The Free Russia Foundation team condemns the crimes of Putin's regime against Ukraine
Yuri Moskalenko

Political and economic analyst

Jan 27, 2022
The Asymmetry of Russian-Sino Relations

The asymmetry in Russian-Sino relations is caused above all by the disparity in the military and economic potentials of Russia and China. China’s economic power in the last two decades has significantly surpassed that of Russia. But Russia’s military mainly (mainly its strategic nuclear forces) significantly surpasses that of the People’s Republic of China (PRC). Therefore, the two countries complement each other in different spheres.

In the last 20 years, the economic gap between China and Russia has continued to increase. According to the World Bank, in 2001, Russia’s nominal GDP was $306.6 billion, but the PRC’s GDP was $1.3 trillion, and in 2020, these figures were $1.5 and 14.7 trillion, respectively. Thus, China has increased its advantage by a factor of approximately four to 10, and the gap continues to grow. And China’s superiority over Russia in military expenditures in the last 20 years has increased from double to quadruple.

During this period, China significantly closed its military gap with Russia and the US, as can be seen with its tests of a hypersonic missile and the building of new silos for ballistic missiles.

At a parade in Beijing in honor of the 70th anniversary of the Chinese People’s Republic in October 2019, China’s latest armaments were demonstrated for the first time – the Dongfeng-41 (DF-41), an intercontinental ballistic missile (ICBM), and the Dongfeng-17 (DF-17) hypersonic medium-range missile. The ICBM DF-41 can be modified to carry a hypersonic glide platform equipped with a conventional or nuclear warhead. According to a Nezavisimaya gazeta report based on an article in the Financial Times, Michael Gallagher, a Republican member of the House Armed Services Committee, issued a statement that China “now has an increasingly credible capability to undermine our missile defenses and threaten the American homeland with both conventional and nuclear strikes.”

At the present time, China has already formulated a nuclear triad and is actively increasing production of weapons-grade plutonium. Analysts at the RAND Corporation, in a report titled “Understanding Influence in the Strategic Competition with China” devoted to the position of the PRC on the world stage, acknowledged Beijing’s serious economic influence. China’s main trump card, in the opinion of experts, is its economic might. For China, the most effect lever of influence on third countries is its ability to offer them a trade or investment partnership – this is more effective than direct military threats or promotion of the Chinese political model.

Recently, China’s economic pressure on Russia has been increasing. A full-scale “trade war” has broken out in the fishing industry between Russia and China. Moreover, the degree of China’s brutality has been unprecedented.

For the Russian Far East, the fishing industry is a very important branch of the economy: 65% of the extraction of Russia’s aquatic biological resources comes from the Far East. And about 70% of all exports of fish and fish and seafood products are made to China.

Pollock is the chief type of fish produced in Russia, making up about 55% of the entire catch of Russian fishermen in the Far East this year. Most of Russia’s catch is exported. China is the chief buyer of pollock. In 2020, Russian exported a total of 793,000 tons of frozen pollock; of these 579,000 went to China, which is 73% of the export.

In October 2020, China began restricting imports after traces of COVID-19 were found on fish packaging coming from Russia. To combat the spread of the coronavirus, China began closing the ports through which Russian fish had been transported into the country; the last port, Dalian, closed in December 2020. Chinese ports remain closed to Russian refrigerated transport vessels to this day.

The Chinese government has announced that the reason for the closure of the ports is to tackle COVID-19 infection, but the reluctance of Chinese authorities to produce the results of laboratory tests and their methodology has caused concern. In the opinion of Russian fishing industry representatives, the actions of the PRC’s authorities appear more likely to be a trade war. From January to June 2021, exports of pollack to China dropped 64% compared to 2020.

Russia has already proposed to China that they discuss the issue of opening the ports and establish quotas for catching pollock in Russian waters. Russia offers other countries fishing quotas on a paid basis in its exclusive economic zone.

China was offered a quota of 20,000 tons of pollock in Russian waters “for cash,” but China refused to buy the quota on general terms, because it wishes to get a much larger amount for free.

China has been the world’s center for fish processing for many years. China adds at least $250 million in additional cost to processed filet of pollack. The high profitability of fish processing in China has for many years been ensured by a cheap work force, low tariffs on electricity and other expenses. But in recent years, the situation has changed; Chinese enterprises require more efforts to preserve their financial stability.

The position of China as the chief buyer of Russian fish gives it substantial advantages in negotiations. China may use the restriction on import of Russian pollack to strengthen its negotiating positions and as a method of trade warfare. The closure of the ports is an instrument of growing pressure on the Russian government.

China may put pressure on Russia in order to obtain permission for its trawlers to catch pollack in Russian waters, since the margin from the pollack haul is much higher than the margin for processing. In Latin America, there is a precedent when a Chinese fleet began to catch calamari directly, and not import it. This is the conclusion of a report titled “Pollockonomics” published in July about the pollock market by Planet Tracker, a British non-profit financial think tank.

As a result of the restrictions placed by China, export of Russian fish to what was once the largest sales market has collapsed. And although Russia has managed to redirect part of its exports to South Korea, the situation with deliveries to China has affected the volumes of fish caught – Russia does not have sufficient capacity for its own fish processing, and the catches have been reduced.

The trade war in the fish industry illustrates that China’s economic pressure on Russia will very likely increase. Chinese state companies already have experience in pressuring Russia, and in fact have been successful in the past. In 2011, the Chinese National Petroleum Company (CNPC) was able to force the Russian oil companies Rosneft and Transneft to insert changes into an already-signed contract for delivery of oil to China via the Skovorodino-Mohe pipeline or Eastern Siberian Pacific Ocean (ESPO) pipeline, and got a discount of approximately $1.50 per barrel.

Rosneft, Transneft and the CNPC had signed an agreement in 2009. In exchange for loans from the China Development Bank amounting to $15 billion and $10 billion, respectively, the Russian state companies contracted to deliver 15 million tons of oil annually from 2011 through 2030 via the ESPO pipeline. For this, Transneft signed a contract to purchase 6 million tons of oil from Rosneft at the price tied to the cost of export to China. The price was determined by a special formula on the basis of quotations by Argus and Platts FOB to the end of the ESPO line, the port of Kozmino.

But as soon as the deliveries began in January 2011, problems emerged with the contract. The two sides made different assessments of the co-efficient which determined Transneft’s logistics costs for delivering the oil. CNPC began to underpay $13 per barrel, since it received oil from a branch of the ESPO – a route that was half as short. Transneft responded that a single network tariff was in effect throughout the pipeline equal to $65 per ton. For Russian companies, the losses from CNPC’s position for the period of the entire life of the contract could equal nearly $30 billion.

Rosneft, Transneft and CNPC agreed to changes in the contract in late December 2011. Rosneft and Transneft offered a “country” discount to the CNPC of $1.5 per barrel. China had initially demanded a discount of $13.5 per barrel. In total, the settlement of the dispute with the Chinese cost Rosneft about $3 billion.

Under conditions when the pipeline was built with a Chinese loan secured with oil deliveries, and which depended on a single consumer – China – it was clear that in fact China’s CNPC  would dictate its own terms.

It is quite logical that Russian has turned out to be the largest recipient of “hidden” loans from China.  From 2000-2017, Russia received $125 billion dollars from China. These loans were obtained largely by state oil and gas companies and secured by future deliveries of oil and gas. All the loans fall into two categories: official development assistance (ODA) and other programs of financing (other official flows or OOF) aimed at the demonstration of increased cooperation of Russia with China, and military or commercial projects advantageous to China.

Russia’s loans are in the OOF category. Venezuela follows Russia in this list ($85.5 billion), then Angola ($40.66 billion), Brazil and Kazakhstan ($39 billion each), Indonesia ($30 billion), Pakistan ($27.84 billion), and Vietnam ($16.35 billion).

In 2020, Beijing’s pressure forced Rosneft to refrain from drilling on a part of the continental shelf of Vietnam, which China considered part of is marine territory. Rosneft was forced to cancel a contract with the London company Noble Corporation for an exploration rig which had been planned for use on the shelf in Vietnam. The breaking of the contract took place amidst serious pressure from China.

In 2017, Rosneft signed six contracts with a Vietnamese drilling company for a total sum of $42 million.

Russian oil companies own two oil fields on the Vietnamese shelf. It was proposed to use the British platforms from Noble Corp. for drilling wells. In mid-July 2020, however, Petro Vietnam canceled the contract for the drilling platform due to pressure from China. Rosneft Vietnam became concerned that China had complained about its project, considering that drilling in the contested offshore waters was its prerogative.

Beijing is trying to push all foreign oil companies out of the South China Sea, leaving itself as the only potential partner for joint development by competing interests.

In the future, as Russia’s economic dependence on China increases, Beijing’s position in potential commercial disputes may grow significantly stronger.  Furthermore, China may use economic levers to change Russia’s position not on specific contracts, but on issues concerning Beijing’s foreign policy interests, for example, Moscow’s relations with Vietnam, India, or the countries of Central Asia.

Long-term trends of development of economic and military capacities are of prime importance in analyzing Russian-Sino relations. The current trends  are not favorable for Russia. They indicate that Russia’s role in bilateral relations with China will continue to diminish. Meanwhile, China’s role will grow and the asymmetry in the bilateral relations will increase.

Consequently, this will cause serious shifts in geopolitics since China in the near future is very likely to play the leading role in their relations.

Today, the greatest threat to international security and basic human rights is the military and political union of Russia and China which has virtually already been forged.

The reality of this union is demonstrated by the joint exercises of their armed forces.

Under these conditions, increasing disagreements in Russo-Sino relations would play a positive role, since the threats to international stability on the part of China and Russia (above all for Ukraine and Taiwan) would be reduced.

The Russian-Sino union suits the Russian political elite almost entirely. But it does not please the Russian military elite.

An important problem in the military-technical sphere of Russia and China is the extreme techno-nationalism of the military and military-industrial circles of both countries. Their ambition is to concentrate all important design and production within their respective countries. The import of goods and services for military purposes is viewed by both countries as a threat to security and a national problem that must be solved as quickly as possible.

Rossiysko-kitayskiy dialog: model’ 2017: doklad no. 33/2017/ [S.G. Luzyanin (ruk) i dr.; Kh. Chzhao (ruk.) i dr.] [gl. red. I.S. Ivanov] [Russian-Chinese Dialogue: 2017 Model: Report No. 33/2017, director S. G. Luzyanin et. al.; director Kh. Chzhao et. al; Rossiyskiy sovyet po mezhdunarodym delam  (RSMD). – Moscow, Non-Profit Partnership Russian Council on Foreign Affairs (NP RSMD), 2017, 112 pp., p. 28.

The Russian political elite will very likely be satisfied with the role of the “junior partner” in Russian-Sino relations. Until the union with China threatens loss of power and loss of corrupt dividends for the semi-criminal Russian elite, they will be prepared to play by the Chinese rules.

An effective method of Chinese influence is the development of informal ties with representatives of elites in other countries. As examples, RAND experts cite China’s attempts to influence elites in Australia, Indonesia, the Philippines, and South Korea. Chinese representatives have offered economic preferences to politicians in Australia and New Zealand so that they would take measures advantageous to Beijing.

A noticeable weakening of the Russian-Sino union, or rejection of it could very likely occur as the result of a drastic change in the domestic political situation in Russia or China, which could be provoked by a struggle for power in the ruling elite. This could be a struggle between the military and political (primarily Chekist) elites in Russia.

Meanwhile, concern is growing among those very siloviki (the intelligence services and law-enforcement agencies) about the growing activity of Chinese intelligence in Russia, and also the increasingly obvious domination of China in the economic and military spheres.

In the opinion of Igor Denisov and Alexander Lukin (authors of the article “Correction and Hedging,” in the journal Rossiya v global’noy politike [Russia in Global Politics], 2021, no. 4), fears are growing among Russian intelligence services regarding a new “assertiveness” in Chinese partners.

It is precisely as a consequence of these fears, in my view, that the Russian authorities are taking measures to contain the emergence of new Confucius Institutes. An agreement was reached so that the number of Russia Centers in China and Confucius Institutes in Russia were equal. In certain cases, law-enforcement agencies have even tried to halt the operation of several Confucius Institutes for supposedly unlawful activity, but to date, unsuccessfully.

Thus, in Blagoveshchensk in 2015, the city prosecutor’s office demanded that the Confucius Institute at the Blagoveshchensk State Teachers’ University be closed. Subsequently, the prosecutor’s office withdrew its demand.

This demarche by the city prosecutor’s office was likely coordinated with the leadership of the prosecutor general’s office and intelligence agencies in Moscow due to the particular importance of the issue for Russian-Sino relations. Such a step likely reflected the concern of Russian intelligence and law-enforcement over the growing activity of Chinese intelligence in Russia.

Right up to my departure from Blagoveshchensk in 2016, I had occasion to hear from informed persons there that among the Chinese teachers at the Confucius Institute, there were people who displayed a professional interest toward Russians.

Any domination by China in the military and military-technical sphere is absolutely unacceptable for the Russian military elite. The joint Russian-Sino exercises which took place in 2021 more than likely caused great worry about Russian military people.

Military cooperation between China and Russia this year has made a breakthrough, the Chinese Ministry of Defense announced, according to a TASS report December 23, 2021. The ministry noted that this was facilitated by the joint exercises Zapad [West]/Interaction 2021 and Joint Sea 2021.

“These measures have demonstrated a new breakthrough in the strategic cooperation between the armed forces of China and Russia,” said a statement published on the Defense Ministry’s site. (See Highlights of the China-Russia Joint Sea-2021 Military Exercise and Joint Cruise).

The joint Russian-Chinese strategic military exercises Zapad/Interaction 2021 took place in the Ningxia autonomous region of China from August 9-13. About 13,000 military personnel were involved in them, with approximately 200 planes and helicopters, 200 armored vehicles, and about 100 artillery systems.

The exercises gave the People’s Liberation Army of China (PLAC) the opportunity to test their latest weapons, and also demonstrate the ability to coordinate work with Russian troops.

For the first time, the armed forces of both countries used a joint system of command and control. According to a statement by the Chinese Defense Minister, Russian troops were integrated into larger Chinese formations and conducted operations planned by the PLAC.

From the political and training perspective, the most important aspect of the past exercises was the new level of integration during the maneuvers of the military of both countries. For the first time, a common joint staff was formed which led the maneuvers of the soldiers through a united command information system. Following commands transmitted through this system, Russian paratroopers along with their fellow Chinese servicemen landed from Chinese helicopters (to be sure of Russian manufacture) and captured the key objectives of a mock enemy, and the Russian Su-30SM launched mock air strikes on commands sent from the Chinese military.

Such a level of integration were characterized in the Chinese press, which is more inclined to vivid commentary in such areas, as “demonstrating a level of cooperation as in NATO.”

In 2013, the Russian military expert Vasily Kashin wrote: “On the whole, the formation of general-purpose forces is made with a clear consideration of the threat of hostility from the PRC.”

Each year, exercises are conducting in airlifting forces from the European part of Russia to the Far East. Great attention is paid to improving the strategic military transport aviation fleet. And nevertheless, the maximum which the general-purpose Russian forces can expect is a comparable armed provocation modeled on the Soviet-Sino border conflicts of 1969 or something slightly larger.

The Vostok [East]-2010 exercises in June-July 2010 in airlifting troops and military equipment to the Far East from the European part of Russia were the largest of those conducted in Russia up to that time.

About 20,000 troops took part in Vostok-2010, more than 5,000 units of weapons and military vehicles, more than 40 ships, and about 75 planes and helicopters.

There was nothing analogous in Soviet history, if we note the number of troops and military vehicles deployed from the west to the east of the country. In the opinion of the military expert Alexander Khramchikhin, who often articulates the concerns of the Russian military elite regarding the Chinese threat, the Vostok-2010 exercises were Russia’s response to the PLAC’s Stride-2009.

In 2009, Stride-2009, the largest military exercises up to that time were conducted in the PRC.  They were held on the territory of four of the seven military districts — Shenyang, Lanzhou, Jinan, and Guangzhou. Up to 50,000 soldiers from the ground forces and air force took part, along with 6,000 transport vehicles. In the course of the exercises, the troops covered a total of 50,000 kilometers. In particular, four combined arms divisions completed a march (first by railroad, and then on their own) over a distance of 2,000 kilometers.

Stride-2009 was an obvious development of the exercises conducted in 2006.

The scenarios for the 2006 exercises were a preparation for war with Russia, and in fact an offensive, not a defensive war.

Alexander Khramchikhin believes that during this period (2006-2009), the Chinese leadership and command of the PLA seriously reviewed the possibility of conducting in the foreseeable future offensive military actions against Russia and the countries of Central Asia.  Gen. Nikolai Makarov, chief of the Russian Federation General Staff of the Armed Forces (June 2008-November 2012) state that Russia, in conducting these exercises, demonstrated a readiness for the change in military political situation in the region.  “Changes” apparently was to be understood as the change from a declarative “strategic partnership” between Russia and the PRC to a confrontation.

Russia’s chief defense capability vis-à-vis the PRC involves nuclear weapons, including tactical ones. The Chinese factor likely explains many aspects of Russian behavior in the area of control and reduction of strategic weapons.

Quite likely the idea expressed by past Defense Minister Sergei Ivanov (March 2001-February 2007) about withdrawal of Russia from the treaty on medium and short-range missiles was related to the Chinese factor.

In February 2007, speaking at a press conference upon the conclusion of the 43rd international Munich Conference on Security Policy, Sergei Ivanov emphasized that India, Pakistan, North Korean, China , Iran, and Israel had medium- and short-range nuclear missiles: “These countries are situated near our borders, and we cannot help but take this into account. Only two countries do not have the right to possess these missiles: Russia and the USA. This cannot continue forever.”

The Chinese threat is one of the chief factors defining Russian foreign policy and military development.

In 2013, Vasily Kashin articulated the Russian position regarding the Chinese threat.

Understandably, after 2014 (with a drastic deterioration of relations with the West and a declared turn to the East), such publications in the open press were no longer possible. But the military threats from China did not disappear and specialists involved in military planning also did not disappear.

Therefore, the policy of Putin and the Russian political elite aimed at clear subordination of Russia to China, including in the military sphere (which was demonstrated by the latest Russian-Chinese exercises) will very likely provoke increasing irritation and resistance on the part of the military elite (the senior officers).

If for domestic policy, the chief irritant for the military elite is the omnipotence and monopolist position of the Chekist elite (the Federal Security Service [FSB], the Federal Protective Service [FSO] and other agencies), then in foreign policy, the increasingly obvious subordination of Russia to China, both in the economic and in the military, spheres may become such an irritant.

Anti-Chinese sentiments have always been strong among senior officers in the army and navy (the military elite).

Many of them remember well (or know from their parents’ stories) of the battles between Soviet and Chinese forces near the Daman Island on the Ussuri River in March 1969. Therefore, many of them are clearly not thrilled with Putin’s open pro-Chinese policy and do not approve of it.