China's President Xi Jinping, second left, and Russian President Vladimir Putin, second right, making bliny [Russian pancakes] as they visit the Far East Street exhibition on the sidelines of the 2018 Eastern Economic Forum in Vladivostok on Sept 11, 2018. Photo: Russian Presidential Press and Information Office handout / Anadolu Agency
China's President Xi Jinping and Russian President Vladimir Putin have been cooking up deals together. Photo: Russian Presidential Press and Information Office / Anadolu Agency

Ties between Moscow and Beijing had a steroid boost earlier this month when Chinese President Xi Jinping visited Russia for top-level talks with Russian President Vladimir Putin.

During his three-day state visit, which celebrated the 70th anniversary of diplomatic relations and which included Xi’s attendance at the St Petersburg Economic Forum, Xi described Russian President Vladimir Putin as his “best friend and colleague,” noting that the two had met nearly 30 times in the past six years

“We’ve managed to take our relationship to the highest level in our history,” Xi declared. That is saying something.

The Soviet Union became China’s closest ally immediately after the formation of the People’s Republic in 1949. Soviet equipment and skilled labor poured into war-ravaged China in a Moscow-backed industrialization and modernization effort, and the two neighbors became bulwarks of the global communist movement.

But in the early 1960s relations became tense amid the so-called Sino-Soviet split. In the late ’60s those tensions escalated with border disputes that led to bloody border skirmishes on the Ussuri River in 1969.

Only in the late 1980s, with Gorbachev’s Beijing visit in 1989, did relations get re-set. Today – despite the fall of the Soviet Union and the end of the Cold War – the two countries’ cozier-than-ever relationship is being advanced not only by history and shared interest, but also by Western animosity.

Moscow is being hammered by Western sanctions, following its 2014 Crimean takeover, while Beijing is being battered by Washington’s tariff war, and its assault on national tech flagship Huawei.

Trade, integration, pandas

In St Petersburg, where 17,000 participants from 75 countries, including heads of states and CEOs, mingled, Xi, accompanied by an impressive delegation of 1,000 Chinese business figures, was the star attendee. He signed about 30 intergovernmental and commercial agreements with Putin and deployed “panda diplomacy” – presenting two of the rare bears to Moscow’s zoo.

China is Russia’s largest trading partner. In 2018, trade volume climbed 27.1% from 2017 to $107 billion, according to Russia’s Ministry of Economic Development. Preliminary figures this year show that figure is rising, boosted by rising oil prices.

Russia is already a partner in China’s ambitious Belt and Road Initiative, with both pledging to deepen the economic integration of Eurasia. That commitment was reaffirmed on the sidelines of the Belt and Road Forum in Beijing that Putin attended.

A core BRI project in Russia is a cross-border highway bridge across the Amur River that will connect China’s northeastern river port of Heihe with the Russian border city of Blagoveschensk, filling in a missing link in Beijing’s overland BRI route.  The 1.28-kilometer bridge, expected to open in October, is part of a larger cross-border 19.9 km highway link.

More ambitious is the China-Mongolia-Russia Economic Corridor from the Chinese port of Tianjin to Ulan-Bator and on to Russia’s Ulan-Ude. This project includes both a highway and a new rail link.

Yet, there is a significant economic imbalance. While G2 China is G12 Russia’s most important trading partner, for China, Russia is very much a second-tier interest. Data from 2017 shows it accounts for only 1.8% of China’s exports –  worth almost $44 billion – compared to the US, which takes 20%, worth $477 billion.

What does Russia offer China?

Despite the disparity in economic and demographic size, the Russian and Chinese economies are significantly complimentary.

The Kremlin boasted that $20 billion worth of contracts were signed in St Petersburg. Trade links in technology and agriculture – two strategic sectors for China – were upgraded. After Beijing banned US soybean imports in May, Moscow stepped in and pledged to boost Russian production to meet the needs of the world’s largest soybean importer.

An agreement to establish a research and technology innovation fund worth some $1 billion was signed on June 6. It will be financed by the Russian Direct Investment Fund and the China Investment Corporation, according to Tass news agency.

Traditionally, energy plays a major role in bilateral economic ties. The much-publicized “Power of Siberia” pipeline is now reportedly 80% complete and coming online by December, supplying liquefied natural gas, or LNG, to China. China also has a 20% stake in the Yamal megaproject in Siberia, expected to become one of the world’s largest production centers for LNG.

Aerospace is another Russian competency China is interested in. The two countries are developing a long-range airliner, the CRAIC C929, which is expected to compete with Boeing and Airbus from 2023.

Then there are arms. China has been Russia’s largest arms client since 1999, accounting annually for 34-60% of the volume of Russia’s exports of major weapons. After years of negotiations, in 2015, Russia finally agreed to sell China some of its most technologically sophisticated arms: 24 Sukhoi‑35 (Su-35) combat aircraft and four S-400 SAM systems – all for approximately $7 billion.

The enemy of my enemy …

Beyond economics, a key issue uniting the two is sour relations with the West. “China is at the forefront of Putin’s efforts to move closer to Asia in the face of tightening Western sanctions,” said Alexander Lomanov, chief research fellow at the Russian Far East Institute.

For the Kremlin, close ties with economic giant Beijing help offset worsening ties with the EU and the US, he added. In St Petersburg, the two leaders waded into American policies stifling free trade and “silencing” competitors.

Putin strongly condemned US assaults on embattled Chinese telecommunications giant Huawei as an attempt to “blatantly squeeze it out of the global market” in “the first technological war of the digital era.”

The Kremlin has also extended a helping hand. Huawei will be jointly developing the 5G mobile network in Russia and a new “home-grown” mobile operating system, to compete with systems owned by US firms.

Putin alleged that Washington, after decades of “pretending” to promote free markets, is now turning its back on them because powerful economic competitors had emerged, threatening America’s dominance.

Both leaders blasted “the economic and commercial diktat exercised by Washington” and its use of the dollar “as a means of political pressure against the whole world.” Though details and the timeline remain vague, the two are pushing to increase energy-sector payments in rubles and yuan in an attempt to resist “US financial domination.”

“We confirmed that Russia’s and China’s stances on the key global issues are similar or coincide,” Putin said after the forum.

Not all is rosy

Still, relations are not all milk and honey.

Russians feel some backward-looking unease. For decades, the USSR was more economically powerful than poor, backward and over-populated China. Now, Russia has been left far behind. Beijing’s vast new capital wealth, which it is brandishing via global investments, makes it the senior partner in both bilateral ties and international organizations.

The two are competing for influence in certain strategic areas.

Russia is wary of Chinese military expansionism in Central Asia, Moscow’s “backyard.” For example, Beijing is flirting with Tajikistan, offering closer military cooperation and joint anti-terrorism activities. That makes Russians, who maintain a heavy military presence and bases there, nervous.

In Southeast Asia, Russia maintains close defense ties with countries including Vietnam. Among the weapons Moscow has sold Hanoi are submarines, which is hardly likely to please Beijing, heavily engaged in maritime competition against Vietnam in the South China Sea.

There’s also deep distrust in Siberia and the Russian Far East, where many locals fear the rising number of Chinese and the aggressive activities of Chinese companies.

And yet, these clouds do not overshadow the bigger picture. There, broader imperatives of economic ties and strategic amity override all else.

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