Russian-Chinese energy co-operation

For the Centre for Eastern Studies, together with Szymon Kardaś, we discuss the current state of and prospects for Russian-Chinese energy co-operation: 

The oil sector has been the major element of Russian-Chinese energy cooperation. The years 2013–2015 saw a significant increase in the volume of crude oil exported by Russia. In 2015, China became the main importer of Russian oil; Russia became the second largest supplier of oil to the Chinese market, after Saudi Arabia. From Beijing’s perspective, supplies of Russian oil are of strategic importance because the main supply routes are overland routes. Russia, for its part, is interested in boosting its export because of its deteriorating position on the European market, which hitherto has been considered a strategic market. 

Cooperation in the field of natural gas has been less advanced; so far Russia has exported only insignificant amounts of liquefied natural gas (LNG) to China. China is less dependent on the import of gas (its own production covers around 70% of the demand). Beijing has been dynamically developing its LNG infrastructure, and has at its disposal gas pipelines which connect China with producer countries in Central Asia. Additionally, all the projects carried out within the framework of Russian-Chinese gas cooperation are being hampered by the financial problems Moscow is experiencing.  

Energy cooperation is and will remain the most important component of Russian-Chinese economic relations. In the present form of this cooperation, Russia has mainly played the role of China’s oil base. The process of Chinese companies investing in oil production in Russia is progressing more slowly than before; most of the agreements made regarding this matter are still framework agreements. In the mid-term perspective, however, a qualitative change to the present model should be expected. It is very likely that Chinese companies will enter the Russian upstream sector, especially taking into account the financial standing of the Russian energy sector and China’s interest in gaining direct access to oil fields.

Read the whole analysis here: 'The oil friendship'

China on Russia's intervention in Syria

For the Centre for Eastern Studies, I analysed how Chinese officials, experts and journalists commented on Russia's intervention in Syria:

China has reacted positively to Russia’s military intervention in Syria. The Chinese government perceives it as an element of the global fight against terrorism, and has emphasised the fact that Russia was acting in response to a request by the Syrian government. At the same time, Beijing has argued that the Syrian conflict cannot be resolved by military means and that a political compromise is necessary. 

Reports and comments in the Chinese media have been dominated by several major issues. The Russian operation was presented as a strategic failure of the West, and a fiasco of the unilateral policy pursued by the US. Numerous Chinese observers have considered Russia’s intervention an adequate response to what they saw as a policy of ‘double standards’ pursued by the West. In their view, under this policy the Western states themselves contributed to the emergence of so-called Islamic State. Chinese media have emphasised the fact that Russia has benefited from the operation in Syria in many ways: it has defended its interests in the Middle East, boosted its prestige in the international arena and overcome its partial isolation in relations with the West, which has been ongoing since the war with Ukraine began. At the same time, Chinese commentators disagree as to their assessment of the impact of the Russian intervention on relations between Russia and the West. Some of them view the prospect of Russia’s rapprochement with the West as likely, whereas others point to the risk that the tensions could be aggravated. 

Beijing’s position on Russia’s intervention is motivated by China’s global and regional interests. In a situation of increased tension in Chinese-American relations, Russia has shouldered the burden of open rivalry with the United States. In the context of China’s interests in the Middle East, Russia’s intervention makes it possible for Beijing to place itself in the position of the only neutral actor in the Syrian conflict, as well as being a possible intermediary. For Beijing, another motive to assess the Russian intervention positively has been the Chinese vision of the global fight against terrorism. China has promoted the need for unity over this issue, by which it intends to legitimise the policy it has pursued in Xinjiang.

Read the whole article here: China on Russia's intervention in Syria

A ‘responsible’ or ‘indispensable’ power? Two approaches to global governance

The end of September saw two major non-Western powers, Russia and China, provide interesting answers to questions on how they perceive their contribution to global governance. Beijing promised to establish a 10-year, US$1 billion China-UN peace and development fund, offered US$ 100 million to the African Union for the purpose of establishing a rapid reaction force, and committed itself to the creation of a special police unit of up to 8,000 troops for UN peacekeeping operations. Moscow, in turn, vowed to forge an anti-Islamic State coalition and, without waiting long for others to reply, embarked upon its first military intervention outside the post-Soviet area. Targeting anti-Assad forces in Syria, Russia directed its activity towards upholding the Assad regime rather than suppressing Islamic State. This evident contrast between Moscow and Beijing's actions calls for broader reflection as these two states have been increasingly regarded as posing the same kind of revisionist challenge to what has been termed the Western-led order. 

The moves by Russia and China outlined above could be dismissed as purely tactical. Xi Jinping, visiting the UN General Assembly, aspired to present China as a ‘benign’ or ‘responsible’ rising power and aimed at diluting the negative fallout of its assertive moves in the South China Sea. Vladimir Putin aimed to demonstrate to the West that Russia will not be isolated from key international security affairs and remains an indispensable player to be reckoned with. Yet, the difference in Russian and Chinese responses suggests that more than mere tactics is at stake. These recent moves reveal fundamental differences in how the two states see their contribution to solving global problems and what kind of global order they are looking for.

The drive to gain recognition and respect - in other words, to elevate their status in international politics - is common to Russia and China. The elites of both states feel underestimated by the West, which, they believe, ignores their fundamental interests. However, the paths they have taken to boost their international status differ substantially. 

Russia has now overtly demonstrated to the West that it cannot be squeezed out of the game and retains significant potential to spoil Western endeavours. If it does not become part of the solution, it will be part of the problem. The Russian elite is afraid of external disorder but for the last two decades it has turned out to be more than able to thrive on instability. For this reason Moscow could afford to play a double game with regard to international crises, without fully committing to finding a solution. The Iranian case provides insight into the thinking of Russian elites - as much as Russia does not want Iran to get the bomb, it is nevertheless prepared to live with it.

China’s perspective on world affairs and its own role within the global order differs strongly from that of Moscow and prompts Beijing to employ different means. China has become entangled in the web of economic ties throughout the world. As a result it requires certain international rules to work to its advantage. Contrary to Russia, China has a lot to lose from instability and change. The Libyan or Yemeni crises forced Beijing to evacuate its citizens from war-torn places and exposed China’s vulnerability that comes with growing interdependence with the outside world. Although Chinese elites may dislike the US-constructed global order, they have no other alternative in sight, at least in the short- to medium-term perspective.

Russia and China tend to stress that they share an approach to the international order and global governance, using their annual summits for regular Western-bashing. But when it comes to details, Moscow and Beijing part ways. China reaches for the cheque book, propping up global multilateralism. Russia resorts to arms, reinforcing its own beliefs in self-reliance on the one hand and multipolarity on the other.

China, Russia and BRICS: a leader and an outlier

BRICS is a perfect illustration of the asymmetry that characterises the Sino-Russian relationship. China – number two in international affairs – is the natural leader of the non-Western world. Russia – a power whose economic decline became conspicuous in the aftermath of the falling oil prices and Western sanctions – does not fit into the Global South. Paradoxically, however, China still needs Russia and no other ‘brick’ can replace it.

From the very beginning of BRICS, scholars and commentators, especially in the West, pointed to a large number of differences between participants, first and foremost between Russia and the remaining states. Russia does not regard itself as a developing state and part of the global South – nor is it perceived as such externally. Despite all its shortcomings, the Russian economy is much closer to those of developed Western countries. In political terms, Russia tends to identify with Europe and the Global North. The living memory of the Soviet Union’s superpower status does not allow the Russian elites to consider themselves part of what used to be depicted as the ‘Third World’. Even Russian commentators tend to stress that Russia is an ‘outlier’ in the BRICS group.

China, in turn, looks like the natural leader of BRICS. It remains part of the Global South and faces similar political and socio-economical challenges. While it is plausible for BRICS to function as a forum for non-Western emerging powers without Russia – which was the case during negotiations on climate change, it seems impossible for BRICS to exist without China.

BRICS took shape in the midst of the global economic crisis. Consequently, the bulk of its member states’ attention was focused on issues related to the global economic and financial system, global trade, sustainable development and climate change. BRICS summits served to press for the reform of international financial institutions, the IMF in particular, and focused on the Millennium Development Goals. BRICS’ members consistently upheld the G20 as the most suitable forum for global economic governance. All these issues are close to the hearts of Chinese elites, who are centred on economic development, but they remain alien to the geopolitical mind-set prevailing in the Kremlin. The regional focus of BRICS – on Africa in 2013 and Latin America in 2014 – is in line with China’s goals, especially given its large economic presence in both continents.

The institutional development of BRICS has followed China’s rather than Russia’s interests in the international order. Regular meetings take place at the level of finance ministers and central bank governors, trade ministers, ministers of science, technology and innovation, trade councils, business and financial forums. Foreign ministers tend to meet at the fringes of other global events, such as the G20. The most recent decision to establish the first two fully-fledged institutions – a reserve fund and a development bank – has only confirmed China’s potential for creating a parallel global governance structure. This impression was only reinforced by Beijing’s successful establishment of the Asian Infrastructure Investment Bank (AIIB), readily joined by China’s partners from BRICS.

But there is a paradox. Despite having the potential to take on the role of BRICS leader, China continues to need Russia. As an economic and developmental outlier, Russia remains the only state in the grouping with which China shares not only a non-democratic political system, but – more importantly – a great-power identity. Neither India, Brazil nor South Africa are able to offer substantial political support to China on the international stage. These states fall behind Russia in terms of material capabilities (military potential) and institutional arrangements (a permanent seat on the UN Security Council). Moreover, they lack the determination to challenge or resist the US primacy.

BRICS illustrates the extent of shifts that have been taking place in the Russo-Chinese relationship since the global economic crisis. Both states play different roles in this forum. China shapes the overall agenda of BRICS, and co-operation with other developing states fits Beijing’s foreign policy interests. Russia, for its part, influences the political agenda and attempts to present BRICS as an alternative to the Western institutional order. Beijing invests in tangible economic arrangements, such as the new development bank. Moscow cares much more about appearances by making sure that BRICS summit communiqués fit the vision of the international order preferred by Russia and China. Notwithstanding the power asymmetry between the two, Russia and China still need each other.

Two approaches to building influence

For The Diplomat, I explored differences between Russia and China’s respective approaches to building influence abroad:

There is a fundamental difference in the goals that push Russia and China to pursue grandiose projects. Moscow frames its project in terms of an exclusionary sphere of influence, which would confirm Russia’s status as a global great power. It is less interested in genuine economic integration than in the acknowledgement of its privileged status in the post-Soviet space by what it perceives as its peers – the West and China. As long as Moscow can gain prestige and keep up the appearance of great-power posturing, the nuances of the implementation process do not matter much. China’s aims related to the New Silk Road are at the opposite end of the logical spectrum. Beijing is first and foremost interested in continuing its economic expansion abroad. The ideas of renewing the Silk Road were framed in a non-exclusionary way. The concept remains open for all possible participants, from Asia through Africa to Europe. China makes no pretenses towards having a sphere of influence – Chinese scholars have even been reminded by officials not to compare the New Silk Road to the Marshall Plan, as the latter allegedly demonstrates “hegemonic features.”

Russia focuses on the form of its influence – Moscow insisted on the establishment of a legal foundation for the integration process and its institutionalization. China cares much more about the substance. The New Silk Road is therefore better understood as an umbrella for what remains bilateral economic engagement. These differences help explain why Russia and China can be expected to reconcile their respective interests in Central Asia.

Read the whole article at The Diplomat

China and Russia: Two Approaches to Integration

Russia’s long-lasting turn to China

The bolstering of Russian-Chinese ties stands out as one of the key international consequences of the Ukrainian crisis. Attempting to push back against Western sanctions, Russia turned to the East and embraced China as a very close partner. Over the course of the past few months, both sides finalised decade-long negotiations leading to the signing of a 30-year gas deal. They also concluded numerous agreements on economic co-operation, including one envisioning Chinese companies constructing a high-speed railway linking the Russian cities of Moscow and Kazan. Russia’s turn to China did not, however, start with the Ukrainian crisis. Its roots go even deeper than Putin’s third presidential term with its increasingly anti-Western and conservative agenda. The focus on China is embedded in the 2008-2009 global economic crisis.

Ten years ago, in the mid-2000s, such a turn to China seemed implausible. Russian-Chinese relations were said to have run out of the post-Cold War steam they had been running on. Despite important positive bilateral developments, such as the signing of the border agreement, the creation of the Shanghai Co-operation Organization (SCO) and the provision of military equipment necessary for the modernisation of the Chinese armed forces, the Russian-Chinese rapprochement was facing a growing number of obstacles. No energy partnership materialised. Russia was at pains to avoid dependence on China in its plans for oil and gas exports to Asia and was repeatedly reaching out to Japan, South Korea and other potential customers. Moscow delayed decision on the construction of Asian pipelines, attempting to stir up competition for its natural resources. The arms sales to China stalled, with Russia unwilling to provide the most advanced weapons and unable to come to terms with China’s illegal copying. As China’s influence in Central Asia grew incrementally, the region was expected to turn into the field of competition and rivalry in the immediate future. Globally, despite shared criticisms of American international primacy, both states pursued different policies. Russia challenged US predominance while China searched for a modus vivendi. Taken together, these developments were, it seemed, not conducive to a more amicable relationship between Moscow and Beijing. China moved up the international power ladder and increased the distance separating it from Russia. The global economic crisis of 2008-2009 only reinforced these trends: China’s rise accelerated, while Russia’s resurgence hit the doldrums.

Surprisingly, Russia and China did not drift apart. On the contrary, Moscow turned towards Beijing. Following the economic crisis, energy co-operation recommenced. Russia constructed the first oil pipeline to China, and this was followed by the signing of a series of contracts on oil deliveries. These made Chinese companies Russia’s most important customer in the Asian market. Chinese banks turned into the main source of financing for Russian energy behemoths, such as Rosneft and Transneft. Security co-operation encompassed not only regular military exercises on land (the Peace Mission) but also joint naval drills. Trade in arms revived and both sides expect to conclude new contracts on such weapons as the Su-35 fighters in the coming months. In Central Asia, Moscow and Beijing found ways to divide their influences, with China dominating the energy realm and Russia the security realm. Moreover, both sides seem able to reconcile their respective initiatives directed towards the region – the Russian-led Eurasian Economic Union and the Chinese ‘Silk Road Economic Belt’. Globally, China began to replace Russia as the West’s key interlocutor and emerged as the major coordinator of non-Western states in multilateral forums, such as the G-20 or BRICS. Even the Russian-American ‘reset’ initiated in 2009 did not weaken ties between Moscow and Beijing. Moreover, in the early-2010s Russian and Chinese policies towards the US converged. Both states put pressure on the US (in Eastern Europe and East Asia respectively) and opposed global American initiatives (e.g. blocking intervention in the Syrian civil war).

The 2014 Ukrainian crisis had the potential to scupper this booming Russia-China co-operation. Having inspired a referendum in Crimea and annexed the peninsula, Moscow put Beijing in a highly uncomfortable position. Russia infringed upon the principles of non-interference and territorial integrity, cherished by China for reasons related to its own fears of separatism, particularly in Tibet and Xinjiang. Despite these serious doubts, Beijing decided to support Moscow. China explained its neutral position with regard to the annexation of Crimea with reference to specific historic circumstances and stopped short of criticising Russia for its ‘silent intervention’ in Eastern Ukraine. During subsequent bilateral and multilateral summits, Chinese leaders offered Vladimir Putin political and economic support rather than criticism.

The Ukrainian crisis did not open a new chapter in Russian-Chinese relations; it validated changes which had been underway since the global economic crisis: Russia’s increasing acceptance of China’s superior position and Beijing’s policy of self-restraint towards Moscow. For a more nuanced account of the developments leading to this outcome, see my forthcoming book.

Chinese engagement, Russian withdrawal?

The past week saw a Chinese destroyer accompanied by a missile frigate and a supply ship all set off for the Hawaii archipelago. Although it may be tempting to make allusions to the Japanese navy approaching Pearl Harbour during the Second World War, this was part of a multi-national naval drill, the Rim of the Pacific (RIMPAC).

China has for some time now been regarded as key to the future of the international order. It is thus not surprising that every Chinese move, especially involving its military, is closely watched. The Sino-Vietnamese brinkmanship over the maritime borders in the South China Sea several weeks ago appeared to confirm China’s image of an increasingly assertive great power, attempting to push through its ideas for the East Asian neighbourhood. However, recent steps taken by Beijing did not fit this pattern. In addition to participation in US-organised multilateral naval exercises, China deployed 850 troops to boost the UN peace-keeping mission in South Sudan. These are, of course, very different types of political-military engagement but the similarity in their interpretation is remarkable. They are treated by observers and commentators as strong political signals from Beijing.

RIMPAC is indeed a significant event as it is the world's largest international maritime warfare exercise hosted and administered by the United States. It makes claims that it is crucial for sustaining cooperative relationships critical to ensuring the safety of sea lanes and security on the world's oceans. This was the first time that China decided to take part in RIMPAC. This move is interpreted as signalling Beijing’s benign intentions, especially given recent Sino-American tensions. It also suggests China’s growing readiness to become engaged internationally and reinforces the image of China as a responsible global actor. Peacekeeping in Africa is seen through similar lens, in terms of improving China’s credentials as a stakeholder in the international order. Beijing makes use of this to demonstrate its benign face to the outside world. Moreover, South Sudan is not the only instance of Chinese military engagement in UN peacekeeping operations. In 2013, the UN mission in Mali was aided by 500 Chinese troops.

The question is whether China’s participation in multilateral efforts to manage international security goes beyond the symbolic, whether China can make a tangible and meaningful contribution to peace and cooperation in the Pacific or to the solution of the Sudanese crisis. China has certainly been forced to leave its ‘splendid isolation’ from global high politics and to start sharing the problems of arranging the international order. It has to take care of its interests far away from the centre. The ubiquitous presence of Chinese workers worldwide makes it necessary for China to be prepared for contingencies. This was a lesson China took in the case of the 2011 revolution in Libya, when it had to evacuate its 30,000 citizens. The growing appetite for energy resources, oil in particular, is another thread which may explain China’s readiness to make more vigorous foreign forays. Beijing’s involvement in South Sudan was frequently interpreted as directly related to China’s overarching goal of securing greater access to natural resources. Regardless of its incentives, China’s engagement reinforces the Western ideas of how the international order should be arranged. Its acceptance of troops being sent to South Sudan followed on from a change to The United Nations Mission in the Republic of South Sudan (UNMISS) mandate, which now covers the protection of civilians and human rights monitoring as well as support for the delivery of humanitarian aid.

Against the backdrop of China’s embrace of multilateral co-operation, Russia has neither taken part in RIMPAC 2014 nor contributed to the peacekeeping mission in South Sudan; or, for that matter, last year, in Mali. Does this abstention testify to Russia’s diminishing interest in global issues and the ‘change of places’, with China gradually taking on more responsibilities globally? The reversal of Moscow and Beijing’s roles has been more and more visible in the aftermath of the global economic crisis. Russia’s economic interests around the globe are negligible when compared to China’s. Russia does not export its workforce, nor does it import resources. Moreover, Western expectations towards both states vary. When Russia took part in the 2012 edition of RIMPAC, this was interpreted as hedging against China, not as a potential contribution to the safety and stability of global sea lanes...