Is there any place left for the SCO?

In my previous post I have argued that a new status quo has emerged in Central Asia over the past few years. During this period Russia and China have worked out and tailored their respective strategies of pursuing their interests in the region: selective multilateralism and bilateralism. Moscow has strived to secure its grip on Central Asia by means of integrating Kazakhstan, Kyrgyzstan and Tajikistan into the Eurasian Union and by maintaining a military presence under the framework of the Collective Security Treaty Organization. Beijing has focused on the establishment of bilateral economic ties. A series of agreements have been concluded with Central Asian states since the late-2000s involving multi-billion dollar loans and investments, in particular in energy exploration and infrastructure. As a result, the Shanghai Cooperation Organization (SCO), which was supposed to be the most suitable structure for region-wide cooperation, has found itself side-tracked. The summit of the SCO, which took place in Bishkek in mid-September, has only testified to the continuing stagnation.

The fundamental bone of contention concerns what type of organization the SCO should be: a vehicle that facilitates the pursuit of the global interests of great powers (i.e. of Russia and China), or the framework for cooperation in Central Asia which would not be dominated by any single actor.

The Bishkek declaration conforms to the former vision, promoted first and foremost by the Kremlin. With the focus on global challenges and strategic issues, this document resembles those issued regularly at the Russo-Chinese bilateral summits and reflects concerns which predominate in Moscow and Beijing. In the declaration the SCO members have: criticized the West’s propensity to use force and its disrespect for international law; called for UN principles to be respected and for the organization to be reformed; expressed concerns related to climate change and food security. They have taken a stance with regard to almost all on-going international crises and contentious issues: they have supported Russia’s initiative concerning Syria’s chemical weapons, opposed the threats of the use of force against Iran and deemed the development of regional or global missile defence unacceptable.

Regional affairs are barely mentioned in the Bishkek declaration. The dispute on how the SCO should finance joint projects – by creating a development fund (promoted by Russia) or a development bank (promoted by China) – has not been solved and the mutually exclusive ideas have found their way into the final document. Russia is not interested in establishing yet another international bank in the post-Soviet space as it is already financing the Eurasian Development Bank. China, on its part, is seeking a flexible formula which could facilitate the implementation of its region-wide energy- and infrastructure-related projects.

This disagreement goes beyond rhetoric or purely economic calculations and reveals a fundamental difference between Moscow and Beijing that prevents greater cooperation among the SCO members. Russia would prefer an organization with global reach and objectives. This is because Moscow already has an abundance of organizations at its disposal in the post-Soviet space, including the Eurasian Union, EurAsEC and CSTO. Conversely, China is in need of a regional organization which would help neutralize the fears of smaller Central Asian states and smooth China’s economic expansion, providing multilateral clout. One of the outstanding consequences of the Russo-Chinese difference is the persistent absence of agreement on the issue of the enlargement of the SCO. The temporary solution, which may prove long-lasting, has been to introduce different association categories, such as observers (e.g. India and Mongolia) and ‘partners in dialogue’ (e.g. Belarus and Turkey).

The only issue which the SCO leaders fully agree on seems to be the necessity to protect their regimes from real and imagined enemies. The attention paid to the Arab revolutions as well as the focus on information security illustrate deep-seated fears of autocrats. The ‘authoritarian security community’ may turn out to be the only possible path for the development of the SCO. But, if that is the case, should not Kyrgyzstan be replaced by Turkmenistan?

The (surprising) absence of the Great Game

The metaphor of the Great Game has been regularly invoked with regard to Central Asia, most recently relating to the competition for the region’s energy resources and geostrategic location. Beijing’s growing economic and political clout has been perceived as a challenge to Moscow’s aspirations and interests in the region. As a consequence, Central Asia has been identified as the most plausible trigger, should a breakdown in Russo-Chinese cooperation occur. Surprisingly, however, both Eurasian powers have managed to steer their relations in Central Asia off a collision course so far. Neither have the series of Chinese inroads, ranging from building oil and gas pipelines to multi-billion dollar investments and loans, nor Russia’s half-baked counteraction in the form of the Customs Union/Common Economic Space led to outright competition.

Since the mid-2000s, relations in Central Asia had undergone deep transformation which, towards the beginning of the current decade, has resulted in the emergence of a new status quo. This power transition has been far from optimal for both Russia and China but satisfactory enough to remove Central Asia from the list of pressing concerns of the Russo-Chinese relationship.

The realm of energy – the most delicate and prone to fierce competition – is an illuminative example of this new status quo. China broke the Russian near-monopoly on the import of resources from the region, having constructed an oil pipeline from Kazakhstan and gas pipelines from Turkmenistan (via Uzbekistan and Kazakhstan). Chinese upstream investments have trumped those of Russian energy giants, in Kazakhstan in particular (24% of oil and gas exploration belongs to China, about 12% to Russia). Meanwhile, Russia has managed to maintain its presence in energy sectors of Uzbekistan and Kazakhstan as well as to retain the dominant position in those of Kyrgyzstan and Tajikistan.

Other aspects of the new status quo include stagnation with regard to multilateral structures in the 

region (with the exception of the Eurasian Union, discussed below). The Shanghai Cooperation Organization seems to have exhausted its potential by the mid-2000s, since then becoming little more than a forum for discussions, photo-ops and regularly conducted military exercises. Neither Russian nor Chinese ideas for substantial cooperation have received support from other SCO members. The energy club, promoted by Moscow, was denied as it would tie China’s hands in the realm of energy. The free trade zone, put forward by Beijing, was dismissed as it would ensure Chinese economic domination. The growing number of observers (the most recent being Afghanistan) and ‘partners in dialogue’ (Turkey) disguises the absence of consensus between Moscow and Beijing whether, if at all, to enlarge the SCO. The Russian-led Collective Security Treaty Organization (CSTO) provides symbolic reassurance of Moscow’s primacy in the field of regional security.

The moves undertaken by Russia and China in recent years have not challenged the new status quo. China has been increasing its presence in the energy sector, further investing in Kazakhstani oil fields and enlarging the capacity of the gas pipelines. The China National Petroleum Corporation has recently concluded a new agreement on the exploration of Tajik natural gas resources, but China has tacitly withdrawn from supporting hydro-energy projects in this state. Russia’s Gazprom has taken over Kyrgyzgaz. None of the other undertaken steps constitutes a qualitative breakthrough. China’s generous loan- offer for Central Asian states, which was to reach  10 billion USD, has not been taken up. Only two projects are underway in Uzbekistan and Tajikistan, which value is estimated at 150 million USD – a fraction of the promised amount).

What are the reasons behind the surprising absence of rivalry between Russia and China in Central Asia? Are we witnessing a ‘new type of great powers relationship’ emerging in the region? It has become the Chinese ‘keyword’ for having a greater say in relations with the U.S. At this stage, it looks more like a return to policy prescriptions of classical realism. Following the emergence of the new status quo in the region, both Russia and, to a larger extent, China have demonstrated self-restraint. Particularly Beijing’s material capabilities would allow for gaining a much more robust position in Central Asia, to the detriment of Russia’s political preponderance, but China seems to be unwilling to project its power.

What are the potential game changers? The most recent Russia’s move – the attempt to establish the Eurasian Union – has a latent potential to tip the existing status quo off the balance. It assumes the creation of a closed economic bloc in the post-Soviet space, with Kazakhstan already being a member and Kyrgyzstan negotiating its accession. Nevertheless, as long as the Russian-led integration does not endanger key aspects of the Chinese presence - such as the energy assets and infrastructure - one should expect neither harsh reactions from Beijing nor increased rivalry with Russia. The predominantly (geo)political nature of the Russian project implies that much of the integration is going to remain on paper, thus perpetuating the new status quo based on informal division of economic and political influence.

Russian assessment of Xi Jinping’s rule

For Russland Analysen, I examine the Russian discourse on China:

The change in Chinese leadership, concluded in March 2013, spurred increased interest among the Russian media and expert community. While the Kremlin stressed continuity in the relations between both powers and praised their unprecedented cordiality, participants in the Russian debate agree that China’s domestic and foreign policies are to undergo transformation which is bound to influence the Russia-China relations.

The idea of ‘the Chinese dream’ which is supposed to lead to the ‘rejuvenation of the Chinese nation’, presented by Xi Jinping shortly after his confirmation as the president, has been widely discussed in Russia. The ‘Chinese dream’ is regarded as potentially paving the way for more nationalistic and assertive policies. The expected period of Xi’s rule – which is to comprise the 100^th anniversary of the Communist Party in 2021 – has been interpreted as conducive to more robust policies, aimed at securing the place of the current Politburo members in the Chinese history as well as to accommodate the growing ambitions of the Chinese society. Two most plausible policies, which attracted the bulk of Russian observers’ attention, included the ultimate re-unification of the Chinese lands and the transformation of the present socio-economic model of development so that it becomes less export-oriented and more domestic demand-driven. As a consequence, while it has been admitted that China should remain preoccupied with its internal challenges, there is a growing belief that Beijing will become more engaged in  international affairs, going beyond the narrow understanding of national interest which has directed the Chinese foreign policy so far.

The recent increase in China’s assertiveness towards its neighbours and the US has not escaped the attention of Russian spectators. Beijing has been perceived as more immune to its neighbours’ security concerns  and more openly challenging the US dominant position in East Asia. This evolution of Chinese foreign policy has been ascribed to the increase in China’s economic and military power as well as to the transformation of its domestic scene, i.e. the strengthening of the military (and hard-liners in general) and the growth of nationalism among the Chinese society. The military modernization has been subject to particular scrutiny by the Russian expert community but no consensus has been reached with regard to actual capabilities of the Chinese armed forces. It is the potential of Chinese nationalism, to which the leadership has been forced to yield, that seems to concern Russian observers even more than the ‘upgrading’ of military capabilities.

In the short-term, China’s rise under Xi Jinping is not perceived by the majority of Russian commentators as threatening. Taking the long-term perspective, however, uncertainty prevails. According to supporters and opponents of cooperation with China alike, mutual mistrust has not been overcome, despite progress in bilateral relations achieved over the last two decades.

My more detailed analysis was published by Russland Analysen (in German).

China plays the Russian (military) card

Since the mid-2000s, Russo-Chinese military cooperation has been symbolized by the regularly-held large exercises, codenamed the Peace Mission. Presented as ‘anti-terrorist’ activities, their scenarios and the forces employed (regular army units supported by tactical and strategic aircraft) have been a clear indication of the aim to practice conventional warfare. Although the Peace Mission exercises have continued, the second decade of the 21^st century has been marked by the naval drills (Joint Sea 2012, 2013), which have become yet another hallmark of the change in Russo-Chinese relations.

In the 2000s the joint military exercises served to strengthen Russia’s image of a re-emerging great power and to demonstrate to the West its close partnership with China. In the face of growing tensions with the West, Moscow was eager to play the Chinese ‘military card’, suggesting the possibility of forging an alliance. Beijing, at that time, was focused on presenting itself as an almost exemplary peacefully-rising power.

For the last two years the roles have reversed. Now it is China who is playing the Russian military card, both against the U.S. and its East Asian allies. Asserting its claims in the contested waters of the East and South China Seas in a more robust way, China has turned to Russia for political support. The 2012 Sino-Russian naval drills, which took place in the Yellow Sea, were interpreted as a response to the exercises conducted by the US with the Philippines and South Korea. The Joint Sea 2013 mirrored the US-Japanese drill.

One should not over-estimate the importance of the Russo-Chinese naval cooperation. Both navies are hardly ready to fight against the U.S. or its allies. The main goal of the joint exercises is political. It has been intended to send a message to Washington and its partners in the region. Russia – at least formally – maintains a neutral stance with regard to the territorial disputes in the South and East China Seas. The engagement in military co-operation in the potential conflict area demonstrates, however, Moscow’s clear political support for Beijing’s position.

For the last couple of years Russia has been eager to show off, deploying its vessels in the Mediterranean Sea or in the Gulf of Aden. The naval drills with China become yet another opportunity to strengthen Russia’s image as a global naval power and an important actor in East Asian security. At the same time implicit support for China’s assertive policies undermines Moscow’s ability to act as a potential counter-balance against Beijing’s ambitions (which has recently been suggested by Elizabeth Wishnick) and limits Russia’s attractiveness to smaller East Asian states.

Sechin steps in Khodorkovsky’s shoes or 'ironiya sudby'

The past several  weeks have been marked with the acceleration of the once denounced Russo-Chinese energy co-operation.

On 24 June, the Russian state-owned energy giant, Rosneft and the Chinese National Petroleum Corporation (CNPC) concluded a deal that provides for another breakthrough in energy trade between the two states.

Rosneft agreed to supply the CNPC with 30 million tons of oil per year. What this means in practice is the doubling – by 2018 – of the amount of oil that is currently sent to China via the East Siberia-Pacific Ocean pipeline. This oil pipeline is by no means the only way of transporting Russian ‘black gold’ to Chinese customers. Starting in 2014, Rosneft will send an additional 7 million tons via another route – the Kazakhstan-China pipeline. Moreover, in 2012 the Russian energy behemoth agreed to supply the planned (though still not constructed) Russian-Chinese refinery in Tianjin with another 9 million tons of oil. Taken together, by the end of the decade Rosneft can be expected to send 46 million tons to China – almost 20% of Russian oil export (about 240 million tons).

On 21 June, the aforementioned CNPC entered into another ground-breaking agreement. It secured a 20% stake in the Yamal-LNG project. The project, led by the independent Russian gas producer Novatek, will enable Russia’s entry into the increasingly competitive LNG market.

The Russo-Chinese energy deals go far beyond their market value and are bound to have far-reaching consequences in the strategic and domestic realms of the two states.

Moscow continues to adapt to China’s rise, strengthening its ties with Beijing whilst allowing possible options for hedging in the case of a political setback between the two powers to disappear one after another. The actions undertaken by Rosneft, and its curator in Putin’s inner circle, Igor Sechin, have effectively undermined the Kremlin’s strategy of diversification of oil exports to Asia. They have led to the dependence on one customer – China. One cannot avoid a sense of the irony of fate – Igor Sechin as the chairman of Rosneft is pursuing a policy for which Mikhail Khodorkovsky has so far spent 10 years in jail. Back in 2002, Khodorkovsky proposed to build an oil pipeline exclusively to China. His idea went contrary to the then Russian strategy aimed at hedging against China: The Kremlin had planned to incite Sino-Japanese rivalry over access to Russian resources and oil transportation routes. The economic crisis of 2008-2009 forced Russia to give up this idea; although it still strived not to become reliant on one sole client in Asia. Sechin’s current behaviour almost completely undermines this.

With regard to the domestic scene, China has unintentionally become a shaping force of Russia’s domestic power relations. Sechin and Rosneft both thrive on deals with China, gaining easy money and additional influence through bargaining over further assets (such as TNK-BP which has just been taken over, while other oil firms like Bashneft are threatened with takeover). The CNPC’s deal with Novatek strengthens the latter against Gazprom and weakens this Russian gas behemoth in its continuous fight to keep its export monopoly. In the meantime, Gazprom has still not struck the expected deal with China, which was supposed to pave the way for the first gas pipeline in Asia and open the Chinese market. In June yet another publicly set deadline passed.

Trading places?

Throughout the 2000s an informal ‘division of labour’ emerged between Russia and China with regard to the global order. Russia has actively and loudly participated in the management of global affairs, becoming the member of all global forums – G-8, G-20 and BRICS – and making its voice heard. China, for its part, has been keeping a low profile, engaging in global issues only if vital Chinese interests were at stake. In the realm of high politics – international security, it has been Russia which has stood out as a non-Western voice, while China has relegated itself to the low politics – global economic governance (see the report by Charles Grant). This ‘division of labour’ has run contrary to the trends in the Russo-Chinese bilateral relationship, allowing the gradually weakening partner – Russia – to enjoy prestige and visibility. The arrangements resemble the pattern of the Cold War relationship between France and West Germany, with the former being compensated for economic weakness with political prestige.

The division of roles between Russia and China has been particularly striking with regard to international crises. For Moscow, the participation in every collective effort to solve an international crisis has been of crucial importance. As the only actor beyond the U.S., Russia has been a member of the Kosovo troika (in 2006-2008), the Six-Party-Talks in the North Korean crisis, the P-5+1 talks with Iran on nuclear issues, and the Middle Eastern Quartet. Russia’s tangible contribution to the solution or easing of the crisis has tended to be limited, but being at the table has seemed sufficient for the Kremlin. China has remained disengaged, with the exception of the North Korean nuclear crisis. Due to the latter’s proximity to the Chinese border, and security interests being at stake, Beijing has remained the most important power-broker in this case. From Moscow’s point of view none of the crises has touched upon vital interests; all have merely been a way to increase its great power prestige. The rule for China has been either to follow Russia’s stance or to remain disengaged - at least till May 2013.

The last take on the Israeli-Palestinian conflict undertaken by China has challenged the well-established pattern of crisis behaviour. Beijing proposed a four-point peace plan and played host to the Israeli Prime Minister, followed by the President of the Palestinian Authority. China’s initiative has little chance of achieving a breakthrough in the peace process, given that it repeats widely-acknowledged principles of the peace (of the peace what?) between Israel and Palestine. It nonetheless signals its willingness to gain a higher profile and a seat at the table. This move corresponds with China’s declaration to send about 500 troops as part of the Mali peace-keeping mission to which Russia has not contributed.

What are the consequences for the Russo-Chinese relationship of ‘trading places’? The recognition of Russia’s special role, demonstrated by Beijing – though in a symbolic rather than a substantial way – has facilitated Russia’s accommodation of China’s rise. In relations with Beijing, the Kremlin has enjoyed a certain comfort which has always been lacking with the U.S. Although both Russia and China have come to realize the bilateral power transition, they have still pretended that nothing has happened. With China’s more frequent participation in crisis-management, Russia’s global role is going to gradually lose its importance (see the commentary in the National Interest pointing to the need to replace the useless Middle Eastern Quartet with Russia onboard, with the Chinese-European mediation).

Factors to shape the future of Russia-China relations

There is an undeniable continuity in post-Cold War Russian-Chinese relations. They seem to be always progressing in a linear direction – towards greater engagement with one another. Even given the periods of stagnation – such as witnessed after Russia’s rapprochement with the US, in the wake of the 9/11 attacks – have not altered this dynamic.

This continuity is often ascribed to just one factor, which is most often either the persistence of unipolarity and the American global domination or similarity in authoritarian political-economic systems (this line has been developed in the most recent piece by Lilia Shevtsova). It is, however, worth going beyond the mono-causal picture by taking a closer look at those domestic, regional and global factors which may be expected to influence the relationship between Moscow and Beijing and make it more complex in the coming years.

Relative domestic stability in both Russia and China has contributed significantly to the development of their ties. Currently neither the old leader in the Kremlin, nor the new leadership in Zhongnanhai can look calmly into the future. While Putin sees his fading legitimacy and may expect further waves of protests, Xi Jinping and his team face conflicting calls, to liberalize the system and to bolster its international standing. Indeed, to which of these vows Xi Jinping responds in realising  the Chinese dream, does matter for the Kremlin.  

The regional dimension is no less interesting to observe, especially given the significance and scale of changes it is expected to undergo. The transformation of Eurasia is looming. It will be marked by the West’s withdrawal from Afghanistan as well as the Russian project of the Eurasian Union. A number of analysts interpret the Russian integration effort as an attempt to forestall further Chinese expansion into the ‘Russian’ Central Asia. The lack of a common political opponent after 2014 is going to adversely affect efforts to avoid open Russian-Chinese rivalry in the region. Moreover, if Moscow succeeds in making its pivot to Asia more substantial (it has so far remained in the sphere of rhetoric), diplomatic mastery in managing bilateral relations will be valuable.

In the global realm, China and Russia face a strategic environment which is far from clear-cut. The US retrenchment strategy has been coupled with more sophisticated attempts to boost American presence in East Asia and to hedge - de facto - against (if not contain) China’s rise. Interestingly, in response Russia and China alike have resorted to using increased assertiveness. Moscow brought the ‘reset’ with the US to a halt and Beijing has pursued territorial claims with regard to disputed maritime borders, thereby testing Washington’s resolve to support US allies in the region.

Groundbreaking events in recent international relations have, for the time being, fueled the Russo-Chinese relationship. The wave of the Arab Revolutions has strengthened the perception of increased potential for domestic turmoil and pushed Russia and China towards closer cooperation (in a similar vein to the wave of colour revolutions in the post-Soviet space in the mid-2000s).