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The Ukrainian Crisis: Impact On Sino-Russian Relations – Analysis

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The Russian confrontation with the West over Ukraine from 2014 gave a boost to Sino-Russian relations. While China did take some steps to support Russia in this conflict, the Chinese ability to do so remains limited and strong interdependence has not been achieved.

By Vasily Kashin*

With the start of the Ukrainian crisis, a new narrative about Russian-Chinese relations has emerged and gained widespread popularity. This narrative is based on two contradictory interpretations of what happened between Russia and China in the last two years. According to one interpretation, Russia has counted on Chinese support at the beginning of the crisis, hoping that China would save the Russian economy from the consequences of the Western sanctions.

Instead, China decided not to do anything and just watched as Russia took economic blows from the West. Even more, China used that situation as an opportunity to weaken the Russian position in some areas, such as Central Asia. According to another point of view, during the crisis Russia has become so dependent on China that it has had to adjust its foreign policy and follow the Chinese lead in areas like the South China Sea.

Propaganda?

These theories owe much to the Russian government propaganda which, during the acute phase of the Ukrainian crisis in 2014, had clearly overblown the issue of Chinese support to Russia. The purpose was most likely to prevent panic among the population at the early stage of the conflict. However, there was a price: when the media and the public saw that the expected projects failed to materialise, that caused the general feeling of disappointment.

In reality, however, very few within Russian officialdom really believed that China would be able to reduce the impact of sanctions in any decisive way. China probably would even like to help, but was clearly not capable of doing so. The most serious sanctions imposed on Russia were the financial ones, which limited the ability of the Russian banks to borrow abroad. Mainland China’s financial sector was unable to perform the same function for Russia; mainland Chinese financial industry was huge, but overregulated, unreformed and lacked the necessary expertise.

The Chinese could do little to help the Russians deal with the Western financial sanctions, but what they could do, they did. Major Chinese state-run banks during the crisis started to provide big loans to a limited number of Russian state companies and to businessmen close to the Russian leadership. The most notable recent example was the US$12 billion loan provided by the Export-Import Bank of China and China Development Bank to Yamal-SPG LNG project controlled by Gennadiy Timchenko, an influential Russian billionaire who was in the Western sanctions lists.

During the worst period of the Russian economic crisis in December 2014 the Chinese officially offered to provide financial and economic help to Russia. However, the offer was politely rejected. The economic crisis was not nearly as serious as it was made out to be by the outside world. There was a concern that the decision to accept the Chinese assistance would greatly weaken Russia’s negotiation position on other economic issues.

Overblown Problems

The idea of the Russian-Chinese ‘competition’ and ‘lack of trust’ in Central Asia is overblown. The realignment of economic relations of the Central Asian countries towards China started long before the Ukrainian crisis and was accepted as inevitable by Russia. One cannot fight geography and China is the key market for the Central Asian commodities.

However, in 2015 Russia still was the major trading partner for the two most important regional countries, Kazakhstan and Uzbekistan. Russia remains the main destination for labour migrants from Uzbekistan, Kyrgyzstan and Tajikistan and the worker remittances are important for their economies. Kazakhstan and Kyrgyzstan are members of the Russia-led Eurasian Economic Union (EEU).

Russian-Chinese competition theories concerning the Central Asia region also tend to ignore two major political factors. The first is that the political strategies of all of the regional countries are about careful political balancing between the major powers and for that balancing act cooperation with both Moscow and Beijing is necessary. Another factor is the paramount Chinese fear of the US-supported ‘colour revolutions’ in the neighbourhood.

The issue of political stability in the Central Asian countries is at the very heart of Chinese policies in the region, especially after the ‘Tulip revolution’ in Kyrgyzstan in 2005. Fierce political competition possibly destabilising the region and opening the doors to Western intervention is the last thing Beijing (and Moscow) need.

The Southeast Asian Factor

Can the recent Russian moves in Southeast Asia, such as President Putin’s support for China’s position on UNCLOS arbitration and the joint Sino-Russian military exercise in the South China Sea, be attributed to the growing Russian dependence on China? Not really.

Russia’s position on the UNCLOS arbitration that set back China’s interests in the South China Sea seems to be determined not by any developments in the Asia Pacific; it was mostly by the fact that Russia is now going to face a similar UNCLOS arbitration which Moscow would like to avoid.

In late August 2016 the Ukrainian foreign affairs minister Pavel Klimkin stated that Ukraine would soon start the arbitration procedure against Russia concerning the exclusive economic zone (EEZ) of the Crimea. In this situation the Chinese decision to reject UNCLOS arbitration jurisdiction using the sovereignty clause sets a useful precedent for Russia. As for the exercise, Russia has just reciprocated the Chinese move in 2015 when China sent a naval squadron for the joint Russian-Chinese manoeuvres in the Eastern Mediterranean, during which the Chinese ships visited the Black Sea.

*Vasily Kashin is a Senior Research Fellow with the Institute of Far Eastern Studies in the Russian Academy of Sciences. He also works in the Centre for Comprehensive European and International Studies, Higher School of Economics. He is currently a Visiting Fellow at the Military Transformations Programme of the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.


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RSIS

RSIS

RSIS Commentaries are intended to provide timely and, where appropriate, policy relevant background and analysis of contemporary developments. The views of the author/s are their own and do not represent the official position of the S.Rajaratnam School of International Studies (RSIS), NTU, which produces the Commentaries.

One thought on “The Ukrainian Crisis: Impact On Sino-Russian Relations – Analysis

  • October 17, 2016 at 3:40 pm
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    Moscow has long and unsuccessfully been trying to position China as its ally, and to drive a wedge between China and the United States, but it is above its capabilities. If we take into consideration the fact that in 2015 the trade turnover between Russia and China (60 billion US dollars) was 10 times less than the trade turnover between the USA and China (600 billion US dollars), it becomes clear that Beijing has no reason to complicate relations with Washington in order to please the Kremlin’s geopolitical ambitions.
    Not everything is going well in the bilateral Russian-Chinese relations either. In 2015, Russia’s trade with China decreased by 30 %. Despite its huge, 180 billion cubic meters, volume of natural gas consumed annually, China still does not need Russian gas. That’s why Gazprom’s persistent offering to supply China with its gas fails. For example, in 2014, Beijing refused to finance the project of the Russian Power of Siberia Gas Pipeline because the gas price did not suit it.
    August 22, 2016, the Maran Gas Apollonia tanker arrived in the Chinese port of Yantian with US liquefied natural gas (LNG). It was the first delivery of US liquefied natural gas to China from the USA’s Sabine Pass new export terminal. This news caused confusion among the functionaries of Gazprom, refusing to understand how the “Chinese friends” could buy US LNG at 290 US dollars per 1,000 cubic meters, while the Russian LNG from the fields of Sakhalin-2 project was cheaper? Obviously, the whole thing is that almost all Russian LNG has been contracted by other customers, and the American LNG production volumes today far exceed the production volumes of Russian LNG. Besides, the expansion of production of Russian LNG slower due to the US and European sanctions.
    Moscow is also irritated by the fact that China without licenses clones and copies Russian military equipment and weapons and without permission sells them to third countries. Such examples of “inadequate friendship” between Russia and China are not rare.
    Much to the Kremlin’s displeasure, China has friendly and mutually beneficial relations with Ukraine, as evidenced by Beijing’s intention to implement large-scale joint projects with our country. For example, the state-owned Antonov Enterprise and the Aerospace Industry Corporation of China (AICC) signed August 30, 2016 an agreement on completion of the second An-225 Mriya — largest in the world transport aircraft and organization of its serial production in China under the license from the Antonov State Enterprise. It is expected that the Chinese company will also finance the serial production of cargo aircraft An-178.
    In August 2016, China finished testing and again proposed to build a deep-water port (25 meters deep waters) on the coast of the mainland of Ukraine. Previously, China planned to build a deep-water port in the Crimea, but investors have publicly stated that they would not deal with the puppet regime of the occupied Peninsula. Now the Ukrainian government must decide — whether a port is needed or not. It is expected that the bulk of the investment for the project will be provided by the Chinese side.

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