Beijing allows Moscow to bow in obedience

Starting a war with Ukraine, Putin proclaimed it a fight for Russia’s independence and sovereignty. A year later, Xi Jinping’s visit to Russia came as a statement of Russia’s obedient service to Beijing’s economic and geopolitical interests. 

Russia and China have always needed each other, and this interdependence has been growing for the last 40 years. At first, China needed Russian technologies and brains, stealing the former and buying the latter, building up its space and military programs. Then China tried to incorporate Russian military expertise (or Soviet, to be exact), participating in almost all military drills, especially the naval ones, as China has built a considerable fleet without the necessary expertise to use it effectively. And, of course, Russia has natural resources that China desperately needs to back its economic and military development. Russia also needs China as a growing export market to receive hard cash. And both powers try to counterbalance the dominant US global influence.

Although the more China developed, the more the interdependence balance shifted towards it. China still needs Russia as a nuclear power to use in its power game with the USA. Still, the sanctions and growing international isolation puts China in the focus of Russian geopolitical and economic needs. 

Xi Jinping is more important for Putin than Putin for Xi Jinping. This is a negotiation formula for all possible Russia-China relationships and deals. No parity, no two-sided strategic gains. Russia needs to be stronger to be considered an equal partner, so Beijing will naturally neglect Russian strategic interests focusing on its own.

Now Russia badly needs arms and technologies. So, Putin lets “Chinese friends”, as he put it, into Russia to pursue and execute their strategic goals in exchange for some basic microchips and probably some money to keep the Russian economy afloat. While the Chinese set their long-term goals of extracting more resources from Russia, the latter will lose its subjective status and perceived legitimacy.

China has developed its own way of neocolonialism; it tries to incorporate some territories with bordering countries, making them officially Chinese:

  • In 1999 Kazakhstan gave China 407 sq. km.
  • From 1991 to 2004, Kyrgyzstan gave China 1250 sq. km.
  • In 2005 Russia also gave China 337 sq. km of land and islands along the Amur river.
  • In 2011 China took 1158 sq. km. from Tajikistan. 

In more distant cases, China established de-facto Chinese governance over territories with Chinese investments. To do it, China corrupts countries’ governments, mass media, and civic leaders, creating a robust pro-Chinese lobby. McGill University conducted a study of 2003-2017 panel data from 56 countries in Africa to analyze the impact of China’s investments. Estimated results suggest that Chinese investments helped increase corruption levels in the sample countries. 

These practices allow China to successfully create Special Economic Zones in invested countries, making them zones with economic ties with China and not with the surrounding country’s economy. 

The text of Xi Jinping and Putin’s joint statement touches upon critical economic issues, like using national currencies in Russian trade with Asian, African, and Latin American countries, stating Russia’s readiness to support Chinese businesses willing to substitute Western companies, and increasing gas and oil supply to China.

Chinese advantages here are more than evident. Bashfully named “trade in national currencies” means trading in yuan. And yuan (RMB) is not a freely convertible currency. It is contrary to “free,’ being fully controlled by the Chinese government. And Beijing knows how to use it for its economic interests. The statement is clear about what will happen after Western companies leave the Russian economy. While official propaganda stresses the importance of domestic manufacturing, Putin is ready to give any Russian industry to the Chinese. Soon after Xi Jinping’s visit, we saw news of high-quality Chinese cars on Russian roads or Chinese speed trains to substitute Siemens made. Yes, Russia will sell more gas and oil to China. Russia will receive more money, but this money will be yuans. And only China will decide if yuans become real money for Putin or stay some abstract electronic ledger.

In 2022 Russian foreign trade turnover was $850 billion. The turnover with China was $185 billion with plans to increase it to $200 bln. So, a potential 25% of Chinese trade in Russian foreign turnover makes it partner #1 for Russia. At the same time, China’s foreign trade turnover reached $6115 billion. For China, Russian trade accounts for about 3%, with main partners being USA, EU, and Japan.

While the significant Russian exports to China are highly demanded natural resources, it sells them at big discounts. Enjoying a 50% discount on gas in 2022, now China reportedly secured a 70% discount for gas. And Russia now will get yuans for this hugely discounted gas. 

The figures show that China makes money with Western economies. Then it uses it to build its international and military might, evidently trying to take on the geopolitical role of the dissolved USSR. And Xi Jinping-Putin’s statement is very clear about that, saying that the Chinese peace plan could become a basis for “the conflict in Ukraine,” implying Beijing, not Washington, to become the main driver of peaceful regulation of the biggest European crisis after WWII. 

Reading the text of the joint statement, we see that both Xi Jinping and Putin confirm that relations between Russia and China are not “a military-political alliance,” “are not of a block and confrontational nature are not directed against third countries.”

The fact that Xi Jinping signed a statement explaining what he does not want to do for Russia is the basis of all other words and phrases. With this statement of negation, Xi Jinping explained to the West that he would only extract resources from Russia and not provide wide and open support to its war in Ukraine. The negation is fundamental here for a psychological reason as well. Imagine you have managed to invite a girl you like for a date. It wasn’t easy, but you did it. Now you walk with her and bump into her friend. Instead of saying, “hi, this is my friend …” she says, “hi, we are not a couple, just walk together.” It must be a bit humiliating. 

Vladimir Putin has yet to confirm whether he will run for the Presidential elections in 2024. At the same time, during his Moscow visit, Xi Jinping told the Kremlin chief that he was convinced that the Russian people would support him in the upcoming presidential elections. In a different situation, it could have been regarded as interference in domestic affairs, but Putin just smiled. He definitely saw a promise of financial and organizational support from a strong pro-Chinese lobby. 

And personal financial support means much more for Putin now than before, with the widening isolation from the West. China has become vital for Putin’s right-hand man Igor Sechin, the head of Russia’s biggest oil company Rosneft. He owes money to China for the credits Rosneft received in 2017. While Rosneft has never disclosed the exact number, experts estimate the debt at $30 billion.

The Chinese leader visited Moscow before, in 2013 and 2017. And both times, Rosneft received big contracts or credits from China. In 2013, e.g., Rosneft received $2 billion from the Chian Development Bank, followed by $35 billion in credits in 2013-2015. Igor Sechin needed this money to pay back his credits to Western banks. In December 2016, on the eve of Xi Jinping’s visit, Rosneft and CNPC prolonged a five-year oil contract increasing it 2,5 times. During the 2017 July visit of Xi Jinping, Rosneft sold shares of its regional subsidiaries to Sinopec and Beijing Gas for $4,6 billion.

And now Putin needs the money more than before. So, one can only imagine what behind-the-door deals Kremlin and Beijing made. Both open and secret deals seem to be better for the Kremlin than dealing with the West, as Putin sees Western democratic practices as a direct threat to his power. China does not care for the internal politics of its junior partners. What it cares about are its economic and geopolitical interests. And Xi Jinping seems to have secured them during his Moscow visit. That was not difficult, however, as Russia will keep becoming less free and more dependent on China not because of some meticulous Western or Chinese plot but because Russians chose it themselves. The news of Chinese navy patrolling Russian-operated gas field in Vietnam’s waters mark what Xi Jinping really signed in Moscow.

The next day after Xi Jinping left home, the Russian Central Bank announced that it would start courses of Chinese for its staff. And five days later, the Moscow Institute of Physics and Technology, the leading Russian educational and research institution for theoretical and applied physics and applied mathematics, substituted courses in Spanish and German languages with Chinese. These Russian news mark what Putin signed in Moscow.

Vitaly Charushin
Vitaly Charushin
Vitaly Charushin is a Russian pro-democracy activist and member of Advisory Board of Creative Cluster, a French-tech ecosystem partner. He has previously worked at the National Democratic Institute in Moscow.