Sino-Russian Relations
Sidelined Russia Makes Deals with China

Chinese Premier Li Keqiang and Russian Prime Minister Dimitry Medvedev have signed a host of massive trade and currency deals in Moscow. In particular, the two giants, fearful of containment by the West, are drawing closer on energy resources, finance, and technology. The Wall Street Journal has the details:

Among the more significant deals, Chinese banks agreed to provide credit lines worth more than $4.5 billion to Russian banks and companies, which have been effectively frozen out of Western markets by sanctions imposed over the Ukraine crisis. […]

Russia, one of the world’s largest energy producers, has in recent years sealed large deals with China, one of its top consumers. Rosneft delivers oil under a 2013 contract worth tens of billions of dollars a year. As Western financing has dried up in recent months, Russia has offered China stakes in its oil fields, overcoming yearslong fears of Chinese encroachment in its far eastern regions.Russia and China agreed to a three-year local currency swap worth 150 billion yuan ($25 billion) aimed at increasing trade in domestic currencies and cutting reliance on the U.S. dollar.

The countries on Monday also signed an intergovernmental accord on natural gas supplies, which Russian state company OAO Gazprom said would allow a 30-year gas deal, worth some $400 billion and agreed to last May, to go into effect.

Last comes a deal specifically aimed at skirting U.S. global economic leverage:

China’s Export-Import bank will provide credit lines worth some $2 billion each to state banks VTB and Vneshekonombank, said the Russian lenders, both of which are targeted under Western sanctions. VTB said its credit line, issued in yuan, would be used for “a broad spectrum of products from China, from produce to high-tech equipment.”

As the WSJ notes here and elsewhere, the figures are not trifling: This trend kicked off with a $400 billion gas deal. China’s newfound access to Siberian energy resource projects is a major strategic win for Beijing—one that would have been hard to imagine a few short years ago. And perhaps the most explicit swipe at U.S. economic hegemony is the opening of a currency swap line worth about $25 billion in yuan, aimed at circumventing the U.S. dollar’s advantage as the world’s reserve currency. All in all, Medvedev and Keqiang signed more than forty trade deals.

Moscow has been moving toward Beijing since Western sanctions started cutting into Russia’s all-important foreign energy sales. We are now seeing early signs that the warnings were justified that the current policy of “sanctions without strategy” would push revisionist powers like China and Russia to set up separate and parallel economic systems. That’s not to say that sanctions are either useless or bad in themselves—only that they should be adopted judiciously and as part of a coherent strategy.

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  • qet

    Isn’t this a little like the Molotov-Von Ribbentrop Pact? I mean, does either side really expect the other to honor whatever agreements it has made? Can either party be considered a reliable partner to the other?

    • No, this is not anything of the sort. For, Stalin and Hitler, hated each other (or at least fear each other) more than they did had any overriding sentiment towards Churchill’s England, or Roosevelt’s isolationist America. But, now, both Russia and China knows in their heart-of-heart that US is a status-conscious power, ever so determined to keep locked-in her beneficial outcome in which the current liberal-minded world order gives to her. While, Russia (most definitely) and China to certain extent, will like to see that lop-sided world order (which is essentially hegemonic order imposed by America and her allies on others) must be reformulated or at least “reform” in-order to take account of the current multi-polar distribution of power and state’s interests.

      Hence, to America, her intention is to say, the world order as it had exist since the end of the WWII (which was also renewed at the end of the Cold War) is good enough for everyone, even, if we in the “land-of-the-cowboys”, are more equal than any other power. And therefore, the concerns and the interest of any other nations must be address within that “established order”, in which we are the guardian of it, as much as it’s “final jury” of what is acceptable conduct by any other nation.

      And, since, any self-respecting nation out there in the world (like the China or Russia) would never assent to that sort of self-serving agenda of America, but may acquiesce, grudgingly, in a temporarily terms (if her interest dictates, as was the case in most of the post-world war eras for China) then, I am afraid, from this point onward, every nation around the world, would do every thing within their power to remove themselves from the “hegemonic strictures” in which American-led world order had put them in.

      Hence, knowing how the strategical view of Russia and China, dove-tailed each-other, particularly in the sense of loosening American’s imposed order on them, then, I do not in a million years see these two powers quibbling with each other on so insignificant issues about paying each other’s contract with a straight dealing.

      After all, they will either hang together (meaning if they pool their ability together they will stand a better chance of withstanding any strategical or financial containment dreamed up by Uncle Sam), Or they will hang apart, which will mean, each of them, can be isolated individually, and being done in for the worse by the western’s powers (headed by the Americans), who are determined to hold on to their fading hegemonic containment against others.

      So, in a word, this currency swap between them (which means by-passing the Dollar’s strong-hold of the international finance and therefore busting Western’s sanctions on Russians banks) as well as strategically lining-up their engagement in so many areas of bilateral cooperation is what these two powers will continue to do so long as USA gives every indication that she has a “well-thought-out-containment plans”, tailored-made for each of these powers in turn. Hence we shall see how this strategical great-game of out time will unfold in the years to come.

      • qet

        Yes, well, that so-called hegemonic order imposed by America has been an order that has permitted both Russia and China, once they freed themselves from the death-grip of communism, to grow rich and powerful. Now they can resent it and oppose it all they like, but they owe everything they now are to that order, which also goes by another name: world peace.

        • I agree that the Hegemonic word order imposed by America at the zenith of it’s power right after the end of WWII, has been on the whole an aiding tool for world prosperity. But, the point is that as each country had grown in wealth and in confidence, American’s become rather obsessive about the ownership of that order, and, in fact, America went out of it’s way to see to it, that no nation can be anything other than a subordinate power to her, and therefore only useful to that order in so long as it agrees with America’s agenda.

          Hence, what that order had delivered is not in contention in here. However what is in dispute is what should replace that order that others had out-grown out of it’s usefulness. So, strategy (and the dispute we are dealing with) is what should replace that fading order, or even, whether there is a need for a different multi-polar order at the present-time.

          And, since modern America is essentially like Britain of late 19th century, desperately trying to hold on to her “strategical preeminence” against others (or at least against Germany of late 19th century) then she is not even entertaining the possibility that her hegemonic imposed world order is needed to be reform, and then get other nations input (or at least get them to buy-in into that order.

          Consequently, in so far so most powerful nation around the world is concern (particularly China or Russia) they are no longer satisfied to be lectured about their role (imagined by America) in so far what they role in the US’s hegemonic order should be.

          And, therefore, once it become clear that US are in effect putting these two powers into the “category” of those who should be contained as opposed to parlay with them and get to a point in which consensual multi-polar world that can replace this failing order can be entertained, then it’s intellectual obvious what a great-game of strategical competition has open up in this area, and, therefore, what world order will prevail (or even if it could prevail) is really open question.

          • Sibir_RUS

            Sergey V. LAVROV, Russian Foreign Minister: «The world is changing, the share of the United States and Europe in the global GDP is shrinking, there have emerged new centers of economic growth and financial power, whose political influence has been soaring accordingly. There will be no stopping this trend. True, it can be resisted, and such attempts are being made, but it is really hard to go against the stream. This is the cause of many crises.»

  • Sibir_RUS

    In a new IMF report on development prospects of the world economy is reflected, writes British The Financial Times’, main highlight: in terms of gross domestic product (GDP)based on purchasing power parity (PPP), the seven largest emerging markets overtook the Big seven industrial countries. Hypothetical new G7, said the “Financial Times”, includes 7 countries: Brazil, Russia, India, China, Turkey, Mexico and Indonesia. The total GDP of the “new leaders”, calculated at PPP (purchasing power parity)is of 37.8 trillion dollars. He at least “slightly”, but exceeded the total GDP of the “old” G7 (Canada, France, Germany, Italy, Japan, UK and USA), which reaches to 34.5 trillion dollars. Revelation IMF in “Financial Times” appeared on the eve of the G20 summit in Australia, on which was invited Vladimir Putin.
    “Hello, new world!”

  • Sibir_RUS

    S.V.Lavrov: Russia-EU Relations Approach ‘Moment of Truth’.
    The relations between Russia and the European Union have approached the “moment of truth,” when the vector of their long-term future development needs to be defined, Russian Foreign Minister Sergei Lavrov said Tuesday. “During our previous contacts we mentioned that relations between Russia and the European Union have approached a kind of moment of truth, when we need to make a decision about the long-term vector of cooperation and answer the question: are we strategic partners for each other, or do we still remain geopolitical rivals?” , he said. Over the past few months, a number of Western countries, including the EU member states, have introduced several rounds of economic sanctions against Russia. In August, Moscow responded to the measures by implementing a one-year ban on certain food imports from the countries that imposed anti-Russian sanctions. Earlier on Monday, Russia’s top official said that Moscow opposes confrontation with the West and a refusal to cooperate is not an option either for Russia or for the West. Moscow is ready to discuss a free-trade zone with the European Union, Russian Foreign Minister Sergei Lavrov said Tuesday. He said that the Russian-led Eurasian Economic Union will formally start its activities on January 1, 2015. “We remain open to cooperation with other states, other regional groups, ready to discuss free trade zone with the European Union and are ready to build the integration model step-by-step,” Lavrov said.

    Damage to Europe from the anti-russian sanctions, according to data given by the Minister, may reach 40 billion euros this year and 50 billion in the next. Russia also suffers losses, but the situation strengthens the resolve of the Russians to concentrate resources to upgrade the industry and to work more efficiently.

  • It doesn’t look like an alliance to me, more like China sensing Russia’s desperation and making good use of it, buying up future Russian oil and gas output.

    • Sibir_RUS

      China takes the 1st place in the ranking of the largest economies in the world, based on the International Monetary Fund’s reckoning of purchasing power. China will become not only a country consumer of Russian oil and gas, but also transit country. Our oil and gas through China will go to India and to the Asia Pacific region. Soon India will be part of the SCO. Russia will ensure energy security of the SCO countries.

      • That’s what I’m saying: China, a large and growing economy, is in a position to dictate its terms to Russia, a much smaller, stagnating, resource-based economy cut off from Western financing and oil & gas technology.

        As for gas transit, I suggest that you look at a physical map before you suggest sending Russian pipeline gas to India through China.

        • Sibir_RUS

          There is nothing wrong with that China dictates the terms. Russia also dictates is normal operating practice, during which the parties came to an acceptable solution.

        • Sibir_RUS

          “As for gas transit, I suggest that you look at a physical map before you suggest sending Russian pipeline gas to India through China.”
          It is not clear that surprises you. Look at a map and calculate the distance from Western Siberia to Germany and compare this distance with India.

          • I said a “physical map”, that is a map that shows relief. Ever heard of the Himalayas?

          • Sibir_RUS

            Oil and gas pipeline will pass through the mountains.
            At the upcoming BRICS summit, India intends to open the question of the extension of the Russian gas pipeline through China to its limits.
            The project of construction of the Russian-Indian oil pipeline is planned to coordinate until mid-2014.
            In this pipelines more need India than Russia, hence the scepticism on the part of Russia and confidence from India. If India will invest sufficient “cash”, the mountains not a hindrance.

    • Sibir_RUS

      In South-East Asia price of gas is on average more expensive than anywhere else. Russia has competition advantages.

      • So does Turkmenistan. Ever wondered about the price of gas Turkmenistan sells to China? It’s $9-10/mmbtu, and Gazprom will be selling at roughly the same price at the border, which also happens to be Gazprom’s EU price. But unlike the EU, there’s no pipeline to China. Gazprom will have to build it and develop the source fields before it starts pumping. The economics is dubious at that price level. Well done, China.

        • Sibir_RUS

          China has its own gas production.
          Current gas production in China 108 billion cubic meters per year. Chinese growth in domestic production by 2020, up to 200 billion cubic meters per year. Even Turkmenistan supplies.
          But this is not enough. The appetites of China grow.
          You don’t know the calculation formula for gas with China.
          Price is an important factor but not the only one.

  • GS

    Perfect. Given the demographics and the geography, digesting the asiatic part of russia would take the chinese at least several generations.

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