China finishes Putin

17:30, 13 August 2015
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One of the main and latest surprises for cornered Russian President Vladimir Putin is China’s harsh pragmatism. The country denied friendly merger with the Kremlin and its anti-Western coalition. Beijing assessed the global game around Russia correctly and promptly, deciding to further squeeze the most out of the Putin regime, while giving nothing substantial in return. The Chinese dragon descends from the mountains in order to get its share of the rapidly weakening Russia.

The most vivid and telling are the current relations between Moscow and Beijing in infrastructure, energy and finance, areas significant for both states; as well as the joint projects for the development of Siberia.

The launch of China’s "New Silk Road" last month, bypassing Russian territory, was a serious blow to the Russian economic interests. The first Nomadexpress container train has already traveled on route

Shihezi (China) - Dostyk (Kazakhstan) - Aktau - Alat (Azerbaijan). From Azerbaijan, the express goes to Georgia, Turkey and the EU. Thus, a joint project of the Trans-Caspian international transport route and the New Silk Road became a reality. The main feature of the project is bypassing Russian territory. Another important caveat is the time.  The route takes six days to cover, instead of 25-40 as before. Of course, China is challenging Russia as Eurasia’s largest Eurasian transit state. The New Silk Road has the potential to become more attractive than the obsolete Trans-Siberian Railway. Moreover, Kazakhstan's participation in the project almost completely eliminates the issue of its further foreign policy orientation – it has shifted from Moscow to Beijing. By the way, in this context, Ukraine also has a unique opportunity to expand its own transit opportunities thanks to Chinese shipments.

The second important issue is the potential gas cooperation between Russia and China. The gas contract between Russia’s Gazprom and China's CNPC on construction of a Power of Siberia pipeline, pompously presented earlier (signed in May 2014, its estimated total value was $400 billion), is frozen for an indefinite period. As it turned out, the idea of ​​reorientation of Russian gas exports from Europe to Asia, with China being a priority, has failed. The main reason is the reduction of gas consumption in China caused by the slowdown in the country’s economic growth, the development of gas production within its own territory (By 2020, China will have produced nearly 30 bcm of shale gas alone), focus on gas imports from Turkmenistan (China currently imports 30 bcm of gas from Turkmenistan, with the possibility of expanding imports to 60-70 bcm by 2020), as well as a gradual decrease in share of oil and gas energy in the country’s total energy balance within the framework of the latest global trends. Besides, the Chinese side did not agree to the price offered by Gazprom, which attempted to propose an equivalent to the European price. China has almost always pushed for the suitable price, which is significantly lower than that for other purchasers of the Russian gas. It is equally important that Bejing has provided no options of the financial assistance whatsoever for the construction of new gas pipelines on Russian territory, to the Chinese borders. Such stalemate allows forgetting the prospects of gas cooperation between the two countries. Besides, it is better for China to wait a full collapse of Putin's regime, so that, as member of anti-Russian coalition club, it could bite a piece of the “Siberian pie”, on far more favorable conditions of access to the those very oil and gas fields. It seems like China has flagrantly given Putin a “black mark” on a gas issue.

With regard to financial cooperation between the two countries, there is growing evidence of Chinese banks' reluctance to carry out interbank transactions with their Russian partners.

Chinese banks have also considerably reduced participation in foreign trade transactions with Russia. Cases of recent expansion of payments in rubles and yuan in certain Chinese border provinces can be explained by China’s will to extend the operating field for yuan, as Bejing has witnessed sharp reduction in the inflow of foreign currency to Russia, especially of the US dollar and euro. So, Putin should not expect any financial aid from China. There are currently no other donors due to severe Western sanctions, and they are not expected to emerge any time soon.

Land is yet another demonstrative issue in Russian-Chinese relations. More precisely, it is about Bejing’s rapidly growing appetite for the development of Russian territories. For example, a huge stir in Russia was caused by the plans of Trans-Baikal regional authorities to lease nearly 300,000 hectares of land to the Chinese company Huae Xinban for a 49-year term for less than $5 per hectare. Although this issue has not yet been fully resolved, the locals have already organized a protest movement. Most probably, the opinion of local activists will not be taken into account, and China will get the desired land by either paying more for the rent, or simply by financially stimulating Russian officials. No wonder the Russian Prime Minister Dmitry Medvedev offers Russian youth to study Chinese, not just English.

Another fact confirming the intention of China to get hold of as much Russian resources and territories as it possibly can until the final collapse of the present Russian Federation is the country’s broad interests in Russia’s Magadan region, the top region in silver mining and the fourth in gold extraction. Chinese Southwest mining company has decided to invest RUR 400 million this year in the development of deposits of antimony and silver. The company's plans cover the construction of roads in the region, mineral exploration, and mining of silver and other precious metals in the already known deposits. Earlier, the Kremlin did not allow China getting close to Russia’s main fields of natural resources across Siberia and the Far East.

Thus, China clearly shows Putin that there will be no qualitative improvement of cooperation with Russia’s current regime in any of Moscow’s areas of importance.

Furthermore, China enters into active competition with Russia for transit flows in Eurasia and control over oil and gas regions of Central Asia, expands its political influence by pressing on and squeezing out Russia’s interests. For Putin it is actually a “final shot to the head”, as he had hoped for a partnership with Beijing as an alternative to the lost cooperation with the West. With the active participation of the United States, China has chosen the West as its partner, believing that it will eventually get Russian resources anyway.

For Ukraine, this situation brings excellent opportunities with minimum risk. The time has come to build a new relationship with China not only in the economic sphere, considering Beijing’s growing interest to Ukrainian agriculture; but also form a clear platform for a political dialogue with China, consolidating China's official position on the annexation of Crimea, Russian aggression in Donbas and setting up an MH17 international criminal tribunal.

China will go for it, seeing the prospects of a quick fall of the Putin’s regime and the new opportunities in the post-Putin Russia. There is no doubt that Beijing will choose the winning side.

Roman Rukomeda

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