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.