China and Russia interested in closer cooperation and further economic ties strengthening Analytic

7 July 2016. PenzaNews. President of the People’s Republic of China Xi Jinping and Russian President Vladimir Putin signed more than 30 cooperation agreements during the official visit of the Russian leader in Beijing, which took place on June 24–25.

Photo: Kremlin.ru

According to observers, the visit that coincided with the 15th anniversary of signing the Treaty on good neighborliness, friendship and cooperation between China and Russia, became the next step in the implementation of the strategic priorities connected with Russia’s pivot to the East.

According to Vladimir Putin, priority in the negotiations has been given to strengthening economic cooperation.

“Global economic crises, instability on commodity markets and foreign exchange markets could not but affect our bilateral relations. We have seen some cutbacks in trade, although last year, the Russian-Chinese goods turnover amounted to 63.5 billion US dollars, which is Russia’s maximum with any country,” he said following Russian-Chinese talks.

Russian President stressed that China is a leading trading partner of Russia.

“This year, Russia almost doubled machinery and equipment exports to China. […]Supplies of farm produce and foods to the Chinese market increased by 30 percent. This, as I said, has given us an emerging positive trend. To reduce dependence on foreign exchange markets, we are expanding the use of national currencies in mutual settlements. […]Our focus is on building up industrial cooperation, launching joint projects in infrastructure, resource development, and development of agriculture. The Joint Commission on Investment Cooperation […] has already selected 58 commercial initiatives with investment totalling 50 billion US dollars; 12 projects are already underway,” Vladimir Putin said.

However, energy of course remains the locomotor of business relations between the two countries. Russia is stepping up deliveries through the Russian-Chinese oil pipeline, and the Tianjin refinery project continues. The Power of Siberia pipeline is being built on schedule and will run at full capacity in 2020.

Moreover, special emphasis was laid at the talks on the global international issues. Vladimir Putin stressed that Russia and China have very close or almost identical views on international developments.

“We will continue to closely coordinate our steps in multilateral organizations, especially the UN, the SCO and BRICS,” he said.

It is noteworthy that the Russian president arrived in Beijing from Tashkent, where the jubilee SCO Summit dedicated to the 15th anniversary of the organization’s creation was held. During the Summit India and Pakistan were admitted as SCO full members.

Commenting on the results of Vladimir Putin’s visits to Uzbekistan and China, Bunn Nagara, Senior Fellow, Foreign Policy and Security Studies, Institute of Strategic and International Studies (ISIS) in Malaysia, noted that the meetings helped to develop mutual understanding and common interests between the two countries.

“The summit also helped to limit the historical differences between Russia and China, such as border issues, and to improve personal relations between the two leaders. Among the many implications of the summit, both economic and diplomatic, the most important were: the sale of over 2 million tons of crude oil to ChemChina by Rosneft, the agreement, according to which ChemChina would take a 40 percent stake in Rosneft’s planned petrochemical complex VNHK in Russia’s Far East, the agreement to expand mutual payments in national currencies, and the joint project for a high-speed rail Moscow — Kazan,” the expert told PenzaNews.

From his point of view, these relations are important, and so also are Russia’s own relations with other countries in Asia with Moscow’s policy of “looking East.”

“East Asia remains the most important growth region in the world. This region’s economic, diplomatic and strategic relations are therefore influential and significant. It is important for Russia to develop these relations on its own, directly with these other Asian countries, and not just depend on China as a middleman,” Bunn Nagara stressed.

He also added that Russia should not “inherit” Chinese problems in its relations in the region, for example, in the South China Sea.

“Such disputes of territory are not simply a matter of strategic differences between China and the United States, as the countries most directly involved are those in the region themselves. If Russia seriously wants better relations with countries in the region as well as China, it should not be seen as the ‘enemy’ in such disputes by being on the side of China,” he explained.

According to Denny Roy, Senior Fellow at East-West Center, Russia and China are not natural allies.

“History makes this clear. Currently, they have strong common interests in opposing the global agenda of the United States and in counter-terrorism. These common interests drive them toward cooperation,” the expert said.

According to him, the SCO is one of many manifestations of that cooperation.

“However, China and Russia are essentially two large and ambitious countries pressed up against each other. This inevitably leads to strains in the relationship. These strains will increase if China continues its rapid economic growth and expands its influence in its neighborhood, which includes areas where Russia also wants to be influential. Russia and China’s respective tensions with the United States have artificially supported a pseudo-alliance between Moscow and Beijing, but their bilateral relations could easily deteriorate in the future,” Denny Roy said.

In turn, Russian political scientist Pavel Danilin said that the bilateral relations are quite stable, and nothing will be able to overshadow them in the near future.

“Cooperation between Moscow and Beijing is gaining momentum year to year, increasing the volume of trade between the states. Despite the deterioration of economic conditions for the Russian Federation, China actively invests in Russia. We are creating joint ventures and developing energy sphere. In the next quarter-century, nothing should overshadow the bilateral relations,” the expert said.

Moreover, according to him, the SCO Summit in Uzbekistan was very successful.

“New countries, including Israel, expressed interest in joining the Shanghai group. The organization demonstrates the good potential, effectiveness and efficiency. This is, of course, not a full-fledged military alliance, but the union provides for the common security on the borders, and enhances cooperation in different formats in the Asia-Pacific region and the Great Eurasia,” the analyst said.

In turn, Kerry Brown, Professor of Chinese Studies and Director of the Lau China Institute at King’s College, London, suggested that the Summit created more trust between the countries in a multilateral context.

“The SCO Summit gave them a further basis by which they can see areas in which they can work together for mutual gain,” the expert said.

According to him, the relations between Moscow and Beijing are very pragmatic.

“It is a hard-nosed, pragmatic relationship, where each is clear of what they need from the other – investment, trade and security reassurances. But it is a relationship without real warmth of depth,” Kerry Brown said.

In his opinion, at the moment relations between Russia and China are on the rise.

“It will be fine between these countries as long as they both see benefits coming their way and feel things are balanced. But this is a relationship with very shaky historic foundations, and a volatile track record. So we would ignore that history at our peril. It would be easy to see issues, from Russian worries about Chinese military strength in the Asian region, to Chinese worries about Russian involvement in Central Asia, disrupting the pleasant balance of things at the moment,” the analyst added.

Meanwhile, Douglas Paal, Vice President for Studies at Carnegie Endowment for International Peace, noted that Russia continues to fall into China’s economic orbit, as its own economy struggles for dynamism and reform.

“The SCO summit reconfirmed the drift toward increased Chinese and reduced Russian influence in the region. Russia needs to find a way to economic recovery,” the expert said.

According to him, currently Russia is very much under the influence of Chinese.

“Vladimir Putin and Xi Jinping seem very comfortable with each other, with Putin drawing strength from Xi, and Xi gaining advantage over Putin. Given US mismanagement of relations with Russia, and Washington’s clumsy lack of a grand strategy for China, this is likely to continue for at least the next year,” Douglas Paal said.

In turn, Xu Jin, Research Fellow at Institute of World Economics and Politics of Chinese Academy of Social Sciences, suggested that the bilateral relationship between Moscow and Beijing is the model among the great power relationships.

“Vladimir Putin’s visit is an important one to the two countries. It’s the first time that the joint declaration uses several paragraphs to criticize the United States. It shows that the two countries on the one side, has publicly opposed USA on the other side in the security affairs,” the analyst said.

Moreover, he also pointed to the possibility of further strengthening and expansion of cooperation between Russia and China.

“If the next president of United States continues its unfriendly policy toward Russia and its rebalancing strategy in East Asia, China and Russia will cooperate more closely than they do now,” Xu Jin added.

Enrico Fardella, Research Fellow at the History Department of Beijing University, also noted that the bilateral relations are getting better but more because of Russian need to balance the tension on the Western Front.

“This might give more leverage to the Chinese side both in economic terms – development of the One Belt One Road project and Chinese FDI in key strategic sector of Russian economy – but also to get better access to Russian military technology that can be useful in the South China Sea,” the expert said.

According to him, China will not get entangled in a new alliance with Russia but it will try to benefit from Russians tension with the West to reinforce its partnership with Moscow.

In turn, Marc Lanteigne, expert on China, senior research fellow at the Norwegian Institute of International Affairs, reminded that for more than two years, the Putin government has advocated its own ‘pivot to Asia’ with China factoring heavily into these policies.

“The Chinese and Russian governments have been in agreement on a number of international issues, including the worsening civil war in Syria and concerns about American intervention in the greater Middle East, but the cornerstone of the relationship remains economics. Russia remains a primary market for raw materials and energy as China continues to develop, while Russia along with Central Asia are crucial actors in Beijing’s developing Silk Road Economic Belt, part of the Belt and Road Initiative. There is also the possibility of further joint development projects in the Russian Far East and Siberian regions, but at present the economic relationship remains lopsided, and it has yet to be proven that enhanced relations with East Asia will offset the losses Moscow has experienced due to frozen relations with Europe,” the analyst said.

According to him, one of the main goals of the visit was to deepen energy agreements and put existing deals, including the Power of Siberia and the potential Altai pipeline, back to rights.

“Although there was much talk about expanding politics and security cooperation between the two governments, at present Beijing is much for focused on addressing its economic slowdown and reworking its domestic economic framework, as well its maritime security concerns including the South China Sea,” Marc Lanteigne said.

As well, although Beijing is at odds with the United States over these maritime issues, China can also not afford to damage economic relations with either the US or Europe, he said.

“The two states will continue to develop stronger economic partnerships and address joint development in Russia’s eastern regions, but in terms of overall economics beyond resources, the two states remain on different pages. Much will also depend on how swiftly the Belt and Road projects come to fruition, and whether Russian relations with the West improve in the coming years,” the expert concluded.