Asia Times: Russia and China: friends in business, but Asian axis not imminent



	March 11, 1999	atimes.com

Central Asia / Siberia

Russia and China: friends in business, but Asian axis not imminent
By Sergei Blagov

MOSCOW - Business ties between Russia and China have given their relationship a fresh boost, raising hopes that these can help ease the economic challenges both countries face and make for deeper relations in the future.

Russian analysts are upbeat following a Feb. 24-27 visit here by Chinese Prime Minister Zhu Rongji, whose pragmatic approach could well reverse flagging trade between the two nations.

Zhu and his delegation signed 11 agreements with Russian officials and held talks with President Boris Yeltsin and Prime Minister Yevgeny Primakov.

Afterwards, analysts expressed hope in the revitalization of economic ties, which have been set back by Russia's economic crisis and a slowdown in China's growth.

After all, Moscow is keen to supply the huge Chinese market with vast energy resources from Siberia, as well as to export arms and nuclear equipment.

''Zhu's visit to Moscow will certainly help enhance bilateral economic ties because both nations are interested in developing Siberian energy projects,'' said Anatoly Kozlov, an expert with the Moscow-based Institute of Far Eastern Studies.

Among the accords between China and Russia, apart from those between Chinese provinces and Russian provinces in the Far East, were a trade protocol for 1999.

However, Primakov conceded that the two nations are unlikely to meet a target to bring bilateral trade volume to $20 billion a year by 2000, from $5.48 billion in 1998.

Russia's main exports to China include fertilizer, steel, timber and machinery, while its main imports are consumer goods and food items.

Chinese enterprises have investments in Russia worth just under $100 million, while Russian investment in China has reached nearly $150 million, according to official statistics.

A Chinese group has finalised a deal to buy property in Moscow. Russia, which sits on a quarter of global natural gas reserves, eyes access to the Chinese market via a multibillion-dollar pipeline project designed to export Siberian gas.

During Zhu's visit RUSIA Petroleum and China National United Oil Corp. signed an agreement to prepare a feasibility study for the Kovykta gas project.

The project envisages installation of a 2,300-mile pipeline between the Kovykta field north of Irkutsk, and China's Shangdong province to carry 20 billion cubic metres of gas annually.

The original project included undersea links to South Korea and Japan, but this has been scaled down due to the Asian crisis and brought the cost estimates down to $4 billion from the earlier $10 billion to $12 billion.

Other problems plague the project, ranging from debates on whether the Kovykta field contains reserves big enough to justify a pipeline and financial problems faced by some of the involved firms.

China National United Oil Corp has also signed an agreement with Russia's second biggest oil producer YUKOS and the oil pipeline monopoly Transneft on a feasibility study for a pipeline between the two countries.

It signed a separate agreement with YUKOS on doubling crude oil supplies to China to one million tonnes in 1999. And under a new deal, Russia's UES energy monopoly will increase supply of electricity to the Chinese State Energy Corp.

Russia's Irkutsk region is now mulling the construction of a 500-kW power line to export electricity to China.

Clearly, despite a background of economic turmoil, Russia still hopes to get access to Asian energy markets through huge pipeline projects.

But analysts argue that with the economic crisis Russia - even with its 200,000-kilometre-long network of pipelines - is unlikely to make these projects competitive.

In recent years, Russia-China ties have also involved nuclear cooperation.

In December 1997 they signed an agreement, the biggest bilateral contract so far, for Russia to build a $3 billion nuclear power plant in Lianyungang, eastern China.

The Russians are also said to have offered help in building a research nuclear reactor of the high-velocity neutron type in China.

Moscow and Beijing have also expanded military sales.

China has purchased 48 Russian Su-27 fighter jets, with combat range of 3,680 kilometers. In 1996 Beijing paid more than 1 billion dollar for a license to produce 200 Su-27s in China within the next 15 years.

Beijing has purchased several Russian-made naval vessels and ''Kilo''-class submarines, believed to improve considerably the combat capabilities of China's air force and navy, notably in sea operations.

Russia's annual military sales to China now total around $1 billion, equivalent to up to 30 percent of Moscow's arms exports.

Together, all these have stoked hopes among some for close relations within spheres other than commerce - such as a wider strategic relationship founded on common security and political interests.

Chief among these interests is Russia's and China's opposition to unilateralism in world affairs. Under this shared view on the need for a ''multi-polar world'', the world order should be one which no single power, read the United States, dominates, as the Kremlin mantra goes.

Russia-China relations improved in the late 1980s, so now both countries describe their ties as ''cooperation aimed at a strategic partnership in the next century."

For more than two decades starting from the mid-1960s Moscow and Beijing, allies in the previous decade, had been engaged in a rivalry for supremacy in the communist world that culminated in border clashes in 1969.

Signs of warming ties have spurred talk by some circles in Moscow of possible military rapprochement with China.

The strategic partnership between Russia and China ''should be enriched by a military alliance'', said Roman Popkovich, chairman of the Defense Committee in the lower house of Parliament.

Primakov recently said he favoured a strategic triangle involving China, Russia and India. But China dismissed Primakov's idea, though it had criticised the North Atlantic Treaty Organization's planned expansion into eastern Europe and U.S.- British air attacks against Iraq.

Indeed, good ties with China are crucial for Russia as it carves out a role as an Asian player. But the ''strategic partnership'' between Russia and China - let alone a military alliance or strategic triangle - is unlikely to materialize any time soon.

(Inter Press Service)