Thursday, March 12, 2015
Chinese Premier Li Keqiang meets with Russian Prime Minister Dmitry Medvedev during Li's October 2014 visit to Russia. (Credit: Xinhua)
Since the beginning of the Ukraine crisis, China has been remarkably forthright in its consistent opposition to the imposition of sanctions against Russia following the country’s annexation of Crimea in March 2014 and support for separatist movements in the Ukrainian regions of Donetsk and Luhansk. China, along with Brazil, India and South Africa, abstained from voting on United Nations (UN) General Assembly Resolution 68/262, which affirmed the UN’s commitment to recognize Crimea within Ukraine’s international borders. More recently, on February 2, in Beijing, the foreign ministers of China, Russia and India issued a joint statement condemning interference in the internal affairs of other nations through the use of United Nations General Assembly resolutions, attempts at regime change and the unilateral imposition of sanctions on the basis of domestic law alone in a clear rebuttal of the United States and its sanctions against Russia (Xinhua, February 2). These strong statements in favor of Russia, albeit without official statements of support for its actions in Ukraine, suggest that China is actively formulating trade and economic cooperation deals with Russia to circumvent Western sanctions and in extremis may consider providing emergency aid to Russia should it be requested by Vladimir Putin. Beijing’s support for Russia, evident in increased bilateral state-run investments, ministerial pronouncements and wide-ranging media coverage, appears to be motivated by economic concerns and a desire to preserve Russia as a bulwark against U.S. dominance in the international community.
Sino-Russian Economic Cooperation
Following the imposition of Western sanctions on Russia, and especially as the Russian economy deteriorated in the second half of 2014, the Chinese government stepped in with numerous agreements for economic cooperation to support the Russian economy. Russia’s quest to alleviate its economic distress by finding alternative export markets and investments as well as using its foreign currency reserves to support the Ruble has likely motivated an upsurge in Sino-Russian diplomacy and trade in 2014. Prominent examples of recent Sino-Russian economic cooperation include 49 agreements signed by President Putin during his May 2014 visit to China, including two major deals for Russia to deliver a total of 68 billion cubic meters of natural gas annually to China beginning in 2018 (see China Brief, January 23; Xinhua, May 24, 2014). Xinhua explained that Russia is seeking to “look east” by strengthening its cooperation with China and other Asia-Pacific states in order to compensate for the departure of Western investors following the imposition of sanctions (Xinhua, May 24, 2014).
During an October 2014 visit to Russia, Chinese Premier Li Keqiang signed 38 cooperation agreements in energy, trade and finance, including the opening of a new credit limit agreement between the Russian Foreign Trade Bank and China Export-Import Bank. Li also signed a currency exchange arrangement intended to promote the internationalization of the Renminbi, which would reduce Russia’s reliance on the dollar. Tellingly, the Chinese Ministry of Commerce reported the deals under an article entitled, “China Helps Russia Resist Western Sanctions,” which further detailed that between January and September 2014, Chinese oil imports from Russia grew by 45 percent, in contrast to a 20-percent decline in Russian oil sales to Europe over the same period (Ministry of Commerce, October 13, 2014).
Despite the accords signed between China and Russia over the summer of 2014, Russia’s economic condition markedly deteriorated from September to December due to declining government oil revenues and the accelerating depreciation of the ruble against the U.S. dollar. By November, a number of Chinese state-run media outlets began to report that China was beginning to be affected by Russia’s economic weakness. According to Zhang Jianping, director of the National Development and Reform Commission Research Unit on International Cooperation, the Ruble’s rapid devaluation and the reduced spending power of Russia’s population were having a detrimental impact on Russia-China trade. Zhang also stated that some cooperation agreements signed between Russian and Chinese companies had been discontinued due to the state of Russia’s economy. He added that Western punishment of the country might have a negative effect on China’s “one belt, one road” project (yidaiyilu), better known as the “New Silk Road,” which is the focus of significant Chinese financial and diplomatic efforts in Asia (see China Brief, December 19, 2014; Xinhua, December 18, 2014).
Liu Huaqin, the deputy director of European Affairs at the Chinese Ministry of Commerce Research Institute, claimed that the ruble’s instability presents significant risks to Chinese companies that invest in Russia, such as Fuyao Glass and automotive manufacturer Geely, and that as of December some Chinese companies were already suffering. Liu asserted that the ruble’s devaluation and the fall of world oil prices is a deliberate part of the West’s punishment of Russia and that the greater competitiveness of Russian exports to China resulting from ruble depreciation is insufficient to mitigate the damage caused by Western sanctions. Liu concluded that it “may be necessary to adopt appropriate measures such as helping Russia through the crisis” (Xinhua, December 18, 2014).
Beijing Debates a China-led SCO Bailout for Russia
Liu’s statement presaged a more serious Chinese discussion of greater support for the Russian economy. Although the underlying factors of Russia’s economic problems in other countries have in the past been solved through a bailout by the International Monetary Fund (IMF), U.S. dominance over the institution suggests it would likely demand the cessation of Russian involvement in Ukraine and the restoration of the status quo ante bellum as a prerequisite of aid. This leaves the Chinese government as the remaining viable option for Russia should assistance be required.
On December 18, Foreign Ministry Spokesman Qin Gang, dismissed Western claims that Russia’s economy was on the brink of collapse, adding that China believed Russia—with ample foreign currency reserves, a comparatively small debt-to-GDP ratio compared with most other G20 nations, a rich energy and good industrial base—had taken steps to stabilize its foreign currency market and would overcome its present crisis (Xinhua, December 18, 2014). When asked whether China would support Russia through the Shanghai Cooperation Organization (SCO), Qin answered: “Presently the world economic recovery is slow and the SCO was not only intended to guarantee regional stability and security but also to provide a serious development platform for members…the SCO has a common wish, which is to strengthen pragmatic cooperation between members, commonly promoting the economic stability and growth of individual member states and the region at large” (Xinhua, December 18, 2014). Chinese Foreign Minister Wang Yi late asserted that China has consistently offered mutual support and assistance to Russia, and if Russia were in need, “China will do everything in its power (lisuo nengli) to help and supply necessary aid” (Phoenix, December 20, 2014).
Chinese solidarity with Russia was also expressed by Premier Li during a December 2014 SCO heads of government summit in Astana, Kazakhstan, where he met with Russian Prime Minister Dmitry Medvedev. According to Li, due to the perilous state of the world economic recovery, SCO members should “cross the river in the same boat” (tongzhuogongyi), a statement which Chinese newspaper Guancha interpreted as a signal that China was prepared to directly assist Russia (Guancha, December 20, 2014). Li also expressed his wish that Russia would widen its cooperation with China in energy, industry, high-speed rail, finance and development of Russia’s Far East (People's Daily, December 16, 2014). Commenting on these developments, Cheng Yijun a research fellow at the Development Research Center under the State Council, claimed that, “if the Kremlin decides to seek assistance from Beijing, it is very unlikely for the Xi leadership to turn it down... This would be a perfect opportunity to demonstrate China is a true friend, and also its great-power status” (Guancha, December 20, 2014).
Russia’s Ambassador to China, Andrey Denisov, thanked China for expressing its opposition to Western sanctions and stressed that Russia only desires support from China, not assistance. Denisov maintained that discussions about Russia’s economic situation should be centered not on aid but on mutual reciprocation and advantage, such as in trade and the settlement of contracts in local currencies (Global Times, December 30, 2014).
Chinese Media Cynical About Goal of Western Sanctions
Besides Chinese ministerial pronouncements about assisting Russia, Chinese state media have also provided insights into China’s strategic calculations in relation to the Ukraine crisis. Following Vice-Premier Zhang Gaoli’s visit to Russia on September 1, 2014, the People’s Daily published an essay by the deputy Director of the China Institute of International Studies, Su Xiaohui, who claimed that the Sino-Russian energy relationship is not at all a stop-gap measure (quanyi zhiji), and is instead based on mutual profit and advantage. Furthermore, China and Russia’s cooperation is beneficial in developing Russia’s Far Eastern region, which is relatively backward and will bring improved roads, power stations and general infrastructure in keeping with Russia’s national revitalization project. Su rebuked those in the West who might criticize China for supporting Russia during sanctions and argued that China has always opposed such measures and instead prefers diplomatic solutions to global disputes (People’s Daily Oversees, September 4, 2014). An editorial titled “China and Russia Have Already Joined Hands to Shape the New World Order,” published in International Finance News (a subsidiary of the People’s Daily) claimed that Russia’s actions in Ukraine are a reaction against U.S. and North Atlantic Treaty Organization (NATO) humiliation of the country following the Soviet Union’s collapse. Moreover, the editorial connects the Ukraine crisis with maritime disputes between China, Japan and the Philippines, both of which, the newspaper asserts, were instigated by the United States as part of its pivot to Asia and attempts to encircle China (International Finance News, September 29, 2014).
However, some Chinese scholars do not agree that China should be prepared to offer loans to President Putin’s Russia. Wang Haiyun, the deputy director of the Sino-Russian Relations Research Group under the Ministry of Foreign Affairs, claimed that Chinese public opinion is evenly divided on the issue of Russian aid, with one group advocating support for Russia and the other contending that helping would only place a burden on China (Global Times, December 21, 2014). Wang maintains that both of these opinions are extreme since definitively backing Russia would accentuate U.S.-China conflict and draw fire onto China (yinhuo shaoshen), which would not be in China’s strategic interest. On the other hand, not concerning itself with Russia would constitute a lack of foresight, since a Russian economic collapse precipitated by sanctions would affect many countries (including China), and ultimately both China and Russia would face renewed U.S. strategic pressure. Criticism has also been leveled at Russia’s poor management of its economy, which has left it vulnerable to sanctions. Zheng Yu, a Russian specialist at the Chinese Academy of Social Sciences, censured Russia for failing to reform its economy noting that Western sanctions are merely exacerbating a deeper economic malaise caused by the preponderance of oil in Russia’s economy. The formation of energy oligopolies, have impeded the productivity of non-governmental industries and scientific progress making Russian non-oil products uncompetitive outside the Commonwealth of Independent States. Zheng contends that this situation, more serious to Russia than the global financial crisis in 2008, might be beneficial in the long-term by compelling the Russian leadership to embark on a comprehensive program of economic reforms (Global Times, October 23, 2014).
Conclusion
Clearly, Chinese ministerial pronouncements and state-run articles indicate the variance of Chinese and Western views toward Russia’s actions in Ukraine and its place in the international community. Chinese media discussion of possible assistance for the Russian economy suggests that Beijing clearly views maintaining a stable and capable Russia in China’s long-term geopolitical and economic interests. Accordingly, the Chinese leadership has taken major steps to facilitate the expansion of Sino-Russian trade and investment, which are vital for Russia in its efforts to avert serious economic distress caused by sanctions and its near-total exclusion from Western capital markets. Moreover, indications exist that the Chinese leadership appears willing to provide emergency assistance to Russia should it be required and that Beijing is seriously contemplating the best way of administering any possible aid to protect Russian pride and help Putin save face in such an event. In addition to securing its northern neighbor against Western encroachment, China will also derive economic benefits from liberalizing investment opportunities in Russia’s Far East while also gaining diplomatic capital in Moscow.
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