By William R. Spiegelberger*
(FPRI) — Ultimately, Russia and the West can and should be partners, not Russia and China. The infrastructure is in place: numerous oil and gas pipelines, extensive rail connections, and convenient ports. Russia and the West face common challenges from China, whose economy has greatly outstripped Russia’s and threatens—over time—to overtake America’s as well. Rich and powerful Russians, especially public officials, may toe Vladimir Putin’s pro-China line, but they tend to have their homes in London and New York, not Shanghai; their money is in Switzerland and Cyprus, not China; and their children attend Eton and Harvard, not Tsinghua University.
The idea that Russia could have normal relations with the West anytime soon is not one that is widely held today. Eugene Rumer and Andrew Weiss have convincingly argued that it would require “magical thinking” to believe “that somehow Russia will address Western concerns by embracing sweeping changes to its domestic political order, or by replacing its well-established brand of foreign policy opportunism and calculated risk-taking with cooperation.” The Sino-Russian relationship, as Sergey Radchenko notes, does have certain indisputable factors going for it: it is not hierarchical, neither side expects the other to embrace its ideology (apart from authoritarianism and anti-Americanism), and the two countries can be expected “work hard to avoid frictions” because “they understand … that they are destined to be neighbors.”
The authors above present an arguable case, but only so long as one conflates the Russian Federation, a triune entity comprised of a people, a territory, and a government, with Putin, its current ruler. This is an error with a pedigree. In 2014, Vyacheslav Volodin, Putin’s erstwhile deputy chief of staff, famously said “No Putin, No Russia.” However, as soon as Russia the country is distinguished from Putin the man, their argument begins to fray. It then becomes clear that Xi Jinping may be a friend of Putin, but he’s no friend of Russia. Rather, Xi has been using Russia to do much of his anti-Western dirty work—at Russia’s expense—and the West has been inadvertently helping Xi by weakening Russia to the benefit of China. Today it would therefore be more accurate to say “No Xi, no Putin.” Russia, in contrast, would do better by aligning itself with the West.
Whether Russia or Ukraine will prevail in the Russian-Ukrainian War is an open question, but one thing seems clear: China has been the big geopolitical winner thus far. Without firing a shot, spending a renminbi, or sacrificing a soldier, it has wrested a deep discount on Russian oil and stands poised to squeeze further lucrative concessions from the Kremlin as Russian troops die in Ukraine and the Russian economy buckles under Western sanctions.
Russia receives drones from Iran and logistical assistance from Belarus, but from China it has gotten little more than a shoulder for Putin to cry on. Xi’s policy toward Russia may be summed up as much talk, little action. True, Xi has reason to be cautious: He is wary of violating US and European sanctions, at least too flagrantly. Yet Xi also has a discrete reason for not offering Russia material assistance. An ever-weaker Russia will have “little choice but to accept unfavorable terms in commercial negotiations, to support Chinese positions in international forums … and even to curtail [its] relations with other countries.”
Follow the Energy
Since oil and gas exports bring in the bulk of Russian state revenue, Chinese engagement with the relevant Russian industries provides a glimpse into the true nature of the China’s attitude toward Russia.
In 2021, Europe imported about ten times more Russian gas than China, and despite the now-reduced flow of gas westward, the volume going east to China is unlikely to rise any time soon. There simply isn’t enough pipeline capacity. In theory, more gas could be pumped through the main existing pipeline from Russia to China (Power of Siberia 1 or “PS1”), since it has not been operating at full capacity owing to technical difficulties at one of its two East-Siberian gas fields. Those difficulties are not, however, likely to be resolved in the near future. Western and Chinese companies with the necessary cash and know-how largely stopped work in Siberia due to sanctions when Russia invaded Ukraine.
Another way to get more gas flowing through PS1 would be to connect it to West-Siberian fields and the Yamal Peninsula. Such a connection, the Altai Trans-Siberian pipeline (also known as the Power of Siberia 2 or “PS2”), has long been in the works, but according to a recent report on the Russian economy, the “idea of a Trans-Siberian Pipeline was first blocked by China in the aftermath of the annexation of Crimea, given [China’s reluctance] to pay higher European prices for gas.” Of course, China could change its mind and begin financing PS2, but the result would almost certainly be punishing terms for Russia. The only other means of transporting gas—by ship—is not feasible in light of Russia’s limited liquified natural gas capabilities. As a result, relatively little Russian gas has gone, is going, or is likely to go to China.
Oil, which brings Russia about three times more revenue than gas, presents quite a different story. Oil is far less dependent on pipelines than gas since it is transportable also by rail and tanker. In past years, China has imported only about a third of the volume of Russian oil that has gone to Europe, though the China’s share has recently been increasing. But there’s a rub: Russia’s profit margin.
China is currently buying Urals crude at a $35/barrel discount off the benchmark Brent crude price. Given the current Brent price of about $85/barrel, and Russia’s relatively high cost of production of $40-45/barrel, the profit margin before shipping costs is only $5-10/barrel. When the considerable shipping costs to Asia are factored in, Russia is probably just breaking even on its oil sales to China.
The volume restrictions on gas and the $35/barrel discount on oil mean that “China won’t be able to make up for Russia’s losses in European markets.” Putin’s “pivot to the East” with regard to hydrocarbons has come at a significant cost. Apart from China’s hard-bargaining on raw-material prices, there also seems to be too much “strategic mistrust between the two countries” to permit them to capitalize even on the available opportunities, much less create new ones. High Russian expectations of foreign direct investment from China have simply “not materialized.” Instead of “playing Europe by engaging with China, Russia is getting played by China.”
In a rare moment of candor after his September 15, 2022, meeting with Xi in Samarkand, Putin remarked that “our Chinese friends are tough bargainers.” This may be the closest Putin has ever come to an admission of weakness, and it explains a lot about what Xi may see in Putin. As Alexander Gabuev, senior fellow at the Carnegie Endowment for International Peace, put it, “Getting cheap [Russian] commodities and weapons designs is good for [Beijing] and the departure of the Putin regime and the unlikely prospect of a pro-Western government in Russia is a terrible nightmare for China.”
Putin’s Popularity in Russia
If the polls are to be believed, Putin has retained much of his popularity in Russia despite his setbacks in Ukraine and the deteriorating Russian economy. But that does not mean that he is making anyone in Russia happy. The Russian military has been humiliated. Probably tens of thousands of Russian soldiers have perished and even more have returned home wounded. Putin’s so-called “partial mobilization” has convinced hundreds of thousands of Russian men to flee the country. The security services have been discredited for their botched assessment of Ukrainian readiness to fight. Rich Russians have seen much of their wealth blocked and their yachts seized. High inflation and the departure from Russia of over a thousand Western companies are mercilessly squeezing the Russian middle class. The poverty rate is likely to double or triple. The conclusion seems inescapable: Putin is making no one in Russia happy, not even himself.
Though many Russians will blame the West, not Putin, for Russia’s straitened circumstances, Putin’s faltering ability to defend the interests of anyone but himself and his regime raises some ticklish questions. Could it be that he is not as strong as he claims? Hasn’t his Ukrainian misadventure undermined Russia’s ability to defend itself? Several Russian municipal officials, in a rare show of dissent, recently made just such a charge. Could it be that Putin’s interests are not well-aligned with those of the country as a whole?
In 1242, Alexander Nevsky faced the Teutonic Knights in the west and the Mongols in the east. He chose to fight the Teutons in the Battle of the Ice, but to submit to the Mongols. In exchange for his submission, Nevsky received a lucrative sinecure. For over twenty years he collected taxes for the Mongols from his Russian subjects, who, as fate would have it, would go on to savor the subtle joys of Mongol rule for over two centuries. Some Russians call those years of rule the Mongol-Tartar Yoke.
Today, 780 years later, Putin is retracing Nevsky’s footsteps. Whereas the West would clearly rather see Putin ousted, China finds him quite suitable for its purposes, which are twofold. First, to let Russia to do much of China’s dirty work chipping away at the West, especially the United States. Second, to sever Russia from its Western trade partners so that Russia will be forced to sell raw materials to China at a deep discount. This explains why Xi likes dealing with Putin: he is good for China. Putin, in contrast, prefers dealing with Xi to the West because Xi offers Putin moral support, though little of substance, in exchange for discounts on Russian energy. This is bad for Russia.
Even the most blinkered Kremlin zealot must understand that the Russia-China relationship is, as Dmitri Alperovich and Sergey Radchenko explained, “not between equals but between a supplicant and a benefactor.” This realization may cause the Kremlin to “rethink its pursuit of malign anti-Western policies and restrain its aggressiveness” and turn back to the West. A few years ago, I put this argument to two well-informed people, one of whom is now a very high-ranking CIA official, the other a prominent political commentator and former Russian intelligence officer. Both had the same response, the gist of which was: “Don’t hold your breath!” Indeed, the consensus then was that “it may be years before Russian leaders adopt a less confrontational posture toward the West.” That, however, was before Putin invaded Ukraine.
It is rarely possible to predict when a given regime will fall, but Putin’s odds of remaining in power must have plummeted in recent months. Losing what was supposed to be a short, swift, victorious war can have serious consequences in Russia. Tsar Nicholas I’s defeat in the Crimean War led to the abolition of serfdom under Alexander II. Tsar Nicholas II’s humiliation in the Russo-Japanese War resulted in the 1905 Revolution, and his bungled effort in World War I then set the stage for the Russian Revolution. Leonid Brezhnev’s ill-considered foray into Afghanistan materially contributed, by most accounts, to nothing less than the collapse of the Soviet Union. Much may likewise hang on the outcome of Putin’s so-called “special military operation” in Ukraine.
The Russo-Ukrainian War brings certain internal contradictions of Putinism into sharper focus. How long will the Russian people tolerate a leader who has led their country into a disastrous, bloody foreign adventure? Who has forsaken lucrative terms with the West in favor of exploitative terms with the East? Who no longer even pretends to take their votes seriously? Who lives large at the expense of his country? Who, in short, is not delivering the goods? These questions are open, and will remain open until the Russian people decide. George Kennan was right when he said that there is “nothing less understandable to foreigners” than the “ways in which people advance towards dignity and enlightenment in government.”
So long as Putin remains in power, it is right and proper for the West to employ coercive measures to undermine his ability to menace Russia’s neighbors and subvert Western institutions. It would, however, be foolish and counterproductive for the West to abet China’s instrumentalization and exploitation of Russia when the West’s (and Russia’s) real problem is Putin and Putinism, and its end goal (and Russia’s) should be to see Russia evolve into the kind of country that Kennan, in 1951, thought would be a tolerable presence in the world. Kennan’s three criteria of a “new Russia” are as valid today as they were seventy-one years ago (alas, so little has changed!). He hoped for a “tolerant, communicative and forthright” Russian government that would “stop short of that fairly plain line beyond which lies totalitarianism” and “refrain from pinning an oppressive yoke on other peoples.”
The West should not drop its stick as Russia continues to wage war against Ukraine, but it must always bear in mind that the stick is aimed at Putin and his regime, not the Russian people. A concerted effort should be made to encourage the Russian people “to at least imagine a future in which Russia is an influential, independent player on the global stage that seeks to peacefully and profitably coexist with the West.” At the same time, the West should also offer Putin’s potential successors some juicy carrots, since it is they who need to be offered an “off-ramp” so that Russia will be able to “to rejoin global trade and investment system in a way that will benefit Russians.” They could, for example, get their seized yachts back, visit their children at Eton and Harvard, and enjoy all the benefits that come from reintegration into the Western legal financial systems—provided they first renounce their false prophet who has led Russia down the road to vassalage and impoverishment. Russia and the West have everything to gain; only Putin stands to lose. As for China, it should do just fine without exploiting Russian weakness.
The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.
*About the author: William R. Spiegelberger is a US lawyer currently practicing in Vienna, Austria. From 2007 through 2017, he was director of the International Practice Department at United Company Rusal PLC in Moscow. He received his JD from Columbia University, where he is a member of the National Advisory Council of the Harriman Institute. His book, The Enforcement of Foreign Arbitral Awards in Russia, was voted Russian law book of the year in 2015 by the Russian Association of Corporate Counsel.
Source: This article was published by FPRI