President Xi in Moscow
The Russian - Chinese partnership and its limits
Commercial Takeaway: The Eurasian Economic Union will be synchronised with the Belt and Road Initiative, meaning that China may focus its future investments in raw materials and natural resources in Eurasia, with a preference towards land transport. This may lead China to de-prioritise some investments in raw materials that it considers vulnerable to US disruption. China’s main weakness is that most of its raw material imports come from Australia, Brazil, the US, the Gulf, and other countries that it trades with by sea. China will deepen military cooperation with Russia, with a view towards obtaining Russian technology and supplying Russia with at least dual use articles that aid Russia’s war effort. An escalation in US sanctions against China, or imminent Russian defeat, would convince China that it needs to supply weapons to Russia.
Analysis:
Deepening Cooperation
On the occasion of Chinese President Xi Jinping’s visit to Moscow, President Xi published an article on Russia’s RIA Novosty, while Russian President Vladimir Putin published an article on China’s People’s Daily. One key idea repeated by both is “synergising” (Xi) and “coordinating the development” (Putin) of China’s Belt and Road Initiative (BRI) with Russia’s Eurasian Economic Union (EEU).
The EEU is aimed at fully integrating into Russia’s orbit each of Armenia, Belarus, Kazakhstan, Kyrgyzstan and, Russia would presumably hope, other Central Asian states. The language used to describe the future development of the BRI and EEU suggests that Russia and China would invest in extracting natural resources and raw materials from EEU countries to ensure their supply chain security.
Nine out of China’s top ten suppliers of raw materials do not have a land border with China, meaning that trade with them must be conducted by sea, making it vulnerable to the US, AUKUS and Japan. This makes joint Russian-Chinese investment in natural resources and raw materials in the EEU more critical. Further research is required to assess the extent to which China can source critical raw materials from Eurasia. It appears unlikely at first glance.
Xi has proposed a peace initiative for Ukraine, which Russia has welcomed. That said, with the US committed to inflicting a strategic defeat on Russia, Ukraine gearing up for a spring counter-offensive, and Russia reducing the size of the frontline (by withdrawing from parts of Kherson and Kharkiv) as well as partially mobilising reserves, such a peace initiative is unlikely to succeed.
Russia and Ukraine are not yet sufficiently exhausted for China’s peace initiative to be a realistic option. The earliest that peace talks can begin to be considered is fall 2023, after the year’s summer fighting season is done and the combatants have had a chance to assess their losses.
Furthermore, China benefits from the war’s continuation for the following reasons:
The war forces the West to dedicate military resources to Ukraine rather than Taiwan.
Russia’s economic difficulties permit China to deepen its land-based food, fuel and raw material supply chains, creating alternatives in the event of a US naval blockade.
The war and Chinese efforts to end it may drive a wedge between Europe and the United States, as it is evident that Europe will suffer more from the war, economically and in terms of living standards, than the US. Such divisions can reduce pressure on China.
Russia’s need for materiel and components gives China access to Russian technology, which, at least in jet engines and missiles, is more advanced than China’s.
Two key ideas that appear in Xi’s article, but not Putin’s, refer to the need to raise the quality of investments, and to coordinate development policy. I read these as implying China wanting additional technological exchange, including in the military sphere, and implying that China needs Russia to develop sources of raw materials that China needs.
Limits to cooperation
Despite the emphasis on deepening cooperation between the two sides, some differences appear. China appears to expect Russia’s economy to be more centrally managed, to fulfil the potential of the two nations’ bilateral cooperation and to translate the goodwill repeated by the political echelon in both countries into tangible results.
Russia, for its part, is keen not to be nor to be seen to be the junior partner of China. It wants China to supply it with alternatives to the consumer goods and technology that the West supplies. But Russia also wants to guard its own military technology and export markets, to retain its role as a great power after the Ukraine conflict.
Russia also wants to secure its own sphere of influence, which, from Russia’s perspective, includes the International North South Transport Corridor, linking Russia to India via Iran and the Caucasus. China’s foray into the Middle East, bringing together Saudi Arabia and Iran, may have upset the Russians.