Russia-China Ties: Sunny With a Chance of Snow

As China’s new leader, Xi Jinping, kicks off a three-day visit to Russia on Friday, his first official trip as president, there will be plenty of sensitive topics to juggle – from competition on the global arms market to haggling over the price of gas and carving up regional influence.

MOSCOW, March 22 (Alexey Eremenko, RIA Novosti) – As China’s new leader, Xi Jinping, kicks off a three-day visit to Russia on Friday, his first official trip as president, there will be plenty of sensitive topics to juggle – from competition on the global arms market to haggling over the price of gas and carving up regional influence.

But Beijing and Moscow will gloss over differences for now, pundits say, as they have too much to gain from their close diplomatic ties and growing economic cooperation.

“There is lots of trouble [in bilateral relations],” Gilbert Rozman, a Princeton University professor who studies Northeast Asia, told RIA Novosti in a telephone interview this week. “But I don’t expect any of the problems to rise to the surface within the next few years.”

Between 20 and 30 bilateral agreements are expected to be signed during Xi’s visit, Russia's ambassador to China, Sergei Razov, said earlier this week. Though experts aren’t expecting any landmark breakthroughs, they agreed that Xi’s choice of Moscow for his first trip was an important symbolic gesture.

Cashing In on the Partnership

For Moscow, improving economic ties with China – the world’s second-biggest economy – is a top priority.

“Russia remains China’s number one political partner. … Now they will be talking about how to bring economic cooperation to the same level,” said Andrei Ostrovsky, deputy director of Russia’s Institute of Far Eastern Studies.

Russian-Chinese trade stood at nearly $88 billion in 2012, according to official Russian customs figures – less than a quarter of the turnover with both countries’ biggest trading partner, Europe. China’s bilateral trade with the European Union totaled $546 billion last year, according to official Chinese figures, while Russia’s was $394 billion, as calculated by the Russian Federal Customs Service.

At the two leaders’ first meeting Friday, Russian President Vladimir Putin said that a “concrete” area of cooperation the two countries must pursue is “the development of economic relations.”

China’s Prime Minister Li Keqiang said Sunday that bilateral trade should more than quadruple in the coming years, Xinhua news agency reported.

The question, of course, is how to achieve this.

For now, Chinese exports to Russia far outweigh trade in the other direction. Moreover, almost all of Russia’s exports – totaling some $35.7 billion in 2012, according to Russian customs figures – consist of raw materials such as oil, gold and timber.

Moscow wants to change that, increasing the share of industrial goods it sells to China, but complains that Beijing blocks entry with protectionist measures, said Vasily Kashin, a China expert at the Institute of Far Eastern Studies.

What Moscow wants even more is to finally start pumping gas into China’s energy-guzzling economy.

This plan has been in the works since at least 2006, when Moscow and Beijing agreed to build gas pipelines from Western Siberia to China, with a planned annual capacity of 38 billion cubic meters. But construction has yet to begin as the two are still haggling over prices.

Moscow wants to charge Beijing the same prices it gets from European buyers, around $400 per 1,000 cubic meters, but China has been working hard to diversify its energy suppliers – including major gas deals in former Soviet Central Asia – so it can bide its time in negotiating down the price, Ostrovsky of the Institute of Far Eastern Studies said.

Gazprom and China National Petroleum Corporation (CNPC) have said they hope to reach an agreement by the end of this year, but analysts have been skeptical. Putin’s spokesman explicitly said Thursday that no final gas agreement would be reached during Xi's visit.

Carving Up the Arms Market

One area where Moscow and Beijing seemed for a long time to work in perfect harmony was arms trade, but the relationship is slowly shifting from cooperation to rivalry.

A major change came last year, when China – the world’s second-biggest arms importer – broke into the top five of exporters, according to the Stockholm International Peace Research Institute (SIPRI), which monitors global arms sales. China’s market share stood at 5 percent – a trifle compared to Russia's 26 percent, but a significant increase from 2 percent in 2007, the group said.


Since the 1990s, China has been a major buyer of Russian weaponry, with trade peaking in 2005, when China’s purchases from Russia reached almost $4 billion. They have fluctuated since then, dipping to $800 million in 2009 and rebounding to $2.1 billion last year, according to Rosoboronexport, Russia's state-owned arms export monopoly.

Russia and China are not direct competitors: More than half of Chinese arms exports go to Pakistan, a market closed off for Russia, which is a strategic partner of Pakistan’s geopolitical rival India. Furthermore, Beijing is likely to keep buying Russian weaponry – having expressed interest in Amur submarines, Su-35 fighter jets and the S-400 anti-aircraft weapons systems – and is even in talks with Moscow about joint production of new weapons.

But worries about potential competition with China are slowly mounting in Moscow, particularly as Russia fears that Chinese manufacturers are reverse-engineering its military technologies, said Kashin.

For now, however, as with most thorny issues, Moscow seems willing to hold a stiff upper lip in the interests of furthering economic cooperation.

Bridge Building in the ’Hood

The two countries also have overlapping interests in two nearby neighborhoods, Russia’s Far East and Central Asia.

The sparsely populated provinces at Russia’s eastern edge suffer from chronic economic depression and decrepit infrastructure. Closer cross-border ties could provide a much-needed boost to the region, as well as to China’s northern provinces, which have historically been poorer than the more industrialized south.

But Moscow remains unenthusiastic about stimulating those ties, due to its deep-running fears of losing the region to its mighty neighbor, which is not only wealthy and overpopulated, but has expressed territorial ambitions in the past, Kashin said. A telling illustration: Most of the 4,000-kilometer Sino-Russian border in the Far East is marked by the Amur and Ussuri rivers, but there are no bridges across them.

The situation is equally tricky in post-Soviet Central Asia, a region that Moscow, which retains a military presence, considers part of its geostrategic sphere of influence.

According to Kashin, China and Russia have thus far largely divided their spheres of influence, with China focusing on economic involvement in the region’s five countries, but leaving politics and security to Moscow (in those states that allow it).

Nonetheless, the split isn’t so clean.

As China recently began importing gas from Kazakhstan, Turkmenistan and Uzbekistan, Russia tried to intervene, leading the media to dub the standoff a “gas war.” China intended to import 30 billion cubic meters from the region last year and forecasted 60 billion by 2015.

Chinese businesses are also increasingly active in the region, with annual trade turnover growing from less than $1 billion in the 1990s to $17 billion in 2011, according to Chinese customs statistics – a figure rivaling Russia's $21 billion the same year, as tallied by its customs service.

The two countries also run competing geopolitical blocs in the region – the Moscow-led Collective Security Treaty Organization (CSTO) and the Shanghai Cooperation Organization (SCO) with headquarters in Beijing.

Moscow has become “increasingly distrustful” of the SCO, given China’s growing influence in Central Asia, the International Crisis Group, a Brussels-based think-tank, said in a report last month. Russia, according to a Chinese analyst cited in the report, “attempts to squeeze the SCO, while supporting competing organizations” such as the CSTO.

Superpowers Past and Present

Up to now, much of the closeness binding China and Russia has been forged in the halls of the United Nations, where both are permanent Security Council members and, since 2005, have often presented a united front against the West and its allies, most notably Japan.

Russia and China have stood together on the 2011 Libyan conflict and the ongoing civil war in Syria, Russia's old ally, and have jointly opposed US plans to develop a missile shield beyond US borders (an issue that became more pressing for Beijing last week after Washington announced it would deploy interceptors in Alaska instead of Poland).

However, Moscow has a delicate balancing act on its hands: While it hopes fervently for closer economic cooperation with its neighbor, it must also contend with what experts call Beijing’s mounting super-power ambitions.

One fault line may lie between the Eurasian landmass and Japan: While both countries have long-simmering tensions with Tokyo over disputed islands, their interests are at odds. Beijing could want Russia’s support for its claims to the Senkaku Islands in the East China Sea, said Princeton’s Rozman. Moscow, meanwhile, despite its own claims to a handful of the Kuril Islands, has been trying recently to improve its ties with Japan – not least of all to diversify its diplomatic and economic ties in the east away from China, according to Kashin.

Another joker card in bilateral relations could be the United States. While Beijing and Washington are tied by a deep economic interdependence, with bilateral trade reaching $484 billion last year by China’s count, that relationship hardly rules out geopolitical rivalry.

If rivalry ever escalates into an outright standoff, China will continue to want “Rusian support on every foreign policy issue,” Rozman said.

But picking sides in a clash of titans is not a choice Moscow will want to make.

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