A Golden Opportunity: Russia and China Collaboration

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Relations between China and Russia have been growing closer since the end of the cold war. Both, for different reasons, resent America’s “hegemony” and share a desire for a more multipolar world order. Russia, a declining great power, is looking for ways to recover at least some of its lost status; whereas China, a rising power, bridles at what it sees as American attempts to constrain it…..

But there have been occasional tensions. Russia played a key role during the 1990s in helping China to modernise its military forces. Russia was able to preserve a defence-industrial base that would otherwise have withered from lack of domestic orders. But since the middle of the last decade, irked by China’s theft of its military technology and its consequent emergence as a rival in the arms market, Russia’s weapons sales to its neighbour have slowed.

Russia is also wary of becoming little more than a supplier of natural resources to China’s industrial machine—a humiliating position for a country that until recently saw China as backward. As long as Russia could sell to Europe all the gas required to keep the Russian economy growing, it could put deals with China on hold. These included plans for two gas pipelines from Siberia into China that were announced in 2006 and then quietly dropped as the two sides bickered over prices.

All that has changed. The Ukrainian crisis is, as Russian media put it, forcing Russia to “pivot” its economy towards Asia in an effort to lessen the impact of Western sanctions by finding alternative markets and sources of capital. For China it is a golden opportunity to gain greater access to Russia’s natural resources, at favourable prices, as well as to secure access to big infrastructure contracts that might have gone to Western competitors and to provide financing for projects that will benefit Chinese firms.

But China abstained from voting on the UN Security Council resolutions condemning Russia, while Chinese media have given Russia strong support. China has quietly welcomed a new cold war in Europe that might distract America from its declared “rebalancing” towards Asia.

Striking evidence of the new closeness between China and Russia was a $400 billion gas deal signed in May 2014 under which Russia will supply China with 38 billion cubic metres (bcm) of gas annually from 2018 for 30 years. At China’s insistence, the gas will come from new fields in eastern Siberia and will pass through an as yet unbuilt pipeline—the better for ensuring that it will not be diverted elsewhere. Other deals have followed. The biggest was a preliminary agreement signed in November 2014  for Russia to sell an additional 30 bcm a year through a proposed pipeline from western Siberia. In every instance it is probable that China was able to drive a hard bargain on price.

Russia’s weakness was also clear in its recent decision to resume high-tech arms exports to China. In April it agreed to sell China an air-defence system, the S-400, for about $3 billion. This will help give China dominance of the air over Taiwan and the Senkaku islands (Diaoyu to the Chinese, who dispute Japan’s claim to them). In November 2014 Russia said it was prepared to sell China its latest Sukhoi-35S combat aircraft. Initially it had refused to sell any fewer than 48, in order to make up for losses it calculated it would suffer as a result of China’s inevitable pilfering of the designs. Now it has meekly agreed to sell only 24.

But problems ahead are discernible. One is that both countries are competing for influence in Central Asia, once Russia’s backyard (Mr Xi was due to head there before proceeding to Moscow). Mr Putin wants to establish his Eurasian Economic Union partly to counter growing Chinese economic power in Central Asia, through which China wants to develop what it calls a Silk Road Economic Belt. China is using the Shanghai Co-operation Organisation (SCO), of which Russia and Central Asian nations are also members, to boost its security ties in the region as well: it often holds counter-terrorism exercises with its SCO partners.

Russia and China: An Uneasy Friendship, Economist, May 9, 2015, at 37.

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