Russia and China: the Potential of Their Partnership

CSS Analyses in Security Policy CSS ETH Zurich No. 250, October 2019, Editors: Fabien Merz and Lisa Watanabe

Russia and China: The Potential of Their Partnership

Russia and China are celebrating their “strategic partnership”, and have been vastly expanding their cooperation since 2014. Their close alliance is based on economic and geopolitical considerations. While it is mutually beneficial, it also has its limitations. However, in the mid- term, both China and Russia appear to be willing to overlook potential fields of tension, for instance in Central Asia.

By Jeronim Perović and Benno Zogg

Russia is increasingly orienting itself toward Asia. President Vladimir Putin’s vision of a “Greater Europe”, which pictured a free-trade zone from Lisbon to Vladivostok, has given way – at least since the Ukrainian crisis of 2014 and the subsequent Western sanctions and Russian counter-sanctions – to the idea of a “Greater Eurasia”. Moscow now tends to highlight its position of power at the center of the Eurasian landmass and the new importance of Asia for Russian foreign policy. China plays a crucial role in this context. There is no other head of state whom Putin has met more often than President Xi Jinping. Pro-government media outlets in Russia depict China in a very positive light, and public perceptions of the neighboring country have also improved. Vladimir Putin and Xi Jinping discussed their cooperation and made bliny, Russian pancakes, at the Eastern Economic Forum in Vladivostok in September 2018. Anadolu Agency / kremlin.ru With their “strategic partnership”, Putin and Xi are demonstrating more than just symbolic unity. Trade between the two countries has rapidly increased in the past after long hesitation, Russia has begun partnerships with the respective other veto years. The two national economies appear selling latest-generation arms to China, and nuclear power. At the international to be mutually complementary: Russia and in 2018, for the first time ever, a level, the two states are united by their supplies energy and raw material, while Chinese troop contingent participated in opposition to the influence of the US and China exports technology, industrial goods, Russia’s large-scale Vostok (“East”) military its allies in international bodies such as the and consumer goods. There is potential for maneuvers. UN. Russia and China both reject further expansion in the areas of agriculture “interference” by the West in the internal and tourism. Russian farming produce is in This intensification of their cooperation is affairs of sovereign states. They favor the increasingly high demand in China, and based on a wide range of common interests. notion of a “multipolar global order” and Russia has become a popular travel At a fundamental level, the fact that both the coexistence of multiple value systems as destination for Chinese tourists. Moreover, powers lack other allies favors their an alternative to the emphasis on a “liberal”

order and universal values by the democratic territories of China, the demographic im- tic extraction, Russia is likely to gain im- countries of the West. balance remains striking. To be sure, in a portance as an energy supplier in the 2018 survey, three quarters of the Russian coming decades. Their partnership may have far-reaching respondents perceived China in a positive effects on the global balance of power. light, and Russia is trying to position itself For Russia, China as a consumer is an Experts disagree, however, over the sus- geopolitically as a Eurasian great power. important alternative market to Europe. It tainability of this close relationship. Both Nevertheless, despite its anti-Western rhet- was no coincidence that Putin traveled to powers seem to be willing, however, to oric, Russia views itself as linked to Europe China just weeks after the annexation of deepen their relations, even though their in cultural terms and as partaking in a Crimea to sign a gigantic trade agreement relationship is to some extent asymmetric shared pan-European past. on Russian gas exports to China worth and they have certain divergent interests. USD 400 billion over the next 30 years, Trade and Energy following nearly 20 years of unsuccessful From Hostility to Cooperation It is in the economic sphere that the closer negotiations. The very fact that Russia and China are relations, but also the asymmetry between even celebrating such a close strategic part- the two powers are most prominent. Over However, the increased trade volume nership today is remarkable, considering the past decades, Russia and China have carries different weight for the two sides. that they were engaged in a hostile standoff continuously reinforced their trade rela- Apart from the EU as a whole, there is no from the late 1950s onwards and actually tions. Not only did the volume of trade in single country with which Russia does fought an armed conflict in 1969 on the 2018 increase by 25 per cent compared to more business than with China. Although Ussuri River, which marked the border be- the previous year, to over USD 100 billion, the two countries were roughly on par in tween the two states. Geopolitically, the but an increasing share of the bilateral terms of economic performance when the Soviet-Chinese conflict served the interests trade was conducted in yuan and rubles, Soviet Union collapsed, China’s GDP of the US. However, already shortly before rather than US dollars. Already, more than today is six times larger, and nominally the demise of the Soviet Union, their rela- one sixth of the Russian central bank’s for- even eight times larger than Russia’s. tions began to improve, gradually and in- eign currency reserves are held in yuan. crementally. In 1996, the two sides empha- There is therefore still a degree of reticence sized their “strategic partnership” for the Bilateral trade has increased not only in on the Russian side that manifests itself in first time, and the border dispute along the quantitative, but also in qualitative terms. the gas trade. Russia does not want to be- Ussuri was finally resolved in 2005. China is a major customer of Russia’s de- come dependent on a single buyer. Plans fense industry. Before 2014, Russia had re- have long been underway for an “Altai Pipe- Thus, the rapprochement between the two fused to export its latest-generation weap- line” that would link gas fields in Eastern powers had already begun long before the ons technology, fearing that China might and Western Siberia, providing access to latest tensions between Russia and the copy it. These concerns must have been as- markets in China or Europe, depending on West. Russia realized early on supply and demand. However, such projects that Asia was gaining economic It is in the economic sphere that require enormous investment. The degree of weight, and was intent on in- the closer relations, but also the involvement of Chinese companies here tensifying its relations with the will be an important indicator for the future Asian states, including with the asymmetry between the two of Russian-Chinese energy relations. ascendant economic power of powers are most prominent. China. From 2014 onward, if BRI Without Russia not before, geopolitical interests The emerging shape of the Belt and Road came to the fore. By emphasizing the stra- suaged since: For instance, Russia sold the Initiative (BRI) underlines China’s status tegic partnership with China, Putin intro- Chinese armed forces its S-400 air defense as a dominant economic power. The duced an ostensible alternative to the West. system in 2018 and its Su-35 fighter in initiative, a geo-economic megaproject 2019. Then again, in many other areas, promoted by China, comprises ongoing Since then, Xi and Putin have used every Chinese technology is superior to Russia’s, and future development and infrastructure occasion to affirm their close friendship. and it can therefore fill the gap left by projects worth approximately USD 1 tril- The two heads of state have so far met 28 Western companies. Chinese telecom giant lion in more than 60 countries. Russia has times and have signed many communiqués Huawei is building a 5G cellular network lobbied for BRI trade corridors to transit and treaties – most recently, on the occa- in Russia, and Chinese face recognition its territory and hopes that this will help sion of Xi’s extended state visit to Moscow technology is used in Russian cities such as develop a high-tech industry. From the in June 2019, confirming a “comprehensive Moscow. Russian perspective, as spelled out in a strategic partnership of coordination for a memorandum of understanding between new era”. The energy sector accounts for a significant the two countries in 2016, strengthening share of Russian exports to China. Since production and infrastructure in the Despite their rapprochement, cultural dif- 2016, Russia has been China’s main oil underdeveloped and thinly settled Far East ferences and reservations remain. The two supplier ahead of Saudi Arabia. State- would be especially desirable. cultural spheres remain alien to one anoth- owned Chinese energy corporations al- er. In the 1990s, Russia had feared that its ready own one fifth of Russia’s Arctic liq- However, Russia only plays a minor part in territory would by overrun by Chinese mi- uefied natural gas projects and supply half the BRI. As described above, the energy grants – a specter that has not materialized. of the equipment needed for oil drilling in sector is the only business sector where Nevertheless, in the Russian Far East, bor- Russia. Given the increasing energy con- China has invested significantly in Russia. dering on the population-rich neighboring sumption and China’s diminishing domes- Kazakhstan, which is one-tenth the size of

Russian-Chinese Trade Relations, 2018 Russia exercises power through regional alliances, mainly the EAEU and the Collec- tive Security Treaty Organization (CSTO). Russia US s D 5 ort 9 b exp illio all Although Russia still retains considerable n / of 18% / 2% of a illion influence in Central Asia, China’s clout is ll ex 48 b ports USD growing rapidly. By constructing two U China important pipelines for Kazakhstani oil S n D lio 3 il and Turkmen gas, China managed in 2009 3 b 6 1 b 3 i ,2 to break the Russian pipeline monopoly. ll 2 io D n S Overall, China has risen to become the U most important trade partner and investor in the region.

In view of this new constellation, the two sides have arrived at something like a func- tional division of labor: China is taking on an increasingly important economic role, while Russia remains the preferred partner Sources: Customs authorities of Russia and China authorities of Russia Customs Sources: rest of the world in the security realm. Russia has stationed troops in Kazakhstan, Kyrgyzstan, and Ta- jikistan and supports the local armed forces with equipment and training. However, it is ultimately not sustainable for a cash- strapped Russia to essentially protect Chi- Russia in economic terms, has received a symbolic step of linking up the land-based nese investments, or for China to have to greater share of the BRI investments than dimension of the BRI and the Eurasian rely on a foreign power in this regard. The Russia (see CSS Analysis No. 249). The Economic Union (EAEU), even though increasing security cooperation between limited direct Chinese investment in the rationales of these two bodies differ to China and the Central Asian powers, as Russia has often benefited businesspeople a certain degree: While Russia created the seen for example in the construction of a with good connections to the Kremlin, but EAEU as an internal market shielded small Chinese military base in Tajikistan, is only a fraction of it has reached the far against external actors, the BRI is conceived evidence of such deliberations. eastern territories of Russia. Chinese as a flexible project that is open to all states companies seem to see little economic and designed to overcome trade barriers. China’s ability to increasingly assert itself in value in investing in Russia due to concerns Nevertheless, Beijing and Moscow are Central Asia, both economically and in the over a lack of legal certainty or new eager to develop the two projects in security sphere – which will inevitably re- sanctions prompted by the Kremlin’s harmony and to emphasize their equal sult in greater political influence – cannot, unpredictable foreign policy. status. In May 2018, the EAEU and China in the long term, be reconciled with Russia’s signed a preparatory agreement to the view that Central Asia is part of its own In addition to economic considerations, future establishment of a comprehensive sphere of influence. The open structure of there are also political concerns that free-trade zone. the BRI and China’s enormous financial re- prevent a greater integration of Russia into sources are attractive, and to some extent in the BRI. On the one hand, China sees Influence in Central Asia competition with the integration projects greater opportunities for gaining influence The divergent aspirations of Russia and dominated by Russia. The countries of and a greater need for stabilization in the China come to the fore in the regional Central Asia are aware of these potential smaller countries along this east-west route contexts, especially in Central Asia. The frictions and seek to exploit them for their than in Russia. On the other hand, given region is a “backyard” to both countries due own interests. By balancing their relations Russia’s self-image, it cannot afford to give to its significance for their own internal with Russia and China, respectively, they Chinese companies and Chinese workers security as well as for the BRI. They have create opportunities for curbing the influ- too great a role in the construction of its an interest in maintaining the relative ence of either. Furthermore, the Central domestic infrastructure. Since Russia views stability of the region and keeping it free Asian states continue to be interested in itself as a great power and emphasizes its from US influence. good relations with the West. However, independence and ability to shape its own Russia and China will not be prepared to let destiny, it cannot afford to submit to a Russia has long played an important role in these Central Asian countries play them off strategy dictated by China. It has no wish the five former Soviet states of Kazakhstan, against each other so easily. The notion that to be just one of many BRI countries. Kyrgyzstan, Tajikistan, Turkmenistan, and long-term divergent interests will result in Conversely, China could not, in the final Uzbekistan. Their historic, cultural, linguis- open Russian-Chinese competition in the analysis, realize the BRI against the wishes tic, and military ties remain strong. Russia region is mere wishful thinking on the part of Russia, which still exerts considerable continues to exert considerable soft power of the West. influence in the post-Soviet space. through the media, and the hotline to the Kremlin remains the main channel of influ- (Geo-) Political Cooperation Given this state of affairs, Xi and Putin ence for Central Asian governments. In the Regardless of how Russian-Chinese rela- decided at a summit in 2015 on the sphere of economic and security policy, tions will play out in the long run with re-

spect to Central Asia, their partnership own self-perception as great powers, enter in the mid-term. As the two veto powers may have far-reaching effects on the global into firm alliances with all the obligations and nuclear-armed states jockey for more geopolitical balance. This can be seen in in- that would entail. influence on the international stage, good ternational organizations, in the emphasis relations between them are vital and indis- of shared political positions, and in in- Russia has been intent on fostering links pensable. The state of affairs in Central creased military cooperation, most recently with other Asian countries, in particular Asia indicates that neither Russia nor Chi- in the joint air-force exercise in the East with Japan, South Korea, India, and Viet- na are willing to give free rein to their long- China Sea. nam. The latter two are key purchasers of term differences and thus expose their vul- Russian arms, and all of them have a tense nerabilities to the West. Russia will accept At the international level, the two powers relationship with China. Given the asym- asymmetry in terms of economic and other support each other in bodies such as the metry vis-à-vis China, these relations are matters as long as the overall balance does UN Security Council, where they empha- gaining importance for Russia. With re- not become too lopsided and China agrees size the right to non-interfer- to treat Russia as an equal. ence in domestic affairs and The Russian-Chinese partnership their opposition to excessive The Western states would do well to adjust sanctions policies. China in may have far-reaching effects on to these new geopolitical realities. Sanctions particular seeks to gain influ- the global geopolitical balance. against Russia and the US-Chinese trade ence in and through interna- war have contributed in the past years to tional institutions. China and facilitating the rapprochement between Russia agree over many local hotspots, for spect to China’s aggressive stance in the China and Russia. Against this background, instance with respect to Iran, North Korea, South China Sea, Russia remains neutral it is worth considering whether it might or Venezuela. and is trying to stay aloof from escalation not be desirable in the longer term to bind dynamics. As it strives for balanced foreign Russia closer to Europe again, even if There is even a convergence between the relations, Moscow’s current orientation to- Crimea remains controlled by Russia for two authoritarian systems in terms of ward Asia should not be understood to the foreseeable future. Culturally, Russia is norms and values. For instance, they are mean that it is giving the West the cold still more closely oriented toward Europe engaged in coordinated efforts to re-frame shoulder. In the longer term, Russia is inter- than toward China. French President the concept of “terrorism” to include any ested in normalizing relations with Europe. Emmanuel Macron offered arguments to acts of violence or sabotage, and thus to ex- this effect on the occasion of a visit by tend it to the activities of political opposi- China, for its part, wants to diversify its en- Putin in August 2019. Such an approach tion groups or separatist movements. This ergy sources and transport corridors – for should in no way be geared toward building understanding also underpins the Shang- energy and goods alike – and aims to pre- an alliance between the West and Russia hai Cooperation Organisation (SCO), vent Russia from playing an overly domi- against China, nor should it be understood which is dominated by Russia and China. nant role. Generally speaking, China is as acceptance of Russia’s violations of Moreover, the Kremlin has patterned its critical of Russia’s adventurism in foreign international law and agreements. However, own legislation on a draconian Chinese law policy and has not officially recognized the it would require a degree of pragmatism on “internet sovereignty”, while Beijing has Russian annexation of Crimea. and long-term thinking on the part of taken recourse to Russian vocabulary by re- European politicians and observers. ferring to the protests in Hong Kong as an Challenge to the West attempted “Color Revolution”. Looking forward, frictions between Rus- sian and China, especially in Central Asia, Prof. Dr. Jeronim Perović is professor at the However, in the geopolitical sphere, too, cannot be excluded altogether. In economic University of Zurich and director of the Center for there are limits to the partnership between and geopolitical terms, too, the partnership Eastern European Studies (CEES). Russia and China. Even though Russia of- between the two states has its limitations. ten refers to the relationship as a de-facto Under Putin or a similarly-minded succes- Benno Zogg is Senior Researcher at the Center for alliance, the two countries cannot, per their sor, however, it looks likely to remain stable Security Studies (CSS) at ETH Zurich.

CSS Analyses is edited by the Center for Security Studies (CSS) at Most recent issues: ETH Zurich. Each month, two analyses are published in German, French, Kazakhstan: A Centrepiece in China’s Belt and Road No. 249 and English. The CSS is a center of competence for Swiss and international European Strategic Autonomy and the US No. 248 security policy. Europe and the Global AI Race No. 247 Editors: Lisa Watanabe, Fabien Merz, Benno Zogg UN Mediation in Libya: Peace Still a Distant Prospect No. 246 Layout and graphics: Miriam Dahinden-Ganzoni Resilience to Disaster Is No Small Measure No. 245 ISSN: 2296-0244; DOI: 10.3929/ethz-b-000367658 Public Attribution of Cyber Incidents No. 244 Feedback and comments: [email protected] More issues and free online subscription: www.css.ethz.ch/en/publications/css-analyses-in-security-policy © 2019 Center for Security Studies (CSS), ETH Zurich 4