China and Russia

Best frenemies

Vladimir Putin pivots eastward. Should America be worried?

May 24th 2014

ON MAY 21st, after a nail-biting session of late-night brinkmanship, China and Russia signed an enormous gas deal worth, at a guess, around $400 billion. Their agreement calls for Russia’s government-controlled Gazprom to supply state-owned China National Petroleum Corporation with up to 38 billion cubic metres of gas a year between 2018 and 2048. The deal capped a two-day visit to China by the Russian president, Vladimir Putin, that included a regional-security summit and joint military exercises off the Chinese coast.

Mr Putin called the deal the biggest in the history of Russia’s gas industry. But it counts, too, for the geopolitics that underpin it. That an agreement should come now, after a decade of haggling, is no accident. The deal will help the Kremlin reduce Russia’s reliance on gas exports to Europe. It is proof that Mr Putin has allies when he seeks to blunt Western sanctions over Ukraine. Both Russia and China want to assert themselves as regional powers. Both have increasingly strained relations with America, which they accuse of holding them back. Just over 40 years ago Richard Nixon and Henry Kissinger persuaded China to turn against the Soviet Union and ally with America. Does today’s collaboration between Russia and China amount to a renewal of the alliance against America?

That is surely the impression Mr Putin wants to create. Ahead of his visit he gushed to Chinese media, saying their country was “Russia’s reliable friend”. Co-operation, he said, is at its “highest level in all its centuries-long history”. From the Chinese side, Xi Jinping chose Russia as the first country he visited on becoming president in 2013.

Commercial ties are growing. China is Russia’s largest single trading partner, with bilateral flows of $90 billion in 2013. Even before the gas deal, the two sides hoped to double that by 2020. If Western banks become more reluctant to extend new loans, financing from China could help Russia fill the gap. China badly needs the natural resources which Russia has in abundance. The gas deal will ease China’s concerns that most of its fuel supplies come through the strategic chokepoint of the Strait of Malacca, and will also enable China to move away from burning so much of the coal that pollutes the air in Chinese cities.

The two have also made common cause in geopolitics. China abstained from a UN security council vote in March that would have rejected a referendum that Russia backed in Crimea before it annexed it. China has also joined Russia in vetoing UN attempts to sanction the regime of Bashar Assad fighting a civil war in Syria. The two have taken similar stances over issues such as Iran’s nuclear programme.

China and Russia share a strong sense of their own historical greatness, now thwarted, as they see it, by American bullying. Both want the freedom to do as they please in their own back yards. Russia’s annexation of Crimea and its manoeuvring in eastern Ukraine have vexed America and Europe and left Mr Putin with even fewer friends than before. China’s push into the East and South China Seas is causing similar concerns in Asia, as smaller neighbours worry about its expansionism.

But the West should not panic. Despite all this, Russia and China will struggle to overcome some fundamental differences. Start with the evidence of the gas deal itself: the fact that it took ten years to do, and that the deal was announced at the last minute, suggests how hard it was to reach agreement. The Chinese were rumoured to have driven a hard bargain, knowing that Mr Putin was desperate to have something to show from his trip.

More a grimace than a smile

In this deal, as elsewhere in the relationship, China has the upper hand. Other supplies of gas are coming online in Australia and Central Asia. And whereas China’s global power is growing, Russia is in decline—corroded by corruption and unable to diversify its economy away from natural resources. The Chinese government will expect the Kremlin to recognise this historic shift—a recipe for Chinese impatience and Russian resentment. Although the two countries are united against America, they also need it for its market and as a stabilising influence. And they are tussling for influence in Central Asia. Their vast common border is a constant source of mistrust—the Russian side sparsely populated and stuffed with commodities, the Chinese side full of people. That is why many of Russia’s tactical nuclear weapons are pointed at China (see article). In the long run, Russia and China are just as likely to fall out as to form a firm alliance. That is an even more alarming prospect.