Striking deals
October 13, 2009
Trade, energy and security deals worth an estimated 3.5 billion euros ($5.5 billion) have been signed during Russian Prime Minister Vladimir Putin's three-day visit to China.
More than 20 agreements have been negotiated, including one committing both countries to notify the other when ballistic missiles are launched from their territories. The Russian RIA Novosti news agency reported that the two sides had also signed an agreement to set up a presidential hotline between Moscow and Beijing.
The Agricultural Bank of China has also agreed to lend $500 million to Russia's VTB bank. A memorandum of understanding has also been signed on developing a high-speed rail link on Russian territory.
Progress was also announced on a natural gas pipeline project as well as nuclear energy, said Shi Yajun, an expert on Sino-Russian relations at East China Normal University.
Putin's visit coincides with the 60th anniversary of diplomatic relations between China and Russia.
The expediency of closer ties
But, despite signs that bilateral ties are running smoothly, some experts believe the two nations are banding together out of a common distrust of other powers, rather than a real desire to become closer allies.
Russia and China have a history of rivalry and distrust stemming from disputes in the 1960s over differences in communist doctrine and skirmishes along their shared 4,300-kilometer (2,672-mile) border. While most of the border issues have been resolved, Moscow is still wary of Beijing's growing economic and security influence on its eastern flank.
"Moscow's main frustration is that China is starting to overshadow Russia as a great power," Jonathan Holslag, head of research at the Brussels Institute of Contemporary China Studies, told Deutsche Welle. "Both players yearn for international esteem and status, but China is way ahead. This has led to growing distrust in Central Asia, where China has gained influence at Russia’s expense. Also in Northeast Asia, Russia’s influence is really squeezed under China's demographic and commercial weight."
Russia, China still in line on Iran despite recent shifts
However, China and Russia have both seen the advantages of stronger ties, even if issues such as China's expanding influence remain thorns in their relations. With international pressure continuing to grow over Iran's nuclear ambitions and the behavior of the regime in North Korea, Moscow and Beijing have often joined forces to deflect attempts at tougher action from the United States and the UN Security Council.
"When it comes to Iran and North Korea, Moscow and Beijing both agree that those countries should not develop nuclear arms, but that it is not worth putting regional stability and economic interests at risk," said Holslag.
Despite Russia's apparent U-turn in favor of sanctions against Iran, the two nations are expected to use Putin's visit to coordinate their international diplomacy on the nuclear issues involving Iran and North Korea, suggesting that Moscow and Beijing are not getting out of step on the issues in which they have stood side-by-side in the face of Western pressure.
Support over restive regions wavers
China and Russia have also lent support directly to each other on issues that have riled the West, such as Beijing's tough position on Tibet and its restive Xinjiang region and Moscow's involvement in its proxy states in the Caucasus. But even in these areas, the sands have shifted.
"Traditionally both countries emphasised sovereignty in their joint combat against religious extremism, secessionism and American unilateralism," said Holslag. "But since Russia’s unilateral intervention in Georgia, this normative common ground has faded. China for example refuses to recognize the independence of South Ossetia and Abkhazia as Russia would like. Behind closed doors the Chinese also criticize Russian plans to build new military bases in Central Asia."
Trade keeping potentially frosty relations warm
The two nations are building the strongest ties in the areas of trade and energy. China is Russia's second largest trade partner after the European Union, and despite bilateral trade shrinking by just over 36 percent to $24 billion in the first eight months of this year as a consequence of the global financial crisis, the two countries expect bilateral trade to increase to $60-80 billion by 2010.
The driving force in these trade relations, however, is China. The Chinese economy has left its Russian equivalent standing in recent years, with China gross domestic product growing in contrast to Russia’s shrinkage during the economic crisis.
"China represents less than 10 percent of Russia’s trade, and the Russian trade deficit is growing," said Holslag. "Yet, it is clear that for the long turn, Russia aims at developing stronger economic cooperation with the Chinese to reduce its reliance on the European consumer market. It has approved major new pipeline projects to China and is seeking to turn its vast territory in a land bridge between the East and the West. The Arctic Ocean will be another trump with which Moscow will seek to step up its economic leverage."
Both sides looking to expand energy cooperation
China is also looking to benefit from Russia's dissatisfaction with Europe as an energy consumer and partner. While still focused on the West, Moscow is keen to find alternative customers for its oil and gas and China has made it clear that it is ready to strike deals over Russia’s huge mineral resources.
"As opposed to Europe, Russia is highly interested in 'security of demand' - especially in view of tightening climate change policies," Arno Behrens, head of energy research at the Centre for European Policy Studies in Brussels, told Deutsche Welle. "Russia is thus very keen to diversify its demand structure and China would be an ideal partner to do so - guaranteeing a high level of demand in the long-run. Similarly, a better cooperation with Russia as a substitution for increasing trade relationships with rogue states may benefit China’s political image in the West."
One deal which could further Russian-Chinese energy cooperation was struck in April when, in return for 300 million tons of Russian oil over 20 years, China agreed to lend Russian oil pipeline monopoly Transneft $10 billion and state-run oil company Rosneft $15 billion.
China's investment in Transneft's East Siberia-Pacific Ocean pipeline will help to aid its slated 2010 completion and could lead to 15 million tons of crude oil being pumped into the insatiable Chinese industry sector.
Gas deals could capitalize on China's growing status
China could also become a major consumer of Russian gas if export monopoly Gazprom can overcome its pricing disagreements with the Chinese and make good on a 2006 agreement to build two major pipelines into China.
"According to the International Energy Agency, China is the world’s second largest and fastest growing energy consumer, and will be the world’s largest energy consumer as of 2010," Behrens said. "Total primary energy demand has almost tripled between 1980 and 2005 and is expected to more than double again between 2005 and 2030. But despite this huge potential, energy relations with Russia remain underdeveloped."
Author: Nick Amies (gb)
Editor: Rob Mudge