NO. 8

2018 PUBLISHED BY THE SWEDISH INSTITUTE OF INTERNATIONAL AFFAIRS. WWW.UI.SE

Сhina's impact on

Russia’s economy

Vladislav Inozemtsev

On June 9, 2018, at the very same day when would have it, a Euro-Pacific country and is the G7 leaders got together at Manoir preordained to serve as a gigantic ‘bridge’ Richelieu in Québec, Canada, for their that links to . Therefore as more annual summit, Russia’s President doubts concerning Russia’s position in Vladimir Putin gleefully peacocked in in Europe were growing, the more active front of reporters in Qingdao, , became talks on both Russian standing side by side with the leaders of ‘Eurasianism’ and its ‘pivot to the East’. China, India, and several post-Soviet states, The latter idea was elevated to a highest who all are now members of the Shanghai rank, just a tad shy from becoming a Cooperation Organization. His three-day- national ideology, with official Kremlin- long state visit to China was used to linked experts drafting endless reports demonstrate how close the ties between the called ‘Toward the Great Ocean’, two nations were nowadays and how elaborated and extended every year. Since important China is for Russia. mid-2000s, China became a total substitute to the ‘East’ in the Russian sociological Without any doubt, China now appears one discourse even geographically ‘Russia’s of the most crucial allies of the Russian East’ was still the West: if one travels Federation – especially in a world Mr. Putin straight East from , she/he would deems Russophobic, claiming that it ‘is get to Novosibirsk, Kamchatka, southern evident and in some countries is simply parts of Alaska, northern Quebec, Ireland, going beyond all bounds’. China’s Britain, and Denmark – but by no means to influence on the Russian economy is either Beijing or Shanghai. humongous – and I would argue that it reaches far beyond the traditional issues of The China obsession was easy to explain. and investment (in both, actually, the First, in a geopolitical aspect, the things might go better than they actually partnership with Beijing in both bilateral are). Trying to elaborate a systemic look at relations and inside the SCO compensated the issue, I would focus on several Moscow for its subordinate position in dimensions of China’s role. regards to the almighty United States and to Europe, which Russia (at least Moscow Emotions believes so) will never become a part of. By cooperating with China, Russia makes up It might sound funny, but the first and for its loneliness in the contemporary world foremost element of China’s influence on and so regains the sense of greatness it Russia is the emotional one. Intermittently allegedly deserves. Secondly, from the (with short breaks in 2002-2003 and in economic point of view, with China on its 2009-2011,) Russia has positioned itself as side, Moscow may feel backed with a strong a staunch Western-sceptic, if not an open ally that grew up to the world’s second- adversary of the West. The entire largest economy and became both its ideological foundation of Mr. Putin’s greatest industrial powerhouse and its regime rests on the old assumption that biggest exporter of goods. With such a ‘Russia is not Europe’, that it should rather friend, Russia feels much more be called ‘Eurasian, or, as some researches economically secured even when facing

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some hostile actions from the West; which wants Russia to fully embrace its therefore I would argue that Putin’s recent secular religion of human rights, boldness could be at least partially democracy, and rule of law. Alexander explained by the ‘China factor’. Thirdly, Nevsky was canonized by the Russian cooperation with China has also an Orthodox Church in 1547, and seems to important ideological (or rather, anti- become a role model for Mr. Putin, who ideological) component: the leaderships in opted to side with China in his showdown both Moscow and Beijing claim they are not with the West. obsessed with Western ‘standards’ whatever it means: the doctrine of human To summarize, I would reiterate that the rights or the principle of popular democratic very nature of Mr. Putin policies, whether self-rule. This all makes the cooperation so economic, domestic, or international, seductive that the Russian political elite dooms him to believe that the Sino-Russian opts for it without thoroughly calculating its alliance is the ultimate one that secures both pros and cons. Russian sovereignty and uniqueness even at expense of some economic concessions. I would argue that many centuries ago some And because, as we all have learned quite adventurous Russians have already been recently, Putin means Russia, and the thinking along the same line. In mid-13th latter’s existence without former is century, when Russian principalities were unfathomable, what is good for the country attacked by the Mongols, the north-western is good Mr. Putin and vice versa. All this part of the country, the democratic republic makes the ties between Russia and China of Novgorod, waged a different kind of war, crucial to the current regime – and the one against the Western Catholics. The perpetuates them even as the direct positive young warrior prince, Alexander impact of the cooperation does not seem Yaroslavich, later called Nevsky, defeated evident at all. Swedes on a shore of Neva River and German crusaders from the Teutonic order Trade on the ice-covered Chud’ Lake. But, after securing his Western borders from those So far, the bilateral trade has been the factor Catholics who wished to convert the of crucial importance to Sino-Russian Russians into their faith, he approached the economic interaction. Starting in the 1992 Mongols, with whom he never crossed with a total turnover of a mere $5.86b it has swords, and who didn’t care about their reached a staggering $95.3b in 2014 before vassals’ religion, and submitted himself declining to the current $84.0b as of 2017. voluntarily to the Great Khan, who awarded China surpassed Germany to become Alexander with the yarlik to govern his land Russia’s largest trading partner in 2011 and as long as he pays taxes to the Khan. I think holds this position ever since. But before that today Kremli is guided by the same praising these impressive results one should logic: it would rather be a second-class look deeper into the issue – both into its partner of an ‘ideologically neutral’ China structure and into its dynamics. which does not intervene into Russia’s domestic affairs, and even to engage into Russia started its cooperation with China unfair trade with it, than to ally with Europe after the Soviet-Chinese relations were

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‘repaired’ in the late 1980s. As China took green (in 1992 the figure was the lowest at its first steps on the path to industrialization, $1.119b, in 2001 – the highest with $5.25b). Russia positioned itself as a superior Unlike many other nations, Russia run partner, so Beijing became a prime buyer of comparatively similar balances with Russian machinery and equipment as well partners both in the West and in the East – as of weaponry and ammunition. Back in but soon China became an exception. While 1995, these two groups of goods accounted Mr. Putin announced in his addresses and for 68 percent of Russia’s exports while oil speeches that Sino-Russian trade that the comprised only 4 percent and natural gas overall trade over must reach another record was not shipped at all. Acting as a more (the biggest figure that he mentioned back advanced nation, Russia then secured a in 2011, was $200b to be reached by 2020), surplus of $2.14b in bilateral trade, buying he rarely addressed the figures of either primarily textiles, cheap watches, and exports or imports. And one may easily replicas of the Japanese electronics. But as understand why: the Russia-Chinese China grew, trade structure started to surplus disappeared already by 2004, and change – and today it appears that in the eventually the deficit grew to $8.5b in 2007 eyes of China Russia looks not better than and reached $18.7b in 2010 (I should say in the eyes of Europe: a huge storage facility that it became considerably lower from for mineral resources with no proper 2015 onwards, and may be completely management. As of 2017, out of $41.2b of leveled out this year – but only because of Russia’s exports to China crude oil and oil the massive oil supplies I mentioned products accounted for 59 percent, timber – earlier). If one sums up all the balances in for 9 percent, coal – for 6 percent and ores Sino-Russia trade for the years Mr. Putin and metals – for a bit more than 5 percent. rules Russia in one or another capacity Combined oil, oil products and metals’ paying more than 30 visits to China so far, share was larger than that in Russia’s meeting with the current President Xi 25 exports to the EU while machinery and times, and praising Russia-China military supplies dropped to below 8 cooperation, they would be in red for percent of the total. Imports from China around $59b, or by far the largest trade were dominated by machinery, electronics, deficit Russia ever run with any other mobile phones and office equipment that in nation. To understand why it happened one total made 61.5 percent of their value. To should address one distinctive feature of summarize, Russia used the last quarter of Russia-China trade deals. century to add to its title of Europe’s ‘commodity appendage’ the status of If it comes to China’s trade in resources China’s raw material colony, and would with the rest of the world, its most crucial bring this process to full fruition with feature consists in a kind of a superiority launching pipelines to export natural gas to China establishes upon each and every its southern neighbor. partner she with. This superiority originates from a proactive investment Another quite important issue is the overall policy enabling Beijing not to buy the trade balance. Even during the most resources but rather either to exchange them challenging periods of its recent history for some loans or investments or to acquire Russia managed to keep its trade balance in concessions in different foreign countries

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thus making the stuff she imports relatively knows the exact price terms for the cheap. In Russia the Chinese leaders applied Gazprom natural gas contract. a bit more sophisticated technique using Russia’s two vulnerable spots. The first was Of course, no one should insist that the trade the geographical location of major coal and with China makes losses for the Russians. of some of oil and gas fields that made The huge Russian companies like Rosneft China the only possible buyer since the and Gazprom are developing new fields – alternative transportation costs were like Vankor or Chayanda – looking unbearable (I should mention here that a predominantly for Chinese demand. The huge part of Russian coal exports to China, majority of local firms in Eastern e.g. is effectively subsidized by the Russian and in the Russian Far East benefit from state through the rail cargo tariff [in 2016 trade with China. Russian citizens greatly the subsidies exceeded the entire profit of benefit of imported goods due to their all the Russian coal producers] since coal affordability, and the Russian retailers make makes 54 percent of Russian Railways’ tkm their profits in a great part from the Chinese turnover). Therefore China can press supplies. But in general the explosion of the Russian suppliers to lower their prices since Russia-Chinese trade comes basically due they have no real alternative except to close to both countries’ shared political values, their businesses. The second point is even which forced them to establish ever closer more telling: since China amassed huge ties. The Russian companies could have piles of cash she is able to make huge found better markets for their exports if the prepayments to the Russian companies that trade would not be dominated by are so ineffective and corrupt that are politically-motivated state corporations and always in debt. In the largest deals the the overall image of Russian business in the Chinese struck with the Russians – as in a world would be somewhat better. forward deal with Rosneft for supplying 45m metric tons of oil starting from 2004 So I believe the trends that are clearly till 2009, in another one for supplying 300 visible in Russia’s trade with China will m tons of oil from 2010 to 2030 and a deal only consolidate in the years to come: new of the same kind with Gazprom for pipelines (like one through Altai and supplying around 1.1tr cubic meters of gas that Mr. Putin debated with Mr. in 30 years from 2018 onward – the Chinese Xi at their recent meeting) will be build; paid the Rosneft $10b and $25b well in larger amounts of Chinese industrial goods advance; in the first case the money were will be imported into Russia as their flow used for repaying the loan issued earlier for from the West decreases – but the most buying the Yukos assets, in the second one - crucial ties – the ones created by bilateral for building East Siberia-Pacific Ocean oil FDI – that might bind together the modern pipeline, while Gazpom needed cash for its economies will supposedly remain ‘Sila Sibiri’ pipeline to China. In the first extremely weak by any contemporary Rosneft deal the oil bought by the Chinese standards. was in the end acquired at 80-84 percent of its average market price for 2005-2009, in the second the discount was around 15 percent, not to say that nobody actually

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Investments proved reserves as well as any natural gas field of size exceeding 50b cubic meters of In what one might call the ‘early years’ of proved reserves, let alone all projects in the Russia-China cooperation China’s role for Arctic and the entire off-shore drilling the Russian economy consisted mainly in a sector are deemed strategic). I would argue huge support for the Russian military- that the Russian officials’ rhetoric sounds industrial complex, by exporting cheap like they hoped that the Chinese would goods that helped the ordinary Russian invest into the Russian processing people to maintain their reasonable living industries – but they did not, simply because standards and in rejuvenating the economy China itself is developing as an of the eastern regions that border China. industrialized nation, and has never assisted Later it became vital for the Russian any other country to become industrialized. resource industries – but what appeared evident already in mid-2000s was the fact I would argue that the gap between trade that China is not very interested in investing and investment activities in China’s case is into the Russian economy. by far the largest that Moscow may record in relations with any other of Russia’s In general, it had a good reason for that. partners. As far as the European Union is China’s investment policies these days are concerned (without Cyprus), its overall rather sophisticated, I should admit. The trade turnover with Russia stood at Є248b money is put either into high-tech or in 2017, while the European accumulated advanced industrial companies that may FDI in Russia exceeded Є107b as of provide the Chinese counterparts with both January 1, 2018. But while China-Russia new technologies and the access to the new trade amounted to $84.0b in 2017, the Bank markets or into the ventures that grant a of Russia evaluates overall Chinese direct access to the natural resources which investments accumulated in Russia at paltry might be exported to China (hence - $2.84b, though some experts raise their investments in Venezuela, Angola, Burma, estimates up to $15.0b. Turkmenistan, and many other countries). The first type of investments goes to the One should also note about Chinese nations, which might be called investments in Russia that its major part ‘postindustrial’, and from where the new remains actually a portfolio investment. technological solutions originate. The One could mention here Beijing second type is channeled to those that might Enterprises’ purchase of 20 percent stake in be called ‘preindustrial’ and where only Verkhnechonskneftegaz for $1.1b, or natural resources come from. Russia Fosun’s $0.9b investment into 10 percent doesn’t fit into either of these categories: its stake in Polyus) (the most recent deal, the hi-tech sector is either non-existing or proposed acquisition of 14.2 percent stake linked to defense industries fully controlled in Rosneft from a Qatari investment fund by by the state and therefore closed for the CEFC China Energy Co., failed because the foreign capital, while the major major company’s management faced criminal resources have ‘strategic’ value and are not charges from the Chinese authorities. The available for purchase or even for lease (any Chinese invest into motor vehicles oil field larger than 70m metric tons of production, but 21 thousands Chinese cars

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produced in Russia by eight automakers, fresh loans from China, with only one make up only 1.3 percent of the Russian Russian corporation (the ill-fated and market for cars. The talks about Chinese operating under the U.S. sanctions RUSAL) investments in Russian real estate (there is now listed on the Hong Kong Exchange were plans to build a huge Chinese-owned compared to 41 traded at the LSE. residential quarter in Moscow) have never Moreover, I would say that the Chinese materialized. When Mr. Medvedev and Mr. respect both the U.S. and EU sanctions so Hu Jintao signed a broad deal on border their technological cooperation with the cooperation back in 2009, it appeared that Russians remains very modest (today the the only mineral deposits that are to be Chinese investments into Russia are still 2.5 developed are on the Russian side while the times smaller than those into Kazakhstan. entire processing remains China’s business. The Russians tried hard to change this At the same time the Chinese infiltrate each attitude by constantly asking Beijing for and every business connected with their broader financial support. Finally, it seems compatriots living in Russia or visiting the that a breakthrough was made during Mr. country: the Chinese tourism which is now Putin’s recent visit as a deal was struck on the rise is served by the Chinese guides, between Russia’s Vnesheconombank and Chinese restaurants, and even Chinese China Development Bank for releasing a currency exchange services; all these $9.5b line of credit to Vnesheconombank. activities are mostly illegal (e.g., only But I would argue that there is not so much Russian citizens are allowed by the law to to celebrate, due to one obvious reason. guide the tourist groups in Russia), but the authorities never took on these activities Transit and infrastructure issues because of ‘brotherhood’ and ‘friendship’ with the Chinese, and this provokes If one reads the language of the CDB-VEB mounting protests from the Russian deal carefully, she/he would realize that the businesses. However, I would argue that Chinese money was granted for ‘creating a Russia-China investment cooperation is as mechanism for financial support of regulated and as informal as is the entire integration processes within the Eurasian Russian economy. Economic Union and infrastructure projects in ‘One Belt, One Road’ countries’. The The huge disillusionment in the idea of transforming Russia into a kind of perspectives for Russia-China cooperation ‘bridge’ connecting the Eurasian landmass came in 2014, as the Western powers was a part of the Kremlin’s ‘grand strategy’ imposed sanctions on Russia following the for decades, but Russia proved to be unable annexation of Crimea and the Russia-led to do anything significant in this field alone, invasion into the Eastern Ukraine. At that so the Chinese ideas for ‘One Belt, One time the Kremlin was pretty sure that China Road’ received a warm welcome in the would become the major moneylender and Kremlin. Today there is not even a single investor for Russia as the Europeans and the highway connecting the Russian Far East American withdrew their support. But it with Western Siberia: for some parts of the appeared soon that the Chinese banks were year, especially in the spring and in the fall, not ready to step in: from 2014 to 2017 the the passenger cars cannot make it through Russian companies got less than $2b in the road. The aging Trans-Siberian railway

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is capable to serve no more than 95-110 Cup in Russia. The tournament is over, but million tons of cargo per year, from which not a single mile of the railroad was built. around 90 percent are either the goods No significant progress has been noticed so moved between different cities in Russia or far in constructing another strategic Russian export shipments, so less than 10 highway going from the border with million tons of capacity might be used to Kazakhstan to Central Russia and further to deliver Chinese goods to Europe or vice Europe – and it should not be a surprise, if versa (I would say that, if this capacity one takes into consideration that would be fully utilized, it would mean that construction of a modern highway between the Trans-Siberian route serves around 0.8 Moscow and St Petersburg was launched in percent of Asia-Europe trade, since 909 2002, and on;y a half was built. In June million tons of cargo have passed through 2018 the Chinese railway company CREEC the Suez canal in 2017 being carried by as has politely informed its Russian many as 17.6 thousand commercial ships. counterparts that it ‘believes the high-speed The so called Northern Sea Route, or the railroad through Russia will never pay off’. Arctic Passage, that supposedly provides the shortest transit line from China to The Chinese tried several times to engage in Europe, is rarely used, with only a dozen of these projects in hopes that they might transit ships passing through in 2017 accelerate the process of implementation. carrying 194.3 thousand (!) tons of goods. But the Russians give construction contracts only to Russian companies, most Russians, in order to change this situation, of which are owned or controlled by Mr. hoped both to extend the capacity of Trans Putin’s close friends like Mr. Rotenberg and -Siberian railway and to cut a brand new his son. As a result, since late 2000s, the ‘’ corridor leading from China to Chinese became much more active in Europe. It was, as I would argue, the most Kazakhstan, where they have successfully ambitious dream based on the belief in the built both a highway and a railroad from Russian resources: actually, the space itself Dostyk to the Caspian port of Aktau in was counted as a resource that might be cooperation with the local companies and used for connecting the continent. The even ordered an Italian engineering Kremlin appeared to hope to benefit not company TOTO Holding to design a bridge only from what is covered beneath the over the Caspian Sea to the Azerbaijan. All Russian soil, but from country’s territory the estimates I have seen indicate that the per se. As early as in 2009, the Russian very idea of commercial transportation of authorities started to speculate about high- goods by rail from China to Europe via speed railway between China and Europe Russia looks unrealistic, since even now its with its first stage, that from Moscow to cost is three times higher than the one for , to be built in 7-8 years. By ocean shipments, and if one talks about a 2014, however, the plan was developed high-speed rail, it may rise two to three only for the stretch going from Moscow to times higher from today’s level. The only , or a half of what was projected option, which looks quite reasonable, earlier, for the price of Rub1tr ($32b at the consists of shipping the goods then exchange rates) and scheduled for manufactured in Xinjiang, in the Western operation by the time of the soccer World part of China, to Europe via Central Asia

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and Turkey (several trains have already misleading idea that the Chinese want to taken this route, obviating Central Russia, ‘colonize’ Russia, as some experts claim, let alone the Russian Far East with its there are around 3m Chinese already settled Trans-Siberian railroad. in Russia. The real picture is more complex. Therefore, both for purely economic and managerial reasons, I believe the ‘Silk The Chinese immigration to Russia is rather Road’ from China to Europe would not go modest, it is estimated at around 330 across Russia, and all the promised thousand people with approximately the ‘investments’ will never be disbursed. This same number of Chinese coming and may become another source of leaving every year, most of them living disillusionment for the Kremlin, since the either in the bordering regions of the topic seems to make high-ranked officials in Russian Far East and Eastern Siberia, or in Moscow increasingly excited, and the major cities like Moscow and St. Russians are really fascinated by China’s Petersburg. The vast majority of Chinese successes in building its high-speed rail migrants keep their Chinese citizenship and network. And even while Chinese don’t stay in Russia only temporary for purposes want to disappoint Russians, eventually of their business and/or trade. The trend of unfeasibility of this ambitious project will marrying with the locals in order to secure become obvious, and Russia will lose its legal residence in Russia ceased to exist in chance to benefit from it, because of it poor mid-2000s, as the disparities in Russia’s management and total absence of any kind and China’s development became too of strategic planning. obvious. However, Chinese presence at Russia’s southeastern border generated two Are a Russian and a Chinese brothers serious issues. forever? First, as unexpectedly as this may sound, it The last, but not least is the issue concerning raised among the Russians living in the Far Russia-China social and cultural ties, as East, awareness of their European identity. well as their economic impact. The attitude After all those years of the Kremlin anti- towards Chinese as Russian’ ‘brothers’ that Western propaganda, less than 20 percent of was nurtured during the early years of the people in the central Russian regions Soviet-Chinese friendship, has been identify Russia primarily as a European replaced by mutual hatred of the last nation , and more than two thirds say it’s a decades of the Soviet Union, and then by a Eurasian country, in the Russian Far East sense of awareness, that, I would argue, has the perception is quite opposite: first of all never become a genuine friendship. Even because the locals can feel the difference though Russia perceives China the most between themselves and the Asians living important ally and economic partner, and on the other side of the border. Moreover, Russian citizens see economic cooperation though in the early 1990s, there was a with China as the most important for their significant and influential movement in wellbeing, many of them find ‘excessive’ support of a ‘Far Eastern Republic’ as an Chinese influence disturbing or dangerous. heir of the one that existed between 1920 This feeling originates in general from a and 1922, now the separatist ideas have

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simply vanished. It happened not because of are political ties between Moscow and government propaganda or fears of charges Beijing, they definitely fail to produce a that might be brought against separatists, sense of friendship between the two nations. but rather because the locals have realized The challenge of dealing with Chinese has that ‘independent’ Russian Far East would reawaken among Russians their European be a puppet state of the powerful China. identity to the extent, which doesn’t match the reality. Secondly, the Chinese economic expansion also raises concerns among the locals who During the recent three decades Russia’s believe the China’s purpose is not to geopolitical and geo-economic posture has conquer the Russian Far East but to ruin it. changed dramatically. Back in the late The reason for such an suspicion is based on 1980s, the Soviet Union was one of two the brutal economic exploitation of the local superpowers bordering a divided Europe, resources: Chinese cut Siberian forests where the GDP of the strongest economy, leaving behind empty deserts, hunt local that of West Germany was less than 70 wildlife ignoring every restriction, pollute percent of the Soviet GDP, and China tributaries that disembogue Amur River, whichs economy was roughly a third of the and force Russian tourists out reserving Soviet size. Now Russia faces the European most Siberian attractions from Baikal to Union in the west with the combined GDP everything else worth seeing to the East of of 5.2 times larger than the Russian one it to Chinese visitors. Chinese economic (calculated at purchasing parity ratio), and expansion is believed to be the primary China in the east with GDP 5.8 times larger. source of the local corruption and the In order to avoid its fate predicted in a tensions are clearly growing between the famous old Soviet joke of turning into a locals and the Chinese businesses. I don’t buffer state between China and Europe, think they would ever reach the degree of Russia should either to make a choice anti-Chinese riots that erupted in Indonesia between the EU and China as its main in 1998 and Vietnam in 2018 – first of all economic partner, or to establish equally because the number of Chinese in Russia is close relations with the both. I would argue much smaller and because the government that the Kremlin made its crucial choice in would do everything possible to safeguard favor of China, and it did so from 2005 its alliance with Beijing, though the risk are onwards for political and ideological there. reasons. The effort China made to dock Russia to itself in a purely economic sense Regarding tourism in general, I would say is shockingly small. However, it is enough. that it is a two way street. China holds a place in top-5 in both as destination for Today Russia is not trying to ‘diversify’ its Russian tourists and in terms of sending economic ties with Europe by adding China Chinese tourists to Russia. But I would as a trade partner. It rather really makes an argue that China is not perceived in Russia irreversible ‘turn towards Beijing’ by as a country where Russians would like to building new pipelines to China, organizing move or which living standards or cultural supply chains that lead to the East and traditions are appealing to Russians. Unlike opting for some gargantuan projects that in the Soviet times, no matter how strong China might be interested in. Mr. Putin’s

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choice in the end is to reject the historical Russia, the Russian Federation finds itself tradition of Russia that put its feet on the on paltry 16th place in the list of China’s Pacific shore as a European power that trading partners. China is the second largest reached the far ends of Asia and to propose consumer market in the world and the a ‘new’ vision of Russia as a rather biggest market for commodities and ‘Eurasian’, than a European nation. The industrial equipment, while Russia falls Kremlin now believes that any concessions behind from year to year. Therefore, while to China is justified as a price to pay for the Russians can claim the equal status with establishing ‘ever closer relationships’ and China, the reality proves the opposite. hopes that the rapprochement with Beijing Secondly, in order to be a developed nation delivers some tangible economic and Russia should industrialize itself and export financial results. But, from my point of not only crude oil, but processed investment view, these thoughts and dreams are plainly and consumer goods as well. China has wrong. successfully transformed itself exactly along these lines in recent decades, and it I should also say that my point of view is seems it has much more interest in keeping increasingly shared even among those who Russia as its raw materials supplier than to belong to Mr. Putin’s closer circle. The help it to develop itself technologically. In main problem lays not even in the Russia- other words, China wants Russia to remain China unequal statuses and in unbalanced economically backward and politically trade between the two nations, but rather in aggressive – this would perfectly fit with the strong pro-Chinese lobby that emerged Beijing’s geopolitical aspirations. within Russian ‘power vertical’ in the recent years. The Chinese companies that There is nothing Russia gets from China, it infiltrate Russia massively bribe both the cannot get from other potential partners; its local officials and the managers responsible economic ‘leaning’ on China is caused for the development of entire industries, and mainly by geopolitical and ideological if they are accused of any wrongdoings or motives. Such a policy is by no means new of some violations of existing rules, they for Russia – but I cannot recall any cases can easily appeal to high-ranking officials when sacrificing economic benefits for sake in Moscow who readily offer their support. of political ambitions has ever delivered Since the Russian judicial system these days positive outcomes for my country. is completely dependent from the executive power, there are no means at all to challenge the Chinese lobby that grows increasingly stronger.

For two main reasons, the future of economic interaction between Russia and China looks dubious. First, Russia is too Vladislav Inozemtsev is Professor of small for China to be treated as an equal Economics at Moscow’s Higher School of Economics and Director of the Center for partner. China’s economy is about six times Post-Industrial Studies larger than Russia’s one, and while China appears now to be #1 trading partner for

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