NO. 8 Сhina's impact on Russia's economy
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NO. 8
2018
PUBLISHED BY THE SWEDISH INSTITUTE
OF INTERNATIONAL AFFAIRS. WWW.UI.SE
Сhina's impact on
Russia’s economy
Vladislav InozemtsevOn June 9, 2018, at the very same day when would have it, a Euro-Pacific country and is
the G7 leaders got together at Manoir preordained to serve as a gigantic ‘bridge’
Richelieu in Québec, Canada, for their that links Asia to Europe. Therefore as more
annual summit, Russia’s President doubts concerning Russia’s position in
Vladimir Putin gleefully peacocked in in Europe were growing, the more active
front of reporters in Qingdao, China, became talks on both Russian
standing side by side with the leaders of ‘Eurasianism’ and its ‘pivot to the East’.
China, India, and several post-Soviet states, The latter idea was elevated to a highest
who all are now members of the Shanghai rank, just a tad shy from becoming a
Cooperation Organization. His three-day- national ideology, with official Kremlin-
long state visit to China was used to linked experts drafting endless reports
demonstrate how close the ties between the called ‘Toward the Great Ocean’,
two nations were nowadays and how elaborated and extended every year. Since
important China is for Russia. mid-2000s, China became a total substitute
to the ‘East’ in the Russian sociological
Without any doubt, China now appears one discourse even geographically ‘Russia’s
of the most crucial allies of the Russian East’ was still the West: if one travels
Federation – especially in a world Mr. Putin straight East from Moscow, she/he would
deems Russophobic, claiming that it ‘is get to Novosibirsk, Kamchatka, southern
evident and in some countries is simply parts of Alaska, northern Quebec, Ireland,
going beyond all bounds’. China’s Britain, and Denmark – but by no means to
influence on the Russian economy is either Beijing or Shanghai.
humongous – and I would argue that it
reaches far beyond the traditional issues of The China obsession was easy to explain.
trade and investment (in both, actually, the First, in a geopolitical aspect, the
things might go better than they actually partnership with Beijing in both bilateral
are). Trying to elaborate a systemic look at relations and inside the SCO compensated
the issue, I would focus on several Moscow for its subordinate position in
dimensions of China’s role. regards to the almighty United States and to
Europe, which Russia (at least Moscow
Emotions believes so) will never become a part of. By
cooperating with China, Russia makes up
It might sound funny, but the first and for its loneliness in the contemporary world
foremost element of China’s influence on and so regains the sense of greatness it
Russia is the emotional one. Intermittently allegedly deserves. Secondly, from the
(with short breaks in 2002-2003 and in economic point of view, with China on its
2009-2011,) Russia has positioned itself as side, Moscow may feel backed with a strong
a staunch Western-sceptic, if not an open ally that grew up to the world’s second-
adversary of the West. The entire largest economy and became both its
ideological foundation of Mr. Putin’s greatest industrial powerhouse and its
regime rests on the old assumption that biggest exporter of goods. With such a
‘Russia is not Europe’, that it should rather friend, Russia feels much more
be called ‘Eurasian, or, as some researches economically secured even when facing
2some hostile actions from the West; which wants Russia to fully embrace its
therefore I would argue that Putin’s recent secular religion of human rights,
boldness could be at least partially democracy, and rule of law. Alexander
explained by the ‘China factor’. Thirdly, Nevsky was canonized by the Russian
cooperation with China has also an Orthodox Church in 1547, and seems to
important ideological (or rather, anti- become a role model for Mr. Putin, who
ideological) component: the leaderships in opted to side with China in his showdown
both Moscow and Beijing claim they are not with the West.
obsessed with Western ‘standards’
whatever it means: the doctrine of human To summarize, I would reiterate that the
rights or the principle of popular democratic very nature of Mr. Putin policies, whether
self-rule. This all makes the cooperation so economic, domestic, or international,
seductive that the Russian political elite dooms him to believe that the Sino-Russian
opts for it without thoroughly calculating its alliance is the ultimate one that secures both
pros and cons. Russian sovereignty and uniqueness even at
expense of some economic concessions.
I would argue that many centuries ago some And because, as we all have learned quite
adventurous Russians have already been recently, Putin means Russia, and the
thinking along the same line. In mid-13th latter’s existence without former is
century, when Russian principalities were unfathomable, what is good for the country
attacked by the Mongols, the north-western is good Mr. Putin and vice versa. All this
part of the country, the democratic republic makes the ties between Russia and China
of Novgorod, waged a different kind of war, crucial to the current regime – and
the one against the Western Catholics. The perpetuates them even as the direct positive
young warrior prince, Alexander impact of the cooperation does not seem
Yaroslavich, later called Nevsky, defeated evident at all.
Swedes on a shore of Neva River and
German crusaders from the Teutonic order Trade
on the ice-covered Chud’ Lake. But, after
securing his Western borders from those So far, the bilateral trade has been the factor
Catholics who wished to convert the of crucial importance to Sino-Russian
Russians into their faith, he approached the economic interaction. Starting in the 1992
Mongols, with whom he never crossed with a total turnover of a mere $5.86b it has
swords, and who didn’t care about their reached a staggering $95.3b in 2014 before
vassals’ religion, and submitted himself declining to the current $84.0b as of 2017.
voluntarily to the Great Khan, who awarded China surpassed Germany to become
Alexander with the yarlik to govern his land Russia’s largest trading partner in 2011 and
as long as he pays taxes to the Khan. I think holds this position ever since. But before
that today Kremli is guided by the same praising these impressive results one should
logic: it would rather be a second-class look deeper into the issue – both into its
partner of an ‘ideologically neutral’ China structure and into its dynamics.
which does not intervene into Russia’s
domestic affairs, and even to engage into Russia started its cooperation with China
unfair trade with it, than to ally with Europe after the Soviet-Chinese relations were
3‘repaired’ in the late 1980s. As China took green (in 1992 the figure was the lowest at
its first steps on the path to industrialization, $1.119b, in 2001 – the highest with $5.25b).
Russia positioned itself as a superior Unlike many other nations, Russia run
partner, so Beijing became a prime buyer of comparatively similar balances with
Russian machinery and equipment as well partners both in the West and in the East –
as of weaponry and ammunition. Back in but soon China became an exception. While
1995, these two groups of goods accounted Mr. Putin announced in his addresses and
for 68 percent of Russia’s exports while oil speeches that Sino-Russian trade that the
comprised only 4 percent and natural gas overall trade over must reach another record
was not shipped at all. Acting as a more (the biggest figure that he mentioned back
advanced nation, Russia then secured a in 2011, was $200b to be reached by 2020),
surplus of $2.14b in bilateral trade, buying he rarely addressed the figures of either
primarily textiles, cheap watches, and exports or imports. And one may easily
replicas of the Japanese electronics. But as understand why: the Russia-Chinese
China grew, trade structure started to surplus disappeared already by 2004, and
change – and today it appears that in the eventually the deficit grew to $8.5b in 2007
eyes of China Russia looks not better than and reached $18.7b in 2010 (I should say
in the eyes of Europe: a huge storage facility that it became considerably lower from
for mineral resources with no proper 2015 onwards, and may be completely
management. As of 2017, out of $41.2b of leveled out this year – but only because of
Russia’s exports to China crude oil and oil the massive oil supplies I mentioned
products accounted for 59 percent, timber – earlier). If one sums up all the balances in
for 9 percent, coal – for 6 percent and ores Sino-Russia trade for the years Mr. Putin
and metals – for a bit more than 5 percent. rules Russia in one or another capacity
Combined oil, oil products and metals’ paying more than 30 visits to China so far,
share was larger than that in Russia’s meeting with the current President Xi 25
exports to the EU while machinery and times, and praising Russia-China
military supplies dropped to below 8 cooperation, they would be in red for
percent of the total. Imports from China around $59b, or by far the largest trade
were dominated by machinery, electronics, deficit Russia ever run with any other
mobile phones and office equipment that in nation. To understand why it happened one
total made 61.5 percent of their value. To should address one distinctive feature of
summarize, Russia used the last quarter of Russia-China trade deals.
century to add to its title of Europe’s
‘commodity appendage’ the status of If it comes to China’s trade in resources
China’s raw material colony, and would with the rest of the world, its most crucial
bring this process to full fruition with feature consists in a kind of a superiority
launching pipelines to export natural gas to China establishes upon each and every
its southern neighbor. partner she trades with. This superiority
originates from a proactive investment
Another quite important issue is the overall policy enabling Beijing not to buy the
trade balance. Even during the most resources but rather either to exchange them
challenging periods of its recent history for some loans or investments or to acquire
Russia managed to keep its trade balance in concessions in different foreign countries
4thus making the stuff she imports relatively knows the exact price terms for the
cheap. In Russia the Chinese leaders applied Gazprom natural gas contract.
a bit more sophisticated technique using
Russia’s two vulnerable spots. The first was Of course, no one should insist that the trade
the geographical location of major coal and with China makes losses for the Russians.
of some of oil and gas fields that made The huge Russian companies like Rosneft
China the only possible buyer since the and Gazprom are developing new fields –
alternative transportation costs were like Vankor or Chayanda – looking
unbearable (I should mention here that a predominantly for Chinese demand. The
huge part of Russian coal exports to China, majority of local firms in Eastern Siberia
e.g. is effectively subsidized by the Russian and in the Russian Far East benefit from
state through the rail cargo tariff [in 2016 trade with China. Russian citizens greatly
the subsidies exceeded the entire profit of benefit of imported goods due to their
all the Russian coal producers] since coal affordability, and the Russian retailers make
makes 54 percent of Russian Railways’ tkm their profits in a great part from the Chinese
turnover). Therefore China can press supplies. But in general the explosion of the
Russian suppliers to lower their prices since Russia-Chinese trade comes basically due
they have no real alternative except to close to both countries’ shared political values,
their businesses. The second point is even which forced them to establish ever closer
more telling: since China amassed huge ties. The Russian companies could have
piles of cash she is able to make huge found better markets for their exports if the
prepayments to the Russian companies that trade would not be dominated by
are so ineffective and corrupt that are politically-motivated state corporations and
always in debt. In the largest deals the the overall image of Russian business in the
Chinese struck with the Russians – as in a world would be somewhat better.
forward deal with Rosneft for supplying
45m metric tons of oil starting from 2004 So I believe the trends that are clearly
till 2009, in another one for supplying 300 visible in Russia’s trade with China will
m tons of oil from 2010 to 2030 and a deal only consolidate in the years to come: new
of the same kind with Gazprom for pipelines (like one through Altai and
supplying around 1.1tr cubic meters of gas Mongolia that Mr. Putin debated with Mr.
in 30 years from 2018 onward – the Chinese Xi at their recent meeting) will be build;
paid the Rosneft $10b and $25b well in larger amounts of Chinese industrial goods
advance; in the first case the money were will be imported into Russia as their flow
used for repaying the loan issued earlier for from the West decreases – but the most
buying the Yukos assets, in the second one - crucial ties – the ones created by bilateral
for building East Siberia-Pacific Ocean oil FDI – that might bind together the modern
pipeline, while Gazpom needed cash for its economies will supposedly remain
‘Sila Sibiri’ pipeline to China. In the first extremely weak by any contemporary
Rosneft deal the oil bought by the Chinese standards.
was in the end acquired at 80-84 percent of
its average market price for 2005-2009, in
the second the discount was around 15
percent, not to say that nobody actually
5Investments proved reserves as well as any natural gas
field of size exceeding 50b cubic meters of
In what one might call the ‘early years’ of proved reserves, let alone all projects in the
Russia-China cooperation China’s role for Arctic and the entire off-shore drilling
the Russian economy consisted mainly in a sector are deemed strategic). I would argue
huge support for the Russian military- that the Russian officials’ rhetoric sounds
industrial complex, by exporting cheap like they hoped that the Chinese would
goods that helped the ordinary Russian invest into the Russian processing
people to maintain their reasonable living industries – but they did not, simply because
standards and in rejuvenating the economy China itself is developing as an
of the eastern regions that border China. industrialized nation, and has never assisted
Later it became vital for the Russian any other country to become industrialized.
resource industries – but what appeared
evident already in mid-2000s was the fact I would argue that the gap between trade
that China is not very interested in investing and investment activities in China’s case is
into the Russian economy. by far the largest that Moscow may record
in relations with any other of Russia’s
In general, it had a good reason for that. partners. As far as the European Union is
China’s investment policies these days are concerned (without Cyprus), its overall
rather sophisticated, I should admit. The trade turnover with Russia stood at Є248b
money is put either into high-tech or in 2017, while the European accumulated
advanced industrial companies that may FDI in Russia exceeded Є107b as of
provide the Chinese counterparts with both January 1, 2018. But while China-Russia
new technologies and the access to the new trade amounted to $84.0b in 2017, the Bank
markets or into the ventures that grant a of Russia evaluates overall Chinese
direct access to the natural resources which investments accumulated in Russia at paltry
might be exported to China (hence - $2.84b, though some experts raise their
investments in Venezuela, Angola, Burma, estimates up to $15.0b.
Turkmenistan, and many other countries).
The first type of investments goes to the One should also note about Chinese
nations, which might be called investments in Russia that its major part
‘postindustrial’, and from where the new remains actually a portfolio investment.
technological solutions originate. The One could mention here Beijing
second type is channeled to those that might Enterprises’ purchase of 20 percent stake in
be called ‘preindustrial’ and where only Verkhnechonskneftegaz for $1.1b, or
natural resources come from. Russia Fosun’s $0.9b investment into 10 percent
doesn’t fit into either of these categories: its stake in Polyus) (the most recent deal, the
hi-tech sector is either non-existing or proposed acquisition of 14.2 percent stake
linked to defense industries fully controlled in Rosneft from a Qatari investment fund by
by the state and therefore closed for the CEFC China Energy Co., failed because the
foreign capital, while the major major company’s management faced criminal
resources have ‘strategic’ value and are not charges from the Chinese authorities. The
available for purchase or even for lease (any Chinese invest into motor vehicles
oil field larger than 70m metric tons of production, but 21 thousands Chinese cars
6produced in Russia by eight automakers, fresh loans from China, with only one
make up only 1.3 percent of the Russian Russian corporation (the ill-fated and
market for cars. The talks about Chinese operating under the U.S. sanctions RUSAL)
investments in Russian real estate (there is now listed on the Hong Kong Exchange
were plans to build a huge Chinese-owned compared to 41 traded at the LSE.
residential quarter in Moscow) have never Moreover, I would say that the Chinese
materialized. When Mr. Medvedev and Mr. respect both the U.S. and EU sanctions so
Hu Jintao signed a broad deal on border their technological cooperation with the
cooperation back in 2009, it appeared that Russians remains very modest (today the
the only mineral deposits that are to be Chinese investments into Russia are still 2.5
developed are on the Russian side while the times smaller than those into Kazakhstan.
entire processing remains China’s business. The Russians tried hard to change this
At the same time the Chinese infiltrate each attitude by constantly asking Beijing for
and every business connected with their broader financial support. Finally, it seems
compatriots living in Russia or visiting the that a breakthrough was made during Mr.
country: the Chinese tourism which is now Putin’s recent visit as a deal was struck
on the rise is served by the Chinese guides, between Russia’s Vnesheconombank and
Chinese restaurants, and even Chinese China Development Bank for releasing a
currency exchange services; all these $9.5b line of credit to Vnesheconombank.
activities are mostly illegal (e.g., only But I would argue that there is not so much
Russian citizens are allowed by the law to to celebrate, due to one obvious reason.
guide the tourist groups in Russia), but the
authorities never took on these activities Transit and infrastructure issues
because of ‘brotherhood’ and ‘friendship’
with the Chinese, and this provokes If one reads the language of the CDB-VEB
mounting protests from the Russian deal carefully, she/he would realize that the
businesses. However, I would argue that Chinese money was granted for ‘creating a
Russia-China investment cooperation is as mechanism for financial support of
regulated and as informal as is the entire integration processes within the Eurasian
Russian economy. Economic Union and infrastructure projects
in ‘One Belt, One Road’ countries’. The
The huge disillusionment in the idea of transforming Russia into a kind of
perspectives for Russia-China cooperation ‘bridge’ connecting the Eurasian landmass
came in 2014, as the Western powers was a part of the Kremlin’s ‘grand strategy’
imposed sanctions on Russia following the for decades, but Russia proved to be unable
annexation of Crimea and the Russia-led to do anything significant in this field alone,
invasion into the Eastern Ukraine. At that so the Chinese ideas for ‘One Belt, One
time the Kremlin was pretty sure that China Road’ received a warm welcome in the
would become the major moneylender and Kremlin. Today there is not even a single
investor for Russia as the Europeans and the highway connecting the Russian Far East
American withdrew their support. But it with Western Siberia: for some parts of the
appeared soon that the Chinese banks were year, especially in the spring and in the fall,
not ready to step in: from 2014 to 2017 the the passenger cars cannot make it through
Russian companies got less than $2b in the road. The aging Trans-Siberian railway
7is capable to serve no more than 95-110 Cup in Russia. The tournament is over, but
million tons of cargo per year, from which not a single mile of the railroad was built.
around 90 percent are either the goods No significant progress has been noticed so
moved between different cities in Russia or far in constructing another strategic
Russian export shipments, so less than 10 highway going from the border with
million tons of capacity might be used to Kazakhstan to Central Russia and further to
deliver Chinese goods to Europe or vice Europe – and it should not be a surprise, if
versa (I would say that, if this capacity one takes into consideration that
would be fully utilized, it would mean that construction of a modern highway between
the Trans-Siberian route serves around 0.8 Moscow and St Petersburg was launched in
percent of Asia-Europe trade, since 909 2002, and on;y a half was built. In June
million tons of cargo have passed through 2018 the Chinese railway company CREEC
the Suez canal in 2017 being carried by as has politely informed its Russian
many as 17.6 thousand commercial ships. counterparts that it ‘believes the high-speed
The so called Northern Sea Route, or the railroad through Russia will never pay off’.
Arctic Passage, that supposedly provides
the shortest transit line from China to The Chinese tried several times to engage in
Europe, is rarely used, with only a dozen of these projects in hopes that they might
transit ships passing through in 2017 accelerate the process of implementation.
carrying 194.3 thousand (!) tons of goods. But the Russians give construction
contracts only to Russian companies, most
Russians, in order to change this situation, of which are owned or controlled by Mr.
hoped both to extend the capacity of Trans Putin’s close friends like Mr. Rotenberg and
-Siberian railway and to cut a brand new his son. As a result, since late 2000s, the
‘Silk Road’ corridor leading from China to Chinese became much more active in
Europe. It was, as I would argue, the most Kazakhstan, where they have successfully
ambitious dream based on the belief in the built both a highway and a railroad from
Russian resources: actually, the space itself Dostyk to the Caspian port of Aktau in
was counted as a resource that might be cooperation with the local companies and
used for connecting the continent. The even ordered an Italian engineering
Kremlin appeared to hope to benefit not company TOTO Holding to design a bridge
only from what is covered beneath the over the Caspian Sea to the Azerbaijan. All
Russian soil, but from country’s territory the estimates I have seen indicate that the
per se. As early as in 2009, the Russian very idea of commercial transportation of
authorities started to speculate about high- goods by rail from China to Europe via
speed railway between China and Europe Russia looks unrealistic, since even now its
with its first stage, that from Moscow to cost is three times higher than the one for
Yekaterinburg, to be built in 7-8 years. By ocean shipments, and if one talks about a
2014, however, the plan was developed high-speed rail, it may rise two to three
only for the stretch going from Moscow to times higher from today’s level. The only
Kazan, or a half of what was projected option, which looks quite reasonable,
earlier, for the price of Rub1tr ($32b at the consists of shipping the goods
then exchange rates) and scheduled for manufactured in Xinjiang, in the Western
operation by the time of the soccer World part of China, to Europe via Central Asia
8and Turkey (several trains have already misleading idea that the Chinese want to
taken this route, obviating Central Russia, ‘colonize’ Russia, as some experts claim,
let alone the Russian Far East with its there are around 3m Chinese already settled
Trans-Siberian railroad. in Russia. The real picture is more
complex.
Therefore, both for purely economic and
managerial reasons, I believe the ‘Silk The Chinese immigration to Russia is rather
Road’ from China to Europe would not go modest, it is estimated at around 330
across Russia, and all the promised thousand people with approximately the
‘investments’ will never be disbursed. This same number of Chinese coming and
may become another source of leaving every year, most of them living
disillusionment for the Kremlin, since the either in the bordering regions of the
topic seems to make high-ranked officials in Russian Far East and Eastern Siberia, or in
Moscow increasingly excited, and the major cities like Moscow and St.
Russians are really fascinated by China’s Petersburg. The vast majority of Chinese
successes in building its high-speed rail migrants keep their Chinese citizenship and
network. And even while Chinese don’t stay in Russia only temporary for purposes
want to disappoint Russians, eventually of their business and/or trade. The trend of
unfeasibility of this ambitious project will marrying with the locals in order to secure
become obvious, and Russia will lose its legal residence in Russia ceased to exist in
chance to benefit from it, because of it poor mid-2000s, as the disparities in Russia’s
management and total absence of any kind and China’s development became too
of strategic planning. obvious. However, Chinese presence at
Russia’s southeastern border generated two
Are a Russian and a Chinese brothers serious issues.
forever?
First, as unexpectedly as this may sound, it
The last, but not least is the issue concerning raised among the Russians living in the Far
Russia-China social and cultural ties, as East, awareness of their European identity.
well as their economic impact. The attitude After all those years of the Kremlin anti-
towards Chinese as Russian’ ‘brothers’ that Western propaganda, less than 20 percent of
was nurtured during the early years of the people in the central Russian regions
Soviet-Chinese friendship, has been identify Russia primarily as a European
replaced by mutual hatred of the last nation , and more than two thirds say it’s a
decades of the Soviet Union, and then by a Eurasian country, in the Russian Far East
sense of awareness, that, I would argue, has the perception is quite opposite: first of all
never become a genuine friendship. Even because the locals can feel the difference
though Russia perceives China the most between themselves and the Asians living
important ally and economic partner, and on the other side of the border. Moreover,
Russian citizens see economic cooperation though in the early 1990s, there was a
with China as the most important for their significant and influential movement in
wellbeing, many of them find ‘excessive’ support of a ‘Far Eastern Republic’ as an
Chinese influence disturbing or dangerous. heir of the one that existed between 1920
This feeling originates in general from a and 1922, now the separatist ideas have
9simply vanished. It happened not because of are political ties between Moscow and
government propaganda or fears of charges Beijing, they definitely fail to produce a
that might be brought against separatists, sense of friendship between the two nations.
but rather because the locals have realized The challenge of dealing with Chinese has
that ‘independent’ Russian Far East would reawaken among Russians their European
be a puppet state of the powerful China. identity to the extent, which doesn’t match
the reality.
Secondly, the Chinese economic expansion
also raises concerns among the locals who During the recent three decades Russia’s
believe the China’s purpose is not to geopolitical and geo-economic posture has
conquer the Russian Far East but to ruin it. changed dramatically. Back in the late
The reason for such an suspicion is based on 1980s, the Soviet Union was one of two
the brutal economic exploitation of the local superpowers bordering a divided Europe,
resources: Chinese cut Siberian forests where the GDP of the strongest economy,
leaving behind empty deserts, hunt local that of West Germany was less than 70
wildlife ignoring every restriction, pollute percent of the Soviet GDP, and China
tributaries that disembogue Amur River, whichs economy was roughly a third of the
and force Russian tourists out reserving Soviet size. Now Russia faces the European
most Siberian attractions from Baikal to Union in the west with the combined GDP
everything else worth seeing to the East of of 5.2 times larger than the Russian one
it to Chinese visitors. Chinese economic (calculated at purchasing parity ratio), and
expansion is believed to be the primary China in the east with GDP 5.8 times larger.
source of the local corruption and the In order to avoid its fate predicted in a
tensions are clearly growing between the famous old Soviet joke of turning into a
locals and the Chinese businesses. I don’t buffer state between China and Europe,
think they would ever reach the degree of Russia should either to make a choice
anti-Chinese riots that erupted in Indonesia between the EU and China as its main
in 1998 and Vietnam in 2018 – first of all economic partner, or to establish equally
because the number of Chinese in Russia is close relations with the both. I would argue
much smaller and because the government that the Kremlin made its crucial choice in
would do everything possible to safeguard favor of China, and it did so from 2005
its alliance with Beijing, though the risk are onwards for political and ideological
there. reasons. The effort China made to dock
Russia to itself in a purely economic sense
Regarding tourism in general, I would say is shockingly small. However, it is enough.
that it is a two way street. China holds a
place in top-5 in both as destination for Today Russia is not trying to ‘diversify’ its
Russian tourists and in terms of sending economic ties with Europe by adding China
Chinese tourists to Russia. But I would as a trade partner. It rather really makes an
argue that China is not perceived in Russia irreversible ‘turn towards Beijing’ by
as a country where Russians would like to building new pipelines to China, organizing
move or which living standards or cultural supply chains that lead to the East and
traditions are appealing to Russians. Unlike opting for some gargantuan projects that
in the Soviet times, no matter how strong China might be interested in. Mr. Putin’s
10choice in the end is to reject the historical Russia, the Russian Federation finds itself
tradition of Russia that put its feet on the on paltry 16th place in the list of China’s
Pacific shore as a European power that trading partners. China is the second largest
reached the far ends of Asia and to propose consumer market in the world and the
a ‘new’ vision of Russia as a rather biggest market for commodities and
‘Eurasian’, than a European nation. The industrial equipment, while Russia falls
Kremlin now believes that any concessions behind from year to year. Therefore, while
to China is justified as a price to pay for the Russians can claim the equal status with
establishing ‘ever closer relationships’ and China, the reality proves the opposite.
hopes that the rapprochement with Beijing Secondly, in order to be a developed nation
delivers some tangible economic and Russia should industrialize itself and export
financial results. But, from my point of not only crude oil, but processed investment
view, these thoughts and dreams are plainly and consumer goods as well. China has
wrong. successfully transformed itself exactly
along these lines in recent decades, and it
I should also say that my point of view is seems it has much more interest in keeping
increasingly shared even among those who Russia as its raw materials supplier than to
belong to Mr. Putin’s closer circle. The help it to develop itself technologically. In
main problem lays not even in the Russia- other words, China wants Russia to remain
China unequal statuses and in unbalanced economically backward and politically
trade between the two nations, but rather in aggressive – this would perfectly fit with
the strong pro-Chinese lobby that emerged Beijing’s geopolitical aspirations.
within Russian ‘power vertical’ in the
recent years. The Chinese companies that There is nothing Russia gets from China, it
infiltrate Russia massively bribe both the cannot get from other potential partners; its
local officials and the managers responsible economic ‘leaning’ on China is caused
for the development of entire industries, and mainly by geopolitical and ideological
if they are accused of any wrongdoings or motives. Such a policy is by no means new
of some violations of existing rules, they for Russia – but I cannot recall any cases
can easily appeal to high-ranking officials when sacrificing economic benefits for sake
in Moscow who readily offer their support. of political ambitions has ever delivered
Since the Russian judicial system these days positive outcomes for my country.
is completely dependent from the executive
power, there are no means at all to challenge
the Chinese lobby that grows increasingly
stronger.
For two main reasons, the future of
economic interaction between Russia and
China looks dubious. First, Russia is too Vladislav Inozemtsev is Professor of
small for China to be treated as an equal Economics at Moscow’s Higher School of
Economics and Director of the Center for
partner. China’s economy is about six times
Post-Industrial Studies
larger than Russia’s one, and while China
appears now to be #1 trading partner for
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