Putin's Pivot East Meets Tepid Chinese Enthusiasm
June 25, 2016
by Charles Recknagel
Vladimir Putin has invested a lot of energy trying to pivot eastward to China to counterbalance Western economic sanctions over Ukraine.
But when the Russian president visits Beijing on June 25, he is likely to find little enthusiasm on the Chinese side, partly due to China 's diminishing appetite for Russian natural gas amid its own economic slowdown.
Putin 's talks with Chinese counterpart Xi Jinping will be the latest in a string of meetings that have seen the two leaders confer directly or on the sidelines of summits as often as five times a year recently. The frequency has fueled an impression that they are forging ever-closer relations based upon a mutual interest in energy, trade, and a desire to counter perceived U.S. global domination.
Yet that image, which seemed particularly convincing last year when Putin privileged Xi with a seat next to him as most Western leaders boycotted Russia 's annual Victory Day Parade due to Moscow 's interference in Ukraine, appears to be fading. The two leaders, it seems, are encountering the long-standing difficulty of converting talk of Russian-Chinese cooperation into reality.
The biggest item on Putin 's agenda as he visits Beijing illustrates the problem. Putin wants to push ahead with a landmark 30-year deal struck in 2014 under which Russia is to sell China natural gas worth $400 billion. But the actual process of building pipelines to deliver the gas has bogged down in squabbles over prices and, more fundamentally, apparent second thoughts in Beijing about how quickly it needs the gas.
One of the pipelines, dubbed Power of Siberia, is intended to bring gas from eastern Siberia into eastern China. The other, the Altai Pipeline, is to bring gas from western Siberia to China's northwest.
"I think [Putin] will get a message from the Chinese, which will be something like 'our gas market has changed, our outlook has changed, let's do Power of Siberia, see how that works, and then let's not sign anything new until we have that project [behind us],'" says Jonathan Stern of the Oxford Institute for Energy Studies in Britain. "That's not a message that he will want to hear but my guess is that is roughly the message he will get from the Chinese side."
The contract for the Power of Siberia pipeline has already been signed and some construction is under way. But the enthusiasm that once saw both sides calling for it be completed by 2019 has now given way to aiming for 2021. A contract for the Altai Pipeline has yet to be signed and its future has grown cloudier as China 's need for gas weakens.
"Their gas demand has dramatically reduced in terms of its rate of increase," Stern says. "In the first half of 2010, their gas demand was increasing in double digits of 10 to 15 percent a year. But in 2015, and this year, we think it will be perhaps a 3 to 5 percent increase."
China 's economic growth, which ran around 10 percent a year in 2011, has plummeted in recent years as the country struggles with industrial overcapacity and other problems. Chinese officials are hoping for a 6.5 percent growth rate this year.
All that is bad news for Russia when it hopes to build trade with China to offset the slump of its own economy under the double burden of low oil prices and Western trade and financial sanctions slapped on Moscow in 2014 for its seizure of Crimea and backing of separatist fighters in eastern Ukraine. Most of Russia 's trade with China -- two-thirds -- is energy related, making energy the center of Moscow 's hopes for any significantly expanded trade.
With prospects for fast progress on energy exports dimming, Putin may have better luck in China with Russia 's other big export item: military technology. In recent years, Moscow has sought to strike large deals with Beijing and has met with some success.
"Russian arms sales had, about a decade ago, plummeted to a very small amount but have subsequently come up quite significantly," says Jeffrey Mankoff of the Center for Strategic and International Studies in Washington, D.C.
In April last year China and Russia finalized a long-awaited deal for a long-range S-400 air-defense missile system. The deal, reportedly worth $3 billion, was the largest Sino-Russian arms deal in over a decade.
But while big-ticket arms sales can be lucrative, they suffer from two limitations. One is that China remains a regional military rival for Russia, giving reasons for Moscow to be reluctant to transfer its most sophisticated technologies to its eastern neighbor. Another problem is that China is adept at copying arms that it buys, so that in the future sales dry up as China manufactures its own versions.
Beyond trade, Putin could have additional reasons to go to China, including bolstering his argument to the Russian public that Moscow still has powerful friends despite its confrontation with the West. He has underlined that point recently by showing solidarity with China in its territorial dispute with Japan over the East China Sea. Earlier this month both Chinese and Russian naval vessels sailed into the disputed waters in an exhibition of mutual support, though the two countries do not have a formal military alliance.
But many observers say that Russia 's attempted pivot to the east has limited prospects of going much beyond where it is now because ultimately it is not in China's interest to do what Moscow wants in return, a reciprocal pivot toward Russia. The reason is Beijing's main economic interests lie in its trade partnerships with the West.
"Chinese financial institutions have a lot more at stake in their relationship with the United States, and with the West more broadly, that they have proven understandably reluctant to jeopardize for the sake of the Russian market," Stern notes.
Total trade between the United States and China totaled about $600 billion in 2015, according to the U.S. Census Bureau. That is roughly 10 times the value Chinese officials give for trade between Russia and China the same year: $60 billion.
Copyright (c) 2016. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.
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