Russia’s partnership with China: An alliance of necessity

By Sergei Blagov

Chinese leader Xi Jinping attended the May 9 Victory Day Parade in the Russian capital, ignoring the western boycott of the event. The move came as the latest sign of Moscow’s drift eastward, a move that has been expedited by the Ukrainian crisis.

Both leaders appeared keen to demonstrate close ties. During the parade, Chinese President Xi Jinping, was sitting on President Vladimir Putin’s right-hand side.

In contrast, Western leaders refrained from attending the parade over the Ukrainian crisis. Other no-shows included North Korean leader Kim Jong-un and some former Soviet presidents, notably Russia’s closest ally, Belarus President Alexander Lukashenko.

Xi was the most closely watched of 30 foreign leaders attending the Victory Day in Moscow.  Chinese soldiers also participated in the Red Square parade for the first time, in another symbolic event.

Key bilateral moves took place ahead of the celebration in Red Square. Putin and Xi held talks in the Kremlin on May 8 and issued a bilateral joint statement. Putin afterwards hailed China as Russia’s “strategic and key partner.”

The most significant step was a pledge by Russia and China to develop energy and trade partnerships. Both sides signed a number of agreements, including deals on Russian gas supplies to China and joint projects. Russian gas giant Gazprom and China National Petroleum Corp (CNPC) signed a deal on gas supplies to China via the so-called Western route.

With the ongoing Ukrainian crisis threatening Russia’s energy trade with Europe, the energy deals underscore the fact that Moscow is increasingly keen to re-orient towards East Asia.

The deals reflect Russia and China’s complex history on the energy front. In the past decade, Russia and China struggled to agree on gas prices. Moscow made its first pledge to export Russian gas to China in 2006. Gazprom initially offered to supply gas at European price levels, while CNPC insisted on lower prices.

Russian officials had earlier expected a final agreement on gas prices to be concluded in 2009, with supplies to begin flowing in 2014-2015. But in October 2009, Gazprom and CNPC were only able to agree that gas prices would be connected with the “Asian oil basket.”

However, the Ukrainian crisis proved instrumental in dispelling disagreements over gas prices between the two countries. After years of fruitless bargaining, it took Moscow and Beijing just a few months following the regime change in Ukraine to clinch a gas deal.

In May 2014, both sides agreed a $400-billion deal for Russia to supply China with 38 billion cubic meters (bcm) of gas annually from 2018 for 30 years via the Eastern route.

Putin said in Moscow on May 8 that construction had already begun in Russia to pipe gas to China. Putin also signed into law a bill earlier this month to ratify the Eastern route gas deal with China.

Russia also wants to increase bilateral commerce with China. Russia’s trade with China in 2014 reached $88.4 billion, down 0.5% year-on-year. Putin said on May 8 that this was mainly due to adverse market conditions and declining energy prices.

In contrast, bilateral trade numbers over the last three years have remained largely steady. In 2012, Russia’s trade with China reached $88.1 billion, up from $38.8 billion in 2009 and almost $60 billion in 2010.

In 2011, Moscow pledged to increase the turnover in bilateral trade to up to $100 billion a year in 2015 and $200 billion a year by 2020. However, these pledges have seemed slow to materialize.

Russian energy supplies to China remain an important element of the bilateral trade. Putin noted on May 8 that Russian crude oil shipments to China reached 28.5 million tons last year, an increase of 40% year-on-year.

Russia began shipping crude oil supplies to China via the East Siberia Pacific Pipeline (ESPO) from January 2011. According to the agreement concluded in 2009, Russian state-run energy giants Rosneft and Transneft pledged to supply 15 million tons of oil to China for 20 years in exchange for Chinese loans totaling $25 billion.

Putin wants to take such energy cooperation between Russia and China further. He hailed new bilateral energy projects on May 8, including nuclear power and development of shelf deposits in Russia’s Arctic and Far Eastern regions.

In a yet another symbolic sign of Moscow’s eastward shift, Russia and China also prioritized joint infrastructure mega-projects. On May 8, Putin said China could invest 300 billion rubles ($60 billion) in a high-speed rail link between Moscow and the Russian city of Kazan to be completed by 2020. This project may become part of a high-speed rail link between Moscow and Beijing that would cost some 7 trillion rubles ($140 billion)

Meanwhile, the summit meeting in Moscow also discussed strategic matters. In their joint statement, Putin and Xi Jinping pledged to develop bilateral strategic partnership, and sustain global stability.

These verbal pledges of “strategic partnership” are being backed up by upcoming joint naval drills between the Russian and Chinese navies. Later this month, Russia and China plan to hold joint naval exercises in the Mediterranean Sea for the first time in mid-May. Nine naval vessels from the two countries are expected to participate.

In the past, Russian officials have made no secret that Moscow’s alliance with China was targeted at opposing what it perceives as western interventionism. But the geopolitical spin is changing. Moscow now increasingly views its economic and security partnership with China as a foreign policy priority which is aimed at countering western moves to isolate Russia.

Sergei Blagov was a reporter in Vietnam for six years. He is the author of Honest Mistakes: The Life and Death of Trinh Minh The (1922-1955) (Nova Science, 2001). He can be contacted at: sergeiblagov@mail.ru.

(Copyright 2015 Asia Times Holdings Limited, a duly registered Hong Kong company. All rights reserved. Please contact us about sales, syndication and republishing.)



Categories: Asia Times News & Features, Central Asia, China

Tags: , , ,