decades ago their two economies were the same size; now China’s is ten-times larger than Russia’s. Xi Jinping is therefore happy to provide Vladimir Putin the public symbolism of equal partnership, as long as he wins on the material benefits.

From the time Russia invaded and annexed Crimea in 2014, Russia’s reliance on China has grown in proportion to its isolation from the US, Europe and the democracies in Asia, especially Japan. When the West first imposed sanctions in 2015, bilateral trade between Russia and China began to grow to the point where it has more than doubled. Western sanctions, the punishment for the war, will almost certainly make Putin even more pliable towards Xi. As you read this, Chinese officials will be drawing up a wish list while the war progresses, the most obvious being a demand for even more discounts for Russian energy supplies as Moscow’s energy weapon turns on itself with fewer European buyers. Beijing will not be bothered that it cannot backfill for all Russia’s lost trade. That’s Russia’s problem.

An immediate challenge for both China and Russia will be to further isolate themselves against sanctions by pursuing workarounds for the SWIFT payments system. Many experts were alarmed by the decision to push Russia out of SWIFT, except for energy-related transactions, as they believed it would simply drive them into Chinese payments platforms, thereby weakening SWIFT by making it less important globally. This could also jeopardise the world dominance of the dollar, with trade fragmenting into smaller currency blocs. China already has an alternative to SWIFT, called CIPS, which is used to clear transfers in Chinese renminbi. So, if Russia turns to CIPS for non-energy transactions, and China allows this game-changer, how long would it be before it also uses it for energy-related transactions? This would mean that many in Europe would have to adopt CIPS alongside SWIFT, increasing the dominance of renminbi transactions in global trade – a potential big win for China.

When America turned its military attention towards Iraq and Afghanistan, a period which consumed Washington’s strategic focus, Beijing considered the time as one of “strategic opportunity”. Policymakers in Beijing who hate the thought of a US rebalance to Asia, are now likely salivating at the thought that the Ukraine war will create another such period. It’s also likely that as a result of its increased reliance on China, Russia will have to display greater deference to Beijing when considering steps that might balance Chinese power in the Indo-Pacific, in particular any high-end arms sales to countries like India. There is also the likelihood that technological cooperation between China and Russia will increase, echoing what happened when US pressure on Huawei turned the company towards Russia. As a consequence, Russia will almost certainly decide to adopt more and more Chinese technological standards, separating itself even further from the West.

This year is a politically sensitive one for China’s leader, Xi Jinping, as he seeks a third five-year term. Russia’s attack on Ukraine presents him with a geopolitical mixed bag, with potential shocks to global financial and energy markets that could add to China’s existing economic headwinds, despite the strategic opportunities the war creates for China. “The longer the fighting drags on, the more it will exhaust Europe, America and Russia, and overall this benefits China”, said a piece on the website China Strategic, recently taken down without explanation. Its authors argued that China should stand by and watch the war, then emerge as a mediator or even a rule-maker in a new order. Others are more wary on the long-term strategic outcome of the war, arguing that as Europe has decided to increase defence spending, it will evolve into a new geopolitical force, more independent from the US, with strategic consequences for China. Some are purely pragmatic; “for the Chinese it’s simple”, they say, “this is not Chinese territory, this is not a Chinese war. Everything on top of that is a cool calculation of what benefits or hurts China – it’s a power-centric world view”.

In many ways, this war is a timely moment for China to consolidate the political slogan conceived by senior Communist Party officials during the pandemic: dongsheng xijiang—“the rise of the East and the descent of the West”. Putin’s Russia is no longer looking to the West, instead becoming the junior partner in a relationship with Xi’s China. By framing the war as the latest example of global disorder provoked by the West, China is carefully constructing a narrative to bring together those countries with long-standing grievances against America into a kind of mutual-protection arrangement, one that will benefit China the most. “If China ditches Russia, it is only a matter of time before America comes after China once more”, said a prominent Chinese geopolitical commentator last week. But whatever the end game, it’s abundantly clear that China stands to be the big winner from a war whose impact will be profound and lasting.

John Dobson is a former British diplomat, who also worked in UK Prime Minister John Major’s office between 1995 and 1998. He is currently Visiting Fellow at the University of Plymouth.

https://www.sundayguardianlive.com/world/china-will-big-winner-russias-invasion-ukraine

China’s new vassal: Vladimir Putin

Xi Jinping now holds the better cards in steering the Moscow-Beijing relationship.

BY STUART LAU

June 6, 2022 4:00 am

China is making a big show of political solidarity with Russian President Vladimir Putin |
Natalia Kolesnikova/AFP via Getty Images

China can now enjoy turning the tables.

When Chairman Mao Zedong visited Soviet dictator Joseph Stalin in the winter of 1949, he was very much the junior supplicant. Stalin packed him off to wait for weeks in his snow-bound No. 2 dacha, 27 kilometers outside Moscow, where the humiliated and constipated Chinese leader grumbled about everything from the quality of the fish to his uncomfortable mattress.

When the two Communist leaders did get to business, Stalin bullied his way to a very favorable deal that put Mao on the hook to buy Russian arms and heavy machinery with a loan on which Beijing would have to pay interest.

Seven decades later, the power dynamics reveal a radical reset. Shortly before invading Ukraine, Russian President Vladimir Putin traveled to the Winter Olympics in Beijing to proclaim the “no limits” friendship with China’s Xi Jinping, but there’s no doubting who the real superpower is in that duo these days. China’s $18-trillion economy is now 10 times mightier than Russia’s. Beijing will hold nearly all the good cards in setting the terms of any financial lifelines from big brother.

As Russia faces a sharply contracting economy under sanctions and an impending oil embargo from Europe, China is the obvious potential benefactor for Putin to turn toward.

Xi shares Putin’s hostility to the West and NATO, but that doesn’t mean he will be offering unalloyed charity. Xi’s overriding strategic concern is China’s prosperity and security, not saving Russia. Beijing is likely to buy at least some oil diverted from Europe, but only at a hefty discount from global benchmarks. China will only help Russia to the extent that it doesn’t attract sanctions and imperil its own ability to sell goods to rich countries in North America and the EU.

A very public partnership

Publicly, China is making a big show of political solidarity with Moscow. It has increased overall trade with Russia, essentially abandoned Ukraine, expanded financial transactions without the use of dollars or euros, and doubled down on future cooperation to develop military technology while carrying out joint exercises in the Pacific region.

Sergey Lavrov, Russia’s foreign minister, has acknowledged that his country’s future lies with China, saying: “Now that the West has taken a ‘dictator’s position,’ our economic ties with China will grow even faster.”

Xi himself also appears to be a strong admirer of Putin on a personal level. Yun Sun, director of the China Program at the Stimson Center, calls this his “Russia complex.” (Since the war broke out, Xi has only spoken by phone with Putin, not his Ukrainian counterpart Volodymyr Zelenskyy).

There are very serious limits to these “no limits” relations, however. For now, at least, China is stressing to Western nations that it is not selling weapons or plane parts to Russia. Beijing doesn’t want to fall victim to sanctions itself, so it sets boundaries to the relationship. Even more worryingly for Putin, China is also out to set a high price for support. Beijing, for example, wants to restrict Russia’s highly lucrative arms sales to India, China’s arch-foe across the Himalayas.

“In a reverse from the Cold War pattern, Russia will be the junior partner to a more powerful China. That will irritate Putin,” said Matthew Kroenig, deputy director of the Atlantic Council’s Scowcroft Center for Strategy and Security.

That second-fiddle role is not a scenario Putin would have envisioned when the Russian president decided to invade Ukraine in February, propelled by a desire to rebuild a bygone glory for his nation.

But all in all, he should have seen it coming. China is a country obsessed by correcting historical humiliations and regaining its position of global leadership. The time when the Soviet Union was ideologically — and economically — superior to Communist China is long gone. Huawei Technologies builds Russia’s 5G networks, while Russia requires Chinese cooperation on everything from aircraft parts to currency swaps. Importantly, it’s also not just the U.S. and Europe imposing sanctions on Moscow, but also three other major Asian economies: Japan, South Korea and Singapore.

Andrey Kortunov, director general of the Kremlin-backed Russian International Affairs Council, doubts that Russia’s elites have much appetite to serve as China’s junior partner. But he sees few alternatives for Moscow. “Since the conflict began, Russia started needing China more than earlier because China remains in many ways the only game in town, with economic ties between Russia and the West curtailed and with sanctions imposed on Russia.”

Crude calculations

Perhaps the single biggest calculation for China is how far it will go to help Putin beat an impending EU embargo on Russian oil. This European ban will drill a significant hole in Russia’s budget unless other big buyers step in.

In deciding how much it will buy, Beijing has massive leverage over Moscow.

Russia and Saudi Arabia are already the two leading suppliers of oil to China. In May, seaborne imports of Russian crude to China reached a two-year high with 1.14 million barrels per day, up from 800,000 barrels per day in 2021, according to data from Vortexa Analytics shared with POLITICO.

Much of the explanation for this is pure hard-headed economics from the Chinese more than a show of political solidarity, however. International sanctions mean traders have been wary of handling Russian crude, creating a mini glut that sees Russia’s oil trading $20 to $30 cheaper than international benchmark prices.

Given that China imports more than 10 million barrels per day, there’s certainly room to buy more, especially when the economy restarts and lockdown measures are gradually removed in key cities like Shanghai. But Russian sales to the EU have been about 2.4 million bpd. Given China’s own security concerns about overdependence on individual suppliers, it would be highly unlikely for China to suddenly start buying all of Russia’s now-surplus oil.

Similarly, China holds the cards when it comes to gas. Just before he invaded Ukraine, Putin signed a deal with Xi agreeing to increase natural gas exports to 48 billion cubic meters per year in future, from a humble 4.1 billion cubic meters in 2020. Russia is also planning a new pipeline, Power of Siberia 2, which could see Russian gas exports to Europe more easily switched to China.

“The problem, however, is that China holds all the cards in the negotiations,” Nikos Tsafos, chief energy adviser to the Greek prime minister, wrote in a think tank report in May. “And like the first Power of Siberia line, China will drive a hard bargain. What is unknowable at this point is whether China is ready to make a deal. Russia is likely to offer very attractive terms — if nothing else, due to its desperation. But will China accept them? Will they be tempted by the price, or will they think twice about expanding their dependence on Russia at this moment?”

Watching the weapons

Russia’s need for an ally coincides with China’s growth in assertiveness. The more isolated Moscow becomes, the more it may have to help China further its geopolitical ambition.

For years, Chinese officials have been quietly lobbying their Russian counterparts to cut arms sales to India, which has had a sometimes bloody border dispute with Beijing.

Between 2017 and 2022, India was the largest arms export market for Russia, followed by China, according to statistics from the Stockholm International Peace Research Institute. Fighting Indian soldiers armed with Russian equipment may not be fun for China, but it’s certainly a lucrative business for Moscow.

Before the war, “Russia was very stubborn and [would] say, ‘Oh, you’re not in a position, China, to dictate us our choices to whom we sell weapons. But I think that China will be in this position probably five years down the road,” said Alexander Gabuev, an expert on Russia-China relations with the Carnegie Endowment for International Peace, a think tank.

India, for its part, is trying to keep an open relationship with Putin. New Delhi, like Beijing, is snapping up cheap oil, even though it’s also eager to maintain strong ties with the U.S.

“A Russia weakened by war and sanctions but not chaotic and unstable suits China’s long-term interests,” said Bobo Lo, a former deputy head of the Australian mission in Moscow who now works at the Lowy Institute. “Russia’s isolation will further push it into a position of a junior partner in the relationship, while increasing its economic and strategic dependency on China.”

Commanding position

Today’s power reversal would have looked highly peculiar to those singing “L’Internationale” in Moscow in the post-war era.

After all, the USSR and the People’s Republic were on difficult terms for decades, despite their supposed ideological proximity.

“In the 1950s, it absolutely was the case that the fact that China was the junior partner was very grating, because there was a view in Beijing that Moscow too often as a status quo power cared too much about its relations with the West at the expense of its relations with China,” said Joseph Torigian, author of “Prestige, Manipulation, and Coercion,” a new book about Stalin and Mao. “When it was Stalin and Mao, Stalin was a teacher, he was the titan of the communist movement. When Stalin died, Mao looked down on Khrushchev, as someone who didn’t understand ideology. When Deng Xiaoping met Gorbachev, Deng by all accounts thought Gorbachev was an idiot.”

While Xi and Putin share a better personal rapport than their predecessors, they also have very different considerations for the future of their countries’ role in the world.

Xi’s full focus is on securing the presidency for a third time, armed with an appeal to make China — a market deeply embedded with the West — more prosperous, eventually overtaking the U.S. to become the world’s No 1 economy. Sanctions would wreck that playbook.

Putin, meanwhile, is in a tougher bind. He would be happy to take whatever he can from China given his country’s current distress — even if that means Russia is seen as a junior partner to China.

“The problem is that he sees the conflict in Ukraine as really central to his struggle to keep his regime,” Gabuev said. “There is so much emotional tunnel vision on the importance of the war in Ukraine and sticking it back to the Americans, particularly since the American military’s help, provision of weapons, sharing of sensitive intelligence data … helps to kill a lot of Russian soldiers.”

“Being in China’s pocket is kind of less feared, because the focus is really on fighting the U.S.,” he said. “If China provides the necessary resources — and at the same time doesn’t seem to interfere in Russia’s domestic affairs — that’s the price that he’s accepting to pay in order to continue his fight with the U.S.”

Victor Jack and America Hernandez contributed reporting.

https://www.politico.eu/article/china-new-vassal-vladimir-putin/

China’s new vassal: Vladimir Putin

Xi Jinping now holds the better cards in steering the Moscow-Beijing relationship.

BY STUART LAU

June 6, 2022 4:00 am

China is making a big show of political solidarity with Russian President Vladimir Putin |
Natalia Kolesnikova/AFP via Getty Images

China can now enjoy turning the tables.

When Chairman Mao Zedong visited Soviet dictator Joseph Stalin in the winter of 1949, he was very much the junior supplicant. Stalin packed him off to wait for weeks in his snow-bound No. 2 dacha, 27 kilometers outside Moscow, where the humiliated and constipated Chinese leader grumbled about everything from the quality of the fish to his uncomfortable mattress.

When the two Communist leaders did get to business, Stalin bullied his way to a very favorable deal that put Mao on the hook to buy Russian arms and heavy machinery with a loan on which Beijing would have to pay interest.

Seven decades later, the power dynamics reveal a radical reset. Shortly before invading Ukraine, Russian President Vladimir Putin traveled to the Winter Olympics in Beijing to proclaim the “no limits” friendship with China’s Xi Jinping, but there’s no doubting who the real superpower is in that duo these days. China’s $18-trillion economy is now 10 times mightier than Russia’s. Beijing will hold nearly all the good cards in setting the terms of any financial lifelines from big brother.

As Russia faces a sharply contracting economy under sanctions and an impending oil embargo from Europe, China is the obvious potential benefactor for Putin to turn toward.

Xi shares Putin’s hostility to the West and NATO, but that doesn’t mean he will be offering unalloyed charity. Xi’s overriding strategic concern is China’s prosperity and security, not saving Russia. Beijing is likely to buy at least some oil diverted from Europe, but only at a hefty discount from global benchmarks. China will only help Russia to the extent that it doesn’t attract sanctions and imperil its own ability to sell goods to rich countries in North America and the EU.

A very public partnership

Publicly, China is making a big show of political solidarity with Moscow. It has increased overall trade with Russia, essentially abandoned Ukraine, expanded financial transactions without the use of dollars or euros, and doubled down on future cooperation to develop military technology while carrying out joint exercises in the Pacific region.

Sergey Lavrov, Russia’s foreign minister, has acknowledged that his country’s future lies with China, saying: “Now that the West has taken a ‘dictator’s position,’ our economic ties with China will grow even faster.”

Xi himself also appears to be a strong admirer of Putin on a personal level. Yun Sun, director of the China Program at the Stimson Center, calls this his “Russia complex.” (Since the war broke out, Xi has only spoken by phone with Putin, not his Ukrainian counterpart Volodymyr Zelenskyy).

There are very serious limits to these “no limits” relations, however. For now, at least, China is stressing to Western nations that it is not selling weapons or plane parts to Russia. Beijing doesn’t want to fall victim to sanctions itself, so it sets boundaries to the relationship. Even more worryingly for Putin, China is also out to set a high price for support. Beijing, for example, wants to restrict Russia’s highly lucrative arms sales to India, China’s arch-foe across the Himalayas.

“In a reverse from the Cold War pattern, Russia will be the junior partner to a more powerful China. That will irritate Putin,” said Matthew Kroenig, deputy director of the Atlantic Council’s Scowcroft Center for Strategy and Security.

That second-fiddle role is not a scenario Putin would have envisioned when the Russian president decided to invade Ukraine in February, propelled by a desire to rebuild a bygone glory for his nation.

But all in all, he should have seen it coming. China is a country obsessed by correcting historical humiliations and regaining its position of global leadership. The time when the Soviet Union was ideologically — and economically — superior to Communist China is long gone. Huawei Technologies builds Russia’s 5G networks, while Russia requires Chinese cooperation on everything from aircraft parts to currency swaps. Importantly, it’s also not just the U.S. and Europe imposing sanctions on Moscow, but also three other major Asian economies: Japan, South Korea and Singapore.

Andrey Kortunov, director general of the Kremlin-backed Russian International Affairs Council, doubts that Russia’s elites have much appetite to serve as China’s junior partner. But he sees few alternatives for Moscow. “Since the conflict began, Russia started needing China more than earlier because China remains in many ways the only game in town, with economic ties between Russia and the West curtailed and with sanctions imposed on Russia.”

Crude calculations

Perhaps the single biggest calculation for China is how far it will go to help Putin beat an impending EU embargo on Russian oil. This European ban will drill a significant hole in Russia’s budget unless other big buyers step in.

In deciding how much it will buy, Beijing has massive leverage over Moscow.

Russia and Saudi Arabia are already the two leading suppliers of oil to China. In May, seaborne imports of Russian crude to China reached a two-year high with 1.14 million barrels per day, up from 800,000 barrels per day in 2021, according to data from Vortexa Analytics shared with POLITICO.

Much of the explanation for this is pure hard-headed economics from the Chinese more than a show of political solidarity, however. International sanctions mean traders have been wary of handling Russian crude, creating a mini glut that sees Russia’s oil trading $20 to $30 cheaper than international benchmark prices.

Given that China imports more than 10 million barrels per day, there’s certainly room to buy more, especially when the economy restarts and lockdown measures are gradually removed in key cities like Shanghai. But Russian sales to the EU have been about 2.4 million bpd. Given China’s own security concerns about overdependence on individual suppliers, it would be highly unlikely for China to suddenly start buying all of Russia’s now-surplus oil.

Similarly, China holds the cards when it comes to gas. Just before he invaded Ukraine, Putin signed a deal with Xi agreeing to increase natural gas exports to 48 billion cubic meters per year in future, from a humble 4.1 billion cubic meters in 2020. Russia is also planning a new pipeline, Power of Siberia 2, which could see Russian gas exports to Europe more easily switched to China.

“The problem, however, is that China holds all the cards in the negotiations,” Nikos Tsafos, chief energy adviser to the Greek prime minister, wrote in a think tank report in May. “And like the first Power of Siberia line, China will drive a hard bargain. What is unknowable at this point is whether China is ready to make a deal. Russia is likely to offer very attractive terms — if nothing else, due to its desperation. But will China accept them? Will they be tempted by the price, or will they think twice about expanding their dependence on Russia at this moment?”

Watching the weapons

Russia’s need for an ally coincides with China’s growth in assertiveness. The more isolated Moscow becomes, the more it may have to help China further its geopolitical ambition.

For years, Chinese officials have been quietly lobbying their Russian counterparts to cut arms sales to India, which has had a sometimes bloody border dispute with Beijing.

Between 2017 and 2022, India was the largest arms export market for Russia, followed by China, according to statistics from the Stockholm International Peace Research Institute. Fighting Indian soldiers armed with Russian equipment may not be fun for China, but it’s certainly a lucrative business for Moscow.

Before the war, “Russia was very stubborn and [would] say, ‘Oh, you’re not in a position, China, to dictate us our choices to whom we sell weapons. But I think that China will be in this position probably five years down the road,” said Alexander Gabuev, an expert on Russia-China relations with the Carnegie Endowment for International Peace, a think tank.

India, for its part, is trying to keep an open relationship with Putin. New Delhi, like Beijing, is snapping up cheap oil, even though it’s also eager to maintain strong ties with the U.S.

“A Russia weakened by war and sanctions but not chaotic and unstable suits China’s long-term interests,” said Bobo Lo, a former deputy head of the Australian mission in Moscow who now works at the Lowy Institute. “Russia’s isolation will further push it into a position of a junior partner in the relationship, while increasing its economic and strategic dependency on China.”

Commanding position

Today’s power reversal would have looked highly peculiar to those singing “L’Internationale” in Moscow in the post-war era.

After all, the USSR and the People’s Republic were on difficult terms for decades, despite their supposed ideological proximity.

“In the 1950s, it absolutely was the case that the fact that China was the junior partner was very grating, because there was a view in Beijing that Moscow too often as a status quo power cared too much about its relations with the West at the expense of its relations with China,” said Joseph Torigian, author of “Prestige, Manipulation, and Coercion,” a new book about Stalin and Mao. “When it was Stalin and Mao, Stalin was a teacher, he was the titan of the communist movement. When Stalin died, Mao looked down on Khrushchev, as someone who didn’t understand ideology. When Deng Xiaoping met Gorbachev, Deng by all accounts thought Gorbachev was an idiot.”

While Xi and Putin share a better personal rapport than their predecessors, they also have very different considerations for the future of their countries’ role in the world.

Xi’s full focus is on securing the presidency for a third time, armed with an appeal to make China — a market deeply embedded with the West — more prosperous, eventually overtaking the U.S. to become the world’s No 1 economy. Sanctions would wreck that playbook.

Putin, meanwhile, is in a tougher bind. He would be happy to take whatever he can from China given his country’s current distress — even if that means Russia is seen as a junior partner to China.

“The problem is that he sees the conflict in Ukraine as really central to his struggle to keep his regime,” Gabuev said. “There is so much emotional tunnel vision on the importance of the war in Ukraine and sticking it back to the Americans, particularly since the American military’s help, provision of weapons, sharing of sensitive intelligence data … helps to kill a lot of Russian soldiers.”

“Being in China’s pocket is kind of less feared, because the focus is really on fighting the U.S.,” he said. “If China provides the necessary resources — and at the same time doesn’t seem to interfere in Russia’s domestic affairs — that’s the price that he’s accepting to pay in order to continue his fight with the U.S.”

Victor Jack and America Hernandez contributed reporting.

https://www.politico.eu/article/china-new-vassal-vladimir-putin/

China will be the big winner from Russia’s invasion of Ukraine

  The upside for China will be that as Russia becomes more economically and politically isolated, Beijing will seek to profit from its dilemma, walking a fine line to skirt international condemnation.

John Dobson

• Published
 
• :
 
• April 2, 2022,
 
• 8:29 pm
 
• |
 
• Updated
 
• :
 
• April 2, 2022,
 
• 8:29 PM
https://www.sundayguardianlive.com/world/china-will-big-winner-russias-invasion-ukraine




A local resident drives past a destroyed Russian armoured personal carrier, as Russia’s attack on Ukraine continues, in the village of Nova Basan, in Chernihiv region, Ukraine. REUTERS

London: If you want to find the most cynical and risible statement made in recent times, look no further than the “Joint Statement of the Russian Federation and the People’s Republic of China on the International Relations…” issued on 4 February this year, the start of the 24th Olympic Winter Games in Beijing. Presidents Putin and Xi Jinping met in closed session just prior to the Games, when Putin assured Xi that he would not attack Ukraine whilst the Games were in progress, so as not to deflect from Xi’s glory in holding the event. Sure enough, just days after the closing ceremony, Russian forces entered the sovereign territory of a neighbour and started an unprovoked war that continues to the present day, with no end in sight.

But back to the Statement. It’s abundantly clear to any neutral observer that Russia and China are two of the most autocratic nations on the planet, yet here’s what they claimed in the document: “The sides (Russia and China) share the understanding that democracy is a universal human value, rather than a privilege of a limited number of States, and that its promotion and protection is a common responsibility of the entire world community”. It then goes on to claim that Russia and China have a “rich cultural and historical heritage in democracy, guaranteeing their people to take part through various means”. If you haven’t felt sick by the hypocrisy so far, this will do it: “The sides believe that the advocacy of democracy and human rights must not be used to put pressure on other countries. They oppose the abuse of democratic values and interference (sic) in the internal affairs of sovereign states under the pretext of protecting democracy and human rights”. So, before even the ink was dry, Russia attacked Ukraine under the pretext that it was protecting democracy and human rights from the “neo-Nazis” that were running the country. So much for the principle of non-interference signed by Vladimir Putin, living in his topsy-turvy world of contradictions.

But China, too, is culpable. The invasion was probably not Beijing’s preferred outcome, but now that it’s happened, China has decided to support Russia while leveraging the crisis for its own benefit. The two countries appear to genuinely share a perverted view that the West is the aggressor and that China and Russia are the victims. Just before the invasion, China’s Foreign Ministry Spokesperson, Hua Chunying, sought to shift the focus from Russian action to American policy, claiming that the US was “the culprit of current tensions surrounding Ukraine”, and that China would not sanction Russia. In using the word “culprit”, Hua illustrated the gradual change over the past twenty years in China’s position on its core principles of sovereignty, territorial integrity and non-interference. By fudging the choice in a haze of sly diplomatic language, Beijing has made it clear that the most decisive element of Chinese policy now is its lean towards Moscow. In making this choice, China appears to have accepted a potential cost in its transatlantic relationships in lieu of the clear cost of breaking with Moscow.

The upside for China will be that as Russia becomes more economically and politically isolated, Beijing will seek to profit from its dilemma, walking a fine line to skirt international condemnation. China relishes being the more powerful state in a lopsided relationship with Russia, one which turns their early Cold War experience on its head. Three decades ago their two economies were the same size; now China’s is ten-times larger than Russia’s. Xi Jinping is therefore happy to provide Vladimir Putin the public symbolism of equal partnership, as long as he wins on the material benefits.

From the time Russia invaded and annexed Crimea in 2014, Russia’s reliance on China has grown in proportion to its isolation from the US, Europe and the democracies in Asia, especially Japan. When the West first imposed sanctions in 2015, bilateral trade between Russia and China began to grow to the point where it has more than doubled. Western sanctions, the punishment for the war, will almost certainly make Putin even more pliable towards Xi. As you read this, Chinese officials will be drawing up a wish list while the war progresses, the most obvious being a demand for even more discounts for Russian energy supplies as Moscow’s energy weapon turns on itself with fewer European buyers. Beijing will not be bothered that it cannot backfill for all Russia’s lost trade. That’s Russia’s problem.

An immediate challenge for both China and Russia will be to further isolate themselves against sanctions by pursuing workarounds for the SWIFT payments system. Many experts were alarmed by the decision to push Russia out of SWIFT, except for energy-related transactions, as they believed it would simply drive them into Chinese payments platforms, thereby weakening SWIFT by making it less important globally. This could also jeopardise the world dominance of the dollar, with trade fragmenting into smaller currency blocs. China already has an alternative to SWIFT, called CIPS, which is used to clear transfers in Chinese renminbi. So, if Russia turns to CIPS for non-energy transactions, and China allows this game-changer, how long would it be before it also uses it for energy-related transactions? This would mean that many in Europe would have to adopt CIPS alongside SWIFT, increasing the dominance of renminbi transactions in global trade – a potential big win for China.

When America turned its military attention towards Iraq and Afghanistan, a period which consumed Washington’s strategic focus, Beijing considered the time as one of “strategic opportunity”. Policymakers in Beijing who hate the thought of a US rebalance to Asia, are now likely salivating at the thought that the Ukraine war will create another such period. It’s also likely that as a result of its increased reliance on China, Russia will have to display greater deference to Beijing when considering steps that might balance Chinese power in the Indo-Pacific, in particular any high-end arms sales to countries like India. There is also the likelihood that technological cooperation between China and Russia will increase, echoing what happened when US pressure on Huawei turned the company towards Russia. As a consequence, Russia will almost certainly decide to adopt more and more Chinese technological standards, separating itself even further from the West.

This year is a politically sensitive one for China’s leader, Xi Jinping, as he seeks a third five-year term. Russia’s attack on Ukraine presents him with a geopolitical mixed bag, with potential shocks to global financial and energy markets that could add to China’s existing economic headwinds, despite the strategic opportunities the war creates for China. “The longer the fighting drags on, the more it will exhaust Europe, America and Russia, and overall this benefits China”, said a piece on the website China Strategic, recently taken down without explanation. Its authors argued that China should stand by and watch the war, then emerge as a mediator or even a rule-maker in a new order. Others are more wary on the long-term strategic outcome of the war, arguing that as Europe has decided to increase defence spending, it will evolve into a new geopolitical force, more independent from the US, with strategic consequences for China. Some are purely pragmatic; “for the Chinese it’s simple”, they say, “this is not Chinese territory, this is not a Chinese war. Everything on top of that is a cool calculation of what benefits or hurts China – it’s a power-centric world view”.

In many ways, this war is a timely moment for China to consolidate the political slogan conceived by senior Communist Party officials during the pandemic: dongsheng xijiang—“the rise of the East and the descent of the West”. Putin’s Russia is no longer looking to the West, instead becoming the junior partner in a relationship with Xi’s China. By framing the war as the latest example of global disorder provoked by the West, China is carefully constructing a narrative to bring together those countries with long-standing grievances against America into a kind of mutual-protection arrangement, one that will benefit China the most. “If China ditches Russia, it is only a matter of time before America comes after China once more”, said a prominent Chinese geopolitical commentator last week. But whatever the end game, it’s abundantly clear that China stands to be the big winner from a war whose impact will be profound and lasting.

John Dobson is a former British diplomat, who also worked in UK Prime Minister John Major’s office between 1995 and 1998. He is currently Visiting Fellow at the University of Plymouth.

https://www.sundayguardianlive.com/world/china-will-big-winner-russias-invasion-ukraine