Understanding a New Era in Russia-China Relations

Since mid–late 1990s for several decades Russia-China relations were largely seen in the West as either a tactical move by Moscow and Beijing in the hope of strengthening their positions in dialogue with the US or as an “axis of convenience”, lacking solid basis, especially in economic dimension. Western experts usually assert that sooner or later Russia and China will see each other as a threat and come into a conflict over such hypothetic issues as Chinese demographic and economic expansion into the Russian Far East and Siberia, rivalry between the two countries in Central Asia or Arctic.

The upward sustainable trend in Russia-China relations since the turn of the 21st century, breakthroughs made and current positive developments in bilateral ties contradict this kind of Western calculus. In June, 2019 during Xi Jinping’s state visit to Russia the two sides signed a Joint Statement on Developing Comprehensive Partnership and Strategic Interaction Entering a New Era, which signaled the upgrade of Russia-China relations to a new level – comprehensive partnership and strategic interaction entering a new era.

The new era of bilateral relations can be characterized as the era when both Russia and China eventually realized that they can no longer prioritize its external relations and trade with the West, and that they need to coordinate their foreign policies against a rapidly changing international environment.

The new era of Russia-China relations is manifested in an unprecedented high level of Russian-Chinese relations since the normalization of bilateral relations in late 1980s, deep reciprocal interest in providing mutual support both in domestic and international issues against the actions of the Trump administration, readiness to seek compromises to conjugate national development strategies and international initiatives. During last few years there has been a number of major accomplishments in Russia-China relations which signal a new level of relations: substantial deepening of military and defense cooperation; a very positive dynamic in trade and economic relations, including energy cooperation; eventual, after decades of delays, construction of the two cross border bridges between Russia and China.

 

Alliance, quasi-alliance or non-alignment partnership?

The sphere where a new era of Russia-China relations is most evident is military and defense cooperation. Since 2005, when China and Russia for the first time jointly participated in multilateral exercises, the two countries significantly deepened cooperation in conducting joint military exercises. Now Russia and China regularly conduct multilateral anti–terrorism exercises under the auspices of the SCO (the so-called “Peace Mission” exercises), bilateral naval exercises “Naval Interaction” (since 2012), and joint missile defense computer simulation.

In its military cooperation with China Russia went as far as to invite Chinese to take part in Russian domestic exercises. In September, 2018, the PLA took part in Russian domestic large-scale maneuvers in the Far East and Eastern Siberia “Vostok–2018” (the largest exercises since the Soviet military exercise “Zapad” in 1981), and in 2019 for the first time took part in the Russia’s “Tsentr–2019” exercises.

The exercise areas have gradually expanded from the close proximity areas further away. The naval exercises have been held in the waters of the Yellow and Japan Seas, the East China and South China Seas, the Baltic Sea and the Mediterranean Sea. In November, 2019 Russia and China in cooperation with South Africa hold their first naval exercises in the waters very remote from Russia and China – near South Africa.

Needless to say, military exercises are only a fracture of the whole scope of Russia-China military and defense cooperation. In the past five years China has received from Russia advanced military systems, including S-400 air defense system and the SU-35 fighter aircraft. The two countries are currently engaged in negotiating the Russia-China agreement on military cooperation, which will replace a document signed in 1993.

A very prominent thing happened on October 3, 2019 at the final plenary session of the Valdai International Discussion Club in Sochi (Russia), where Russian President Vladimir Putin noted that Russia has been assisting “Chinese partners create a missile attack warning system”, which “will fundamentally increase China’s defense capability”. [1] Putin’s remarks were interpreted by many observers both in Russia and abroad as a clear sign of Russia-China de-facto military alliance without formally declaring an alliance. Some analysts even claim that contemporary Russia-China relations are allied relations in its core.

However, the official designation of bilateral relations to the level of formal alliance and the sealing of corresponding treaty may be a difficult task. The two countries have negative historical legacy of the Sino-Soviet alliance of the 1950s which did not last long and turned into the Sino-Soviet split. Many Chinese experts tend to see the allied relations per se as relations between the senior and junior partner, between the leader and the follower, between the stronger and the weaker country. The Sino-Soviet alliance of the 1950s clearly proved that notion, since at that time Soviet Union tried to shape domestic and foreign policies of China.

Some Chinese experts point out that if China were to pursue alliance diplomacy, the international community would suspect Beijing of seeking hegemony, the US-China tensions would also worsen, and the two countries may fall into the Thucydides’ Trap.

Indeed, the formal Russia-China alliance would further antagonize the US and the West thus reducing the chances of normalizing Russia’s and China’s respective relations with the US and the West. It would also considerably limit the space for diplomacy and maneuvering on the world arena, retain strategic flexibility for both Russia and China.

On the issue of military alliance between Russia and China, during past two years there have been very inconsistent and contradictory signals coming from the two countries’ leaderships. The messages indirectly indicative of Moscow and Beijing are moving toward an alliance usually come from Russian President Putin. For example, in opening remarks during the review of troops taking part in “Vostok–2018” exercises (where China and Mongolia also participated for the first time), Putin stated that it was the duty of Russian military “to be ready to stand up for its [Motherland] sovereignty, security and national interests, and support our allies, if required”. [2] At the Valdai Discussion Club session Putin characterized Russia-China relations as “an allied relationship in the full sense of a multifaceted strategic partnership”. [3]

However, in a Joint Statement on Developing Comprehensive Partnership and Strategic Interaction Entering a New Era adopted during the state visit of China’s President Xi Jinping to Russia in June, 2019 the two sides underlined the basic principles of Russian-Chinese relations in a very distinctive way. One of these principles states the “refusal to establish allied relations, confrontation and non-orientation against third parties”. [4] 

Russia-China relations: what they are not

In the Western and in some Russian circles there appeared an assertion that Russia is currently dependent on China, and has been transiting to become a junior partner of China. This kind of assertion is more of emotional (for those Russians who feel uncomfortable with China’s rising power) or propagandistic (coming from Western audience with the aim to spoil Russia-China deepening relations) nature rather than the one based on a meticulous expert analysis.

Firstly, in the international affairs there are no signs of Russia’s sub ordinance to China. Amongst the two countries Russia is the country that has the great power DNA, a legacy of playing major role on the world arena and an extensive experience in high international politics.

Secondly, despite Chinese technological progress in some specific areas (like 5G, artificial intelligence, etc.), militarily and technologically Russia is still miles ahead of China.

Thirdly, equally wrong is the assertion about Russia’s economic dependence on China. Experts who assume such economic dependence usually refer either to the dramatic difference in the size of economy and financial might between the two countries in China’s favor or the asymmetry in Russia-China bilateral trade.

Yet, these facts do not provide any grounds for asserting Russia’s dependence on China. There are two major instruments when one country can use economic leverage over the other country: when there is a strong export or import dependency on the other country (overall dependency or dependency for individual product groups), and when a country’s debt to the other country is huge.

If one takes a close look at Russia-China trade, he or she can easily discover that Russia does not have any trade dependency on China. China’s share in Russia’s trade turnover is only 16%, which is equivalent to, for example, China’s share in the US’s trade turnover (as of 2018). Russia’s trade volume with EU is 2.7 times larger than with China. The EU’s share in Russia’s trade turnover is 43% (as of 2018). [5]

The list of countries which dependency on trade with China is critical includes Turkmenistan (where China’s share in Turkmenistan’s trade turnover is 71%, and 85% in Turkmen exports), Mongolia (with China’s share in the country’s trade turnover at 70%, and in export – as much as 94%), North Korea (the share of China in trade turnover is 67%, in import – 77%), or Myanmar (where China’s share in trade turnover is 34%).

Some analysts point out the fact that while China is Russia’s leading foreign trade partner, Russia ranks 11th among the largest trade partners of China, thus making a conclusion that Russia needs China more than China needs Russia in the economic domain. This kind of simplification totally neglects Russia’s important role in China’s energy security calculus. Since 2016, Russia has been the largest source of oil for China. Russia represents 16% of overall Chinese crude oil imports for 2018. [6] Notably, Russian oil is crucial for China’s improvement of its energy security, since Russia provides one of the few sources that do not go through the Malacca Strait – a vulnerable chokepoint both because of piracy threats and the US capacity to block it. Russia will also become the largest source of natural gas for China with the launch of the Power of Siberia gas pipeline in December, 2019.

The large volume of oil and gas in Russia-China trade (mineral fuel, oil and petrochemicals accounted for 71.6% of Russian exports to China in 2018) do not lead to Russia’s dependence on Chinese energy market. Russia’s oil exports are diversified: although China is the largest importer of Russian oil, its share in Russia’s oil exports is 17.3% as of 2018 (other big importers of Russia’s oil are Netherlands with share at 15%, Germany with share at 6.9%, South Korea with share at 6.2%, Poland with share at 5%). [7]

The launch of the Power of Siberia gas pipeline with export capacity of 38 billion cubic meters of gas per year also will not make China largest importer of Russian natural gas. The largest market for Russian gas is European. In 2018, Russia’s Gazprom supplied a total of 200.8 billion cubic meters of gas to European countries, which is over 5 times more than the Power of Siberia gas pipeline’s export capacity.

Russia is not dependent on China’s capital – neither investment nor loans. EU’s investment – both accumulated and flows – in Russia is much higher than Chinese. According to the statistics of Russia’s Central Bank, in 2018 Russia received direct investment (flows) from China totals 2.67 billion dollars, while from Germany solely – 17 billion dollars. [8]

More importantly is that China does not have debt instruments to exert any pressure over Russia. According to the Central Bank of Russia, as of July 1, 2019 Russia’s external debt to GDP ratio stands at 29.5%, while General government’s external debt liabilities to GDP ratio are at 4.0%.[9] Russia is one of the least indebted countries in the world. As of July 1, 2019 external debt of the Russian Federation totaled $479.8 billion, and indebtedness of General government amounted $64.5 billion. [10] Russia’s external debt (including corporate debt) is covered by Russian international reserves, and China’s share in it is really small. [11]

As a matter of fact, in its trade and economic relations with China Russia adheres to very cautious approach – due to asymmetry in trade and a gap in economic and financial might Moscow tries to prevent itself from falling under the economic dependence on China for growth, debt, trade, and logistics. That explains Russia’s restraints in participating in China’s Belt and Road Initiative (many of the initially announced projects under the auspices of the BRI has never been implemented), despite the fact that Moscow officially supports the BRI.

The chemistry and limits of bilateral relations

The defining features of Russia-China cooperation are such characteristics as “respect” (respect of political and economic models, core national interests and international initiatives promoted by its partner), “equality”, and “cooperation”. These characteristics are manifested in the fact that in their interaction the parties proceed from the search for areas of cooperation and consideration of the interests of the partner, even in such issues where some experts see potential sources of conflict of interests between the two countries.

In times of potential frictions the two countries voice their concerns to each other, discuss the issues and try to compromise, to reach mutually beneficial solutions. The two largest Eurasian countries have managed to avoid confrontation in Central Asia – a traditional sphere of Russia’s influence where China has its own expanding national and economic interests. Instead of seeing each other as a rival in Central Asia, Russia and China reached some sort of consensus over division of labor in this region with Russia dominating the strategic space and China the economic one, with Russia leading a free trade processes and a free flow of labor, and China dominating the infrastructure development in the region. More recently, China and Russia reached a compromise when they decided to conjugate the Russian initiative of the Greater Eurasian Partnership and China’s Belt and Road Initiative.

Where Western experts see potential “apple of discord” between China and Russia (like in Central Asia or Arctic), Beijing and Moscow manage to find promising areas of cooperation and win–win solutions. Russia and China were wise enough to realize that zero–sum game and rivalry for exclusive influence in different regions of the world will only harm the two countries’ interests. Putin remarks are very indicative in this regard: “about trying to contain China. I think this is impossible by definition. Anyone trying to do so will realize it’s impossible, and will certainly only hurt himself in the course of such an attempt”. [12]

As a result of this win-win logic, by now Russia-China relations have reached an unprecedented high level of strategic cooperation based on the principles of pragmatism and equality. The contemporary Russia-China relations are not about sacrificing countries’ national interests for the benefit of its strategic partner (that explains why China does not recognize Crimea as part of Russia, and Russia takes a neutral stance on Beijing’s claims in the South China Sea), but about taking into account and respecting the national interests and concerns of the partner when making foreign policy decisions, and not allowing transformation of any misunderstandings in full–fledged problems.

However, assessing current stage of Russia-China relations, one should be also careful in its analysis not to overestimate the depth and the prospects of Russia-China relations. While on the official level Russia-China relations are characterized as very rosy and picturesque, among both Russian and Chinese political and business circles, as well as in the expert communities there are much nuanced and mixed estimations of bilateral relations. For a long time both countries prioritized relations (both political and economic) with the US and the EU.

The imperative of China’s foreign policy has long been that the most important relations are those with the US. China’s approach has long been influenced by the fact that Russia was in the slow decline. From Chinese perspective, Russia is not dependent or absolutely loyal (like China’s all–weather strategic partner Pakistan or those poor, highly–dependent on China countries).

Russia also – since the establishment of the Russian Federation in 1991 – has been constantly focused on cooperation with the Euro–Atlantic space. Russia sees itself as having European identity. Russian politicians and business circles have close ties with the EU countries and the US (have property, business interests, investment there).

Currently the consensus within political, business, and expert circles of both Russia and China over the irreversible nature of Russia-China de–facto alliance or extremely close strategic partnership has not yet developed. The current chemistry in Russia-China relations is the chemistry between two Presidents – Russian President Putin and Chinese President Xi Jinping – and the pragmatic calculus from both Russian and Chinese side to meet its national priorities and promote national interests, and to also join efforts against unfriendly international environment and challenges from the US.

Since 2018, Russia-China relations indeed have entered a new era – an era when both Russia and China have become equally interested in strengthening and deepening of their partnership relations against the background of confrontation with the US. The US confrontational posture towards the two countries laid the strategic basis for Russia-China relations which since the turn of the century have been developing with upward trend anyway

 

[1] Vladimir Putin’s speech at the final plenary session of the 16th meeting of the Valdai International Discussion Club, 03.10.2019

[2] Military maneuvers “Vostok-2018”, 13.09.2018

[3] Vladimir Putin’s speech at the final plenary session of the 16th meeting of the Valdai International Discussion Club, 03.10.2019

[4] Joint Statement by the Russian Federation and the People’s Republic of China on the development of a comprehensive partnership and strategic interaction in a new era, 05.06.2019

[5] https://webgate.ec.europa.eu/isdb_results/factsheets/country/details_russia_en.pdf

[6] http://www.worldstopexports.com/top–15–crude–oil–suppliers–to–china/

[7] https://ru–stat.com/date–Y2018–2018/RU/export/RU/0527

[8] Statistics of the Central Bank of the Russian Federation

[9] Balance Of Payments, International Investment Position And External Debt Of The Russian Federation, January-September 2019, The Central Bank of the Russian Federation, 2020

[10] Balance Of Payments, International Investment Position And External Debt Of The Russian Federation, January-September 2019, The Central Bank of the Russian Federation, 2020

[11] Vasily Kashin, The West and Russian-Chinese Relations: Stages of Denial

[12] Vladimir Putin’s speech at the final plenary session of the 16th meeting of the Valdai International Discussion Club, 03.10.2019