VIVEK Y. KELKAR, MUMBAI
Russian troops and tanks are unnerving the US and Europe on the borders of Ukraine while China looms over the South China Sea and Pacific. Vladimir Putin and Xi Jinping appear to have their interests aligned and their alliance secure. But who really holds the cards in that relationship?
Putin and Xi met virtually last December 15, making a conspicuous display of their bonhomie. “A new model of cooperation has been formed between our countries—one based on foundations like non-interference in domestic affairs and respect for each other’s interests,” Putin told Xi on television. The Russian and Chinese flags were placed carefully in the camera frame; their public display was ornamented with such terms as, “old friend,” “dear friend,” and “esteemed friend.”
But what calculations lie beneath this display, and who has the real power in this “new model of cooperation?”
Russia and China have common interests, to be sure. They’re both powers with considerable military heft who seek to drive a wedge between the US and its allies, whether across the Atlantic or the Pacific and the South China Sea.
They are both irredentist powers who terrify their neighbors. The Kremlin covets control over Ukraine and Belarus. China has never made a secret of its plan to absorb Taiwan along with Ladakh and Arunachal Pradesh, territories now under Indian control.
Putin and Xi, both armed with nuclear weapons and an appetite for destabilization, are authoritarians who brook no dissent. Both are keen to denigrate and discredit Western democracies. Both require the other’s “non-interference” as they pursue their geopolitical goals.
Xi and Putin share a similar goal of dominating their regions economically. Over the last several years, Putin has spoken of his vision for strengthening the Eurasian Economic Union, a single market among Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan, much like the EU. Xi’s Belt and Road Initiative will involve a vast network of roads, railways, fiber-optic cables, pipelines, and shipping routes via the Artic that link markets from Korea to the UK, with China holding the reins. The venture spans Russian Manchuria, Central Asia, and Eastern Europe, all regions either within Russia or contiguous. That makes Russian acquiescence crucial.
A marriage made in heaven; one would think.
But Putin is surely aware that Russia is disadvantaged in its relationship with China. China has more cards to play in Asia. China has access to the vital links of the South China Sea and the Indian Ocean. China’s landmass abuts far more of Asia’s vital economic engines than Russia’s. Its diaspora spans Singapore and Malaysia; its supply chains extend to South Korea, Sri Lanka, Pakistan, and Africa.
In recent years, Xi and Putin have talked up their trade cooperation. “The trade structure is diversifying. Of course, energy accounts for over 70 percent of our exports, but this is natural,” Putin said last year. The trade that Putin talks about is little more than crude oil and natural gas.
Putin has tried in recent months to portray Russia as a technologically advanced exporter, stressing Russia’s sales of nuclear power, aircraft, and even a missile warning system to China. But for China, Russia is little more than a source of raw materials and weapons—and soon, China won’t need Russia’s weapons.
It might be smiles and “Dear Friends” today, as Chinese and Russian interests temporarily converge, but soon, China will be in the driver’s seat. Then, we’ll see.
Russia’s position as a global leader in arms manufacturing and exports is slipping. In October last year, a US Congressional Research Service report pointed out that China is Russia’s second-largest market for arms, but sales peaked years ago. In the early 2000s, Russia sold a host of weapons to China: fighter aircraft, missiles, radars, surface-to-air missiles, helicopters, submarines; anti-ship and anti-aircraft guided-missile destroyers. But China has now indigenized most of this Russian technology. SIPRI data indicates that China has already surpassed Russia to emerge as the world’s second-largest arms producer.
Moscow and Beijing have announced several strategic weapons projects over the past few years, including a joint early-warning missile defense system, space technologies with military uses, and AI programs. But as the West has learned, China is not interested in long-term, reciprocal exchanges of technology. China’s goal is self-sufficiency, and it is more than willing to steal technology to that end. Ultimately, Russian arms sales are giving China the expertise with which to develop its own industry. The benefit to Russia from such sales and joint projects will be short-lived.
Last June, the Center for Strategic and International Studies highlighted this point, noting that “the recent upgrade in military relations has come at a significant price for Russia,” predicting that China would use its access to Russian technology to build a new generation of advanced Chinese weapons systems—which will ultimately give China a significant advantage in the Pacific. But unless Russia gains access to China’s technology base, it will find itself at a growing disadvantage. There is little reason to think it will: Once China has acquired Russia’s technology and manufacturing skills, its arms industry will have no incentive to maintain cooperation with its Russian counterparts.
China and Russia share a 2,600-mile border, but infrastructure links between the countries remain poor. They share only a handful of railway crossings. Three of the BRI’s six corridors pass through Central Asia, not Russia.
China provided financing through its Silk Road Fund and state-owned enterprise to several downstream petrochemical companies in Russia, but BRI projects remain more hype than reality. Flagship BRI projects like the astronomically expensive Moscow-Kazan high-speed railway have been repeatedly delayed. Estimates of the size of China’s investments in Russia are distorted by the US$22 billion railway; once you subtract that, it’s not nearly as much as it seems at first glance Only a handful of cross-border projects—the crucial Power of Siberia pipeline, and two bridges in Russia’s far east—have been completed. Russia’s gains from China’s vaunted BRI initiatives are thus quite limited. Central Asian states that were once part of the Soviet empire have probably gained much more.
Russia’s natural resources, especially in oil and natural gas, have skewed its economy. In 2019, 39 percent of Russia’s federal budget revenue came from fossil fuels.
Thanks to Western sanctions, Russia is profoundly reliant upon China for investment in its oil and gas industry. The Yamal LNG project in the Russian Arctic could not be completed without Chinese monetary and technology support.
China, which has pledged to decarbonize its economy by 2060, will need an ever-larger amount of natural gas as it weans itself off coal. Liquified natural gas from the Gulf and other parts of the world is transported to China largely by sea and then through the Malacca Straits. These Straits and other chokepoints are vulnerable to interference by unfriendly naval powers. This is the primary attraction, for Beijing, of a relationship with Russia: the possibility of transporting Russia’s natural gas to China over land. Sinopec, one of China’s largest energy companies, estimates that by 2040, China’s demand for gas will reach 620 billion cubic meters, nearly double its current level. This is similar to Europe’s consumption, current and forecast.
The Power of Siberia pipeline, owned by the petrochemical giant Gazprom, started pumping gas from Siberian fields last year. In 2022, it’s expected to reach its full capacity, 36 billion cubic meters per year.
But the new pipeline, Power of Siberia 2, is more interesting. Jointly owned by Gazprom and the Chinese National Petroleum Corporation, it connects the Yamal gas fields to Mongolia and thus to China. These are the fields that supply natural gas to Europe, via Germany and Turkey. Work on the pipeline has begun. The pipeline is expected to begin pumping 50 billion cubic meters of gas per year by 2030. This gives Russia an advantage in its dealings with Europe and a disadvantage in its dealings with China.
To ship LNG from the Yamal gas fields via the Arctic, over the so-called Polar Silk Road, Russia needs Chinese assistance. Because the US has sanctioned the banks that fund the pipeline, Russia was obliged to ask China for help. The Russian firm Novatek wound up finishing the pipeline with Chinese funding and Chinese companies wound up holding 20 percent of the equity. Russia’s other state-owned gas giant, Rosneft, is heavily dependent on the Skovorodino-Mohe oil pipeline, which transports 30 million tons of oil per year to China.
Beijing will retain the option to diversify energy sources, but Russia’s largest oil and gas companies will be left with pipelines that go nowhere but China. Beijing will, growingly, be able to dictate terms to Moscow.
In trade overall, China also holds the upper hand. China’s share of Russia’s exports has increased from 10.5 percent in 2013 to nearly 20 percent last year, most of this fossil fuel. Trade the other way is paltry, even including the arms and energy exports. Russian goods made up just 2.4 percent of China’s imports last year, reflecting the massive gap between the two countries’ manufacturing bases.
So it might be smiles and “Dear Friends” today, as Chinese and Russian interests temporarily converge, but soon, China will be in the driver’s seat. Then, we’ll see.
Putin, however, seeks to create the illusion that this is a relationship of equals. His very public virtual summit on December 15 followed on the heels of his visit to India, his first visit abroad in 20 months. The December 6 trip to New Delhi was timed to coincide with the delivery of India’s first batch of S-400s, the fruit of a deal signed in 2018.
The timing of Putin’s visit to New Delhi and his summit with Beijing were carefully orchestrated to give the impression that Moscow is a critical player in Asia. Just after Putin’s meeting with Xi, a Russian presidential aide, Yuri Ushakov, announced that Putin had addressed “the topic of cooperation in the Russia-India-China format.” There has been no summit-level meeting between the Indian and Chinese leaders since May 2020. The armies of the two powers—one a superpower, the other a superpower aspirant—remain in a standoff. Ushakov’s words suggested that Russia could be a peacemaker if China and India played their cards with Russia right; and if they didn’t, Russia could be the power that puts its thumb on the scale. In the event of another hot war between India and China, the comment implied, Russia could lend its diplomatic or military support to India. This could be quite damaging to Beijing.
“The leaders,” Ushakov continued, “agreed to continue exchanging opinions in this regard and to endeavor to hold the next summit within the RIC framework in the near future.” He noted that Putin “informed Xi Jinping about the visit to New Delhi on December 6 in this context.” Neither India nor China commented on Ushakov’s statement. They could not be expected to do so. But clearly, Putin was conveying the message that in the conflict between China and India, Russia has significant heft. The underlying message was that it would be unwise for India to jump with both feet into the United States’ camp on Ukraine.
Is the Kremlin really in a position to play a role in Asia in the coming decade, or is this just smoke and mirrors meant to distract from Russia’s underlying weakness? Can you build real power, in the long run, with nothing but arms and fossil fuels? Perhaps. But Russia’s growing economic dependency on China leaves Putin and the Kremlin with fewer cards to play globally than one might at first think.
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Vivek Y. Kelkar is the co-founder and editor of the Cosmopolitan Globalist.