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Russian-Chinese cooperation: smokescreen or long-term reality?

September 4th, 2015

By Sarah de Geest – Research Assistant

Over the past year many observers have pointed to an increased cooperation between China and Russia. Oil deals, military cooperation, China’s president’s appearance at the Victory parade in May – all this has led some to believe China and Russia’s partnership has reached a new level of involvement. In the period May 2014-November 2014, China and Russia signed over 100 agreements. Despite this impressive expansion some analysts continue to argue the partnership is not as strong as it appears and is tearing at the seams. In response to such claims, this article proposes a contextualisation that takes into account current events. It argues that what can be interpreted as a drawback can be explained by other factors, and it proposes alternate reasons for a slowdown in Sino-Russian cooperation. Simply put – this article argues that the two countries – especially China – have no need to rush their extensive cooperation agreements. In the past couple of years we have seen a myriad of agreements between China and Russia, the most notable being the 30-year $400bn natural gas supply deal. Other than the energy related agreements, there is an overall significant increase in bilateral initiatives, as well as expansion of cooperation within two important multilateral organisations: the Shanghai Cooperation Organisation (SCO) and the BRICS.

Interestingly, the argument that cooperation is in decline came up right before the double BRICS/SCO summit in the Russian city of Ufa. A host of articles[1] actively minimised the importance of the changing the Sino-Russian relationship, especially focusing on the fact that bilateral agreements and energy cooperation agreements have yet to show concrete results. A comprehensive Reuters opinion piece[2] argues that no tectonic shift is taking place in Sino-Russian relations since the Ukraine crisis and that any claims that Russia pivots to China are an overstatement because: 1. there has been little actual implementation of important bilateral energy agreements, 2. the Chinese leadership have refused to “provide diplomatic support to Moscow where it matters. The Chinese leadership has not formally recognised the annexation of Crimea.” Before going into more detail on delays with regards to China-Russian oil deals – it seems prudent to address this particular argument. The central question arises whether the lack of recognition is really all that significant, as many would argue that the lack of condemnation of the Crimean annexation could be considered quite telling all on its own. It is perfectly natural that China does not formally set down its foot on an issue that is so controversial and would directly defy Western partners, especially since China is in the process of renegotiating its economic cooperation with the EU. Add to this Beijing’s established policy of flying under the radar and avoiding unnecessary attention on matters where it simply holds no interests, its reaction of “understanding /describing the annexation as justifiable” could be considered provocative.[3] More so, an ECFR report argues that China benefits from the divide with the West, as it would distract the United States from Chinese movements in the Asia Pacific, “buying China an additional ten more years of breathing space”.[4]

Moreover Putin arguably has no need for China to formally recognise the annexation. The only recognition Russia’s administration needed (and received) was the recognition it got from the Crimean referendum to “justify” its actions towards the Russian people. With regards to the Crimean annexation it could be noted that while countries such as Kazakhstan[5] may be alarmed by Russian expansionism, no real action on their part is to be expected partly due to increased cooperation[6] in institutions such as the Eurasian Economic Union (EEU). While the sanction regime imposed by the West may well affect Russia in the long term,[7] it appears that at this time Russia’s isolation in the region remains manageable and its isolation vis-a-vis the West is both incomplete[8] and a two-way street as Putin continues to add to his list of banned officials and increases border control specific goods.[9] Meanwhile the EEU has evolved to the point of negotiating a free-trade agreement with China. As a whole, Russia continues to further enhance its influence in the South Caucasus. Other than Georgia, which has been virtually abandoned by the EU and NATO, (short of a merger visit by President Tusk) and which is the last Western toehold in the area, Russia’s sphere of influence is next to complete.[10] Perhaps the recent announcements of President Xi and President Putin to coordinate the Silk Road and EEU economic zones have been most important, this move could effectively neutralise concerns both countries have about their economic interests in the region.[11]

With regards to the other point of contention; the lack of development on far-reaching energy deals (oil and natural gas, pipelines etc.) it would appear premature to conclude these struggles mean the parties won’t follow through eventually. First of all, Russia and China have a history of renegotiating their long-term contracts in energy when circumstances shift[12] – it is conductive to discuss contextual developments that could be influential and prompt such renegotiation. For example, despite Western claims to maintain sanctions to further pressure the Russian leadership, European companies have ample opportunity to do business with Russia.[13] For example several European energy companies continue to continue to do business with Gazprom as surprisingly only the United States has placed restrictions dealings on the oil giant. Such inconsistencies severely weaken the sanctions’ range. Big energy companies such as Shell (Anglo-Dutch), EON (German) and OMV (Austrian) recently announced the continuation of existing agreements like building a new pipeline under the Baltic Sea.[14] One could argue that allowing such cooperation shows the embarrassing reluctance of the EU to go as far as the United States for violations taking place at its own borders. So far the technology ban instated by United States’ sanctions causes Gazprom – and Russian companies more broadly – important hardship with regards to LNG export capabilities, stifling expansion to the Chinese and Asian market.[15]

The recent Iran deal further opens up the oil and gas market and will likely influence the play in China’s favour. China considers Iran a stable partner in the Middle East, and such a relationship could very well allow Beijing to exert greater sway in the region.[16] Since 2003 China has been an important economic partner for Iran – its investments played a role softening the sanctions’ effects. Now, as sanctions lift, Iran, due to it strategic location, will play critical role in China’s new Silk Road vision and China’s need to create extended infrastructure networks.[17] As China draws closer to both Iran and Russia, there are rumours pointing to a closer Russia-Saudi cooperation as well. In short, the international theatre on which the most recent version of Sino-Russian cooperation is built is shifting, so it is not unlikely that the 2014 agreements are reviewed in light of these events. Gazprom also announced that the May 2015 deal to supply China with Russian gas via the Western Siberia pipeline is showing good dynamics.[18] While this is just one example, it shows that the two continue to talk and further implement their plans for closer cooperation. Another potentially impactful decision that undermines the economic sanctions regime is military cooperation. Despite France’s decision to cancel the sale of two Mistral battle ships[19], Germany recently approved an €118m arms exports to Russia.[20]

Apart from pushing Russia into a deeper relationship with “big brother” (China), all these things could surely help explain Russia’s determination with regards to Crimea and Ukraine. If the West hoped to halt increased cooperation between the two powers, pressure relief could be considered a fortunate development. Meanwhile however it would be unwise to underestimate the potential of the Sino-Russian partnership. If the West continues to alienate Russia it will find more reason to ally itself with China, as in the past it has done so several times. For example Russia and China often find themselves on the same side of issues that hit the UN Security Council.[21] Despite aforementioned reasons and historical context that leads observers to believe that China and Russia don’t have a strong bilateral future, the Chinese and Russian leadership have ample reason and opportunity to further enhance their partnership. If all goes well, both Xi and Putin will be in charge of their respective administrations this coming decade (until 2024), providing unprecedented bilateral stability, which is more than can be said for the EU and US leadership. In this respect it makes sense for the two leaders of the neighbouring countries to forge closer alliances. Moreover both leaders address each other with great respect and admiration in public and find ways to express these views to their citizens (see documentary[22]), conveniently ignoring historical difficulties and stressing historical ties.[23] Because of this it is equally important to recognise that the closer cooperation is not by any means a friendship based on deeply held shared values – in many ways it is based on convenience. For instance, in 2014 Putin had little choice when he approached China on the oil deal as Western sanctions blocked access to a significant portion of the oil export market.

Make no mistake, Russia’s financial situation is suffering from an array of difficult circumstances: the economic sanctions regime, low oil prices, devaluation of its currency, the ruble etc. but it nevertheless calculated taking a stand would be worth it.  To counter the difficulties they have drawn closer to China out of necessity – they also sold valuable weapons technology on almost all of their current capabilities (excluding its newest T-14 Armata battle tank) and drove up overall defence industry spending[24] as a counterweight for its economic losses. Meanwhile, despite speculation, it appears that China finally gained Russian support for the long awaited SCO development bank. A recent article argues Russia would continue to oppose[25] the SCO development bank, but after the July summit in Russia these claims appear to ring hollow, as Russia’s Foreign Minister Sergei Lavrov signalled that the establishment of  “mechanisms of financial provision of the organisation’s projects is long overdue”, and China reaffirmed longstanding support.[26] Needless to say it will take time for institutions such as the SCO to fully develop shared financial institutions, but their establishment will certainly enhance the organisation reach and establish it as a permanent player on the international playing field, defying claims of its relative redundancy as a competitor to NATO. The steps taken by the SCO are arguably some of the biggest ones since its creation in 2001. Since then it slowly built its image, attracting prospective members and taking on observers. With the coming of a new SCO development bank and in naming India and Pakistan as future members, it will soon establish its image as a stable and influential regional player.

It is key to see Sino-Russian cooperation not as primarily a values-based relationship, but rather a pragmatic cooperation initiative underpinned by shared authoritarian values. Therefore, when bilateral agreements encounter delays, any probable explanation likely rests on contextual factors that influence this pragmatic relationship. Both parties however have a lot riding on this partnership and obviously look to find the best possible deal. It is probably unwise to dismiss or to underestimate the potential of Sino-Russian cooperation, especially considering the stance both of them take against the West on separate occasions (Crimea, South China Sea) in their effort to consolidate power vis-a-vis the West.

[1] See among others: http://uk.reuters.com/article/2015/07/08/duben-russia-idUKL1N0ZO2ET20150708http://www.ibtimes.com/china-russia-boost-military-technical-training-cooperation-should-not-be-seen-1989770, http://blogs.reuters.com/great-debate/2015/03/24/allies-of-convenience-chinas-xi-jinpings-just-not-that-into-vladimir-putin/, http://www.ft.com/cms/s/0/cd637c7e-f4a8-11e4-8a42-00144feab7de.html?siteedition=uk#axzz3i15bc49U .

[2] Column: Why Russia’s turn to China is a mirage, 8 July 2015, http://uk.reuters.com/article/2015/07/08/duben-russia-idUKL1N0ZO2ET20150708.

[3] It could even be argued that China arguably supports the Russian Presidents actions to “protect Russian speaking minorities” – it holds a similar a cultural appreciation for Chinese people worldwide which it all considers part of the Chinese ethnicity and culture despite living abroad [huáqiáo 华桥]. For writings on the subject see: http://dtic.mil/dtic/tr/fulltext/u2/a483586.pdf , http://chinachange.org/2015/06/09/chinese-students-studying-abroad-a-new-focus-of-ccps-united-front-work/.

 [4] A “Soft Alliance”? Russia-China relations after the Ukraine crisis, 10 February 2015, 2-4, http://www.ecfr.eu/publications/summary/a_soft_alliance_russia_china_relations_after_the_ukraine_crisis331.

[5]Making waves, if not ruling them, 1 August 2015, http://www.economist.com/news/europe/21660184-mixture-bluff-and-opportunism-vladimir-putin-talking-up-his-countrys-diplomatic-and.

[6] Partly because the Kazakhstan president considers itself among the founding  fathers of the EEU. , see ECFR report http://www.ecfr.eu/article/commentary_kazakhstan_and_the_eurasian_economic_union_view_from_astana395.

[7]Russia’s gas gambit – energy politics in Eastern Europe, 26 March 2014, http://www.hscentre.org/environment-and-energy/russias-gas-gambit-energy-politics-eastern-europe/.

[8] See Gazprom deals.

[9] Russia destroys banned Western food, 12 August 2015, http://learningenglish.voanews.com/content/russia-destroys-banned-western-food/2914059.html

[10]Viewpoint: What’s behind Russia’s actions in Georgia, 10 August 2015, http://www.bbc.com/news/world-europe-33675488.

[11] Eurasian Silk Road Union: towards a Russia-China Consensus?, June 2015, http://thediplomat.com/2015/06/eurasian-silk-road-union-towards-a-russia-china-consensus/.

[12] A “Soft Alliance”? Russia-China relations after the Ukraine crisis, 10 February 2015, http://www.ecfr.eu/publications/summary/a_soft_alliance_russia_china_relations_after_the_ukraine_crisis331.

[13] EU pledges to extend Russia sanctions, delays confirming, 20 March 2015, http://www.bloomberg.com/news/articles/2015-03-20/eu-pledges-to-extend-russia-sanctions-delays-confirming.

[14]Gazprom building global alliance with expanded Shell, 19 June 2015, http://www.reuters.com/article/2015/06/19/us-gazprom-shell-exclusive-idUSKBN0OZ0IQ20150619.

[15] Russia’s energy pivot to China, myth or reality, http://atimes.com/2015/07/russias-energy-pivot-to-china-myth-or-reality/

[16] Oil-thirsty China a winner in Iran deal, 14 July 2015, http://www.wsj.com/articles/oil-thirsty-china-a-winner-in-iran-deal-1436909582.

[17] Here comes the China Iran alliance, 27 August 2015, http://www.businessinsider.com/here-comes-the-china-iran-alliance-2015-8.

[18]Western route to China showing good dynamics – Gazprom, 18 August 2015, http://www.oilandgastechnology.net/pipeline-news/western-route-china-showing-good-dynamics-–-gazprom

[19]Saudis intent on Russians French Mistrals, 10 August 2015, http://www.defenseindustrydaily.com/russia-to-order-french-mistral-lhds-05749/.

[20]Germany approves €118m arms sales to Russia, http://asia.jokpeme.com/2015/08/germany-approves-118m-in-arms-sales-to.html.

[21] Syria http://www.reuters.com/article/2014/05/23/us-syria-crisis-un-icc-idUSBREA4M03220140523, Iraq etc. http://www.cnn.com/2012/02/08/opinion/lopez-russia-sanctions-cold-war/.

[22] Handsome Putin praised in bizarre Chinese propaganda video, 9 May 2015, http://www.independent.co.uk/news/world/asia/handsome-putin-praised-in-bizarre-chinese-propaganda-video-10238291.html.

[23] As Russia-China alignment grows, shared vulnerabilities emerge, 12 May 2015, http://www.worldpoliticsreview.com/articles/15743/as-russia-china-alignment-grows-shared-vulnerabilities-emerge#.VVIMCIYBagk.twitter.

[24]Russian defense industry is negotiating military-technological cooperation with over 20 countries, 22 June 2015, http://www.armyrecognition.com/june_2015_global_defense_security_news_uk/russian_defense_industry_is_negotiating_military-technological_cooperation_with_over_20_countries_12206151.html; Despite sanctions, Russian defense revenues soaring, 29 July 2015, http://www.defensenews.com/story/defense/policy-budget/industry/2015/07/26/despite-sanctions-russian-defense-revenues-soaring/30589895/.

[25] By opposing SCO development bank, is Russia biggest loser?, 25 March 2015, http://www.eurasianet.org/node/72701, Russia gives way to China in BRICS and SCO, 17 July 2015, http://www.lowyinterpreter.org/post/2015/07/17/Russia-gives-way-to-China-in-BRICS-and-SCO.aspx.; Putin and Xi Jinxing discuss projects to combine the Silk Road economic belt with EEU, 8 July 2015, http://tass.ru/en/economy/806984.

[26]China to support creation of SCO development bank – Vice Foreign Minister, 10 July 2015, http://sputniknews.com/politics/20150710/1024470980.html.

About Sarah De Geest

Sarah De Geest is a Research Assistant in the Global Governance division. She holds two Masters of law with distinction from KULeuven and the School of Oriental and African Studies.