New Trends in Russo-Chinese Relations
China is opening its bond market to Russian energy companies, e.g., Gazprom. This report is noteworthy for several reasons going beyond Russo-Chinese relations. First, China has hitherto refused to provide this open access to its bond market lest Washington impose sanctions upon it. Therefore this decision, coming after China and Russia have both faced the Trump Administration down, evidently reflects China’s belief that it can challenge the U.S. with minimal risk. Moreover, it is clear to both parties that Washington will not desist from trying to pressure them even if it does so without any true strategy. So, they probably feel that they have nothing to lose by proceeding in this fashion.
Second, although many will feel that this is a victory for Putin that he has now gained ac access to capital, albeit Chinese rather than Western funding. But in fact this decision represents another Chinese victory and signified Russia’s growing dependence upon it. This agreement, like the Memorandum of Intent to build the Power of Siberia 2 pipeline reflect Russia’s dependence on China as its main energy customer.
Although China is exposing itself to greater reliance on Russian gas in fact it is Russia who loses here. A pipeline to one customer as will be the case here, gives that customer enormous leverage over the seller, i.e., Russia, regarding price and the terms of the contract. Likewise, now that China will be the bondholder for companies like Gazprom which is a notoriously corrupt company and has been an obstacle to and competitor with China in its bilateral negotiations with Russia, China will gain great leverage over Gazprom and other companies’ operations. Third, these energy giants as well as Russian businesses are increasingly reliant if not dependent upon the Renminbi, China’s currency. And this deal will increase the presence and thus the power of China’s currency in and over Russia.
Thus, these energy policies extend China’s influence over the Russian economy to the point of being able to guide major Russian energy firms’ policies by virtue of its status as bondholders. But the political significance of these decisions is potentially even greater.
These energy decisions on the pipeline and on opening the bond market go far to ensnare Russia in a Chinese-led Renminbi bloc that would challenge the dollar for primacy in global economics and politics. Creation of such a bloc is a long-standing Chinese objective, but it is difficult to see how Russia benefits from it.
China now has its hands on the motor of the Russian economy, gas and oil and it will make its influence and priorities known, even if subtly to Moscow who will find it hard to regain its previous freedom of movement. China will likely increase its influence, and not only on energy, at Russia’s expense in Central Asia if not the Caucasus. Furthermore, these deals reinforce Russia’s fiscal dependence upon China as it is the only consumer for this new and existing pipeline and likely the main bondholder for Russian energy. It already is the case that without Chinese financial and material support that Russia could not continue its war in Ukraine. Testifying before the U.S. China Commission, Elena Rybakova reported that without Chinese support Russia could not afford to fight this war. In addition, Russia would not have the technology needed to conduct operations. Towards the end of the Biden Administration, Secretary of State Blinken remarked about Chinese components that “”Those are being used to help Russia on what’s an extraordinary crash course effort to make more munitions, tanks, armored vehicles, missiles. About 70% of the machine tools and 90% of the microelectronics Russia imports come from China.”
Politically as well these deals portray a relationship that is becoming tighter, not weaker, and this is especially noticeable in the two sides’ military relationship where similar processes are under way. E.G. China insisted that the recent and unprecedented joint Sino-Russian military exercises be held near Taiwan to send Taiwan and presumably Washington a message that Russia might support it in a war over Taiwan.
These indicators of Chinese leadership and growing intimacy with Russia are long-standing and also expose the delusion and fallacy that by being accommodating to Russia President Trump could effectuate a “reverse Nixon” and undo this growing alliance. These moves also highlight Beijing and Moscow’s assessment that there is nothing behind Trump’s rhetoric of threats as has been shown to be the case until now. Therefore, they are moving with all due speed to consolidate and advance not just their partnership but its scope. Thus, the rapprochement of India and China due to the senseless policies of the Administration strengthens both Moscow and Beijing at both Washington and New Delhi’s expense. As Fareed Zakaria observes this is the greatest “own goal” in modern foreign policy.” Worse yet, he finds that U.S. foreign policy today is “a collection of the random slights, insults, and ideological obsessions, of one man.” Unfortunately, Beijing and Moscow have taken the measure of Trump’s threats and found them wanting, something we cannot say about their threats.
Dr. Stephen J. Blank is a Senior Fellow at Foreign Policy Research Institute. He is an internationally renowned expert on Russian and Chinese defense policy. He is the author of “Light from the East: Russia’s Quest for Great Power Status in Asia” (Taylor & Francis, 2023). He was a Professor of National Security Studies at the Strategic Studies Institute of the U.S. Army War College.