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Gas for cash

Roman Goncharenko / cb
May 21, 2014

Russian President Putin's visit to Shanghai represents another step in Moscow's move toward strengthening ties with Beijing. Russia hopes a 30-year deal for energy supplies will lead to increased Chinese investment.

China Wladimir Putin und Xi Jinping 20.05.2014
Image: Reuters

Once again Russia is saying "thank you." After the contentious referendum on the Crimean peninsula in March, Russian President Vladimir Putin thanked China, saying Beijing's leadership took "the entire historical dimension" into account when looking at the situation in Ukraine.

Unlike the anger the annexation sparked in the West, China's reaction has been low-key. Beijing also spoke out against placing sanctions on Russia. Russian Deputy Prime Minister Dmitry Rogozin has also praised the ally, saying "China has acted like a serious partner."

Great plans, modest growth

During his current visit, Putin is taking the chance to show his appreciation in person. "China has established itself as our most important trade partner," Russia's president said in Shanghai on Tuesday (20.05.2014). Until 2015, trade revenue between the two countries could rise from currently $90 billion to $100 billion, according to Putin. He added that numerous projects were planned that together would cost up to $20 billion.

Right now, the growth dynamic in Russian-Chinese trade is rather modest. Russia estimated growth of roughly 2 percent in 2013, while the Chinese are more pessimistic and estimated 1.1 percent growth in bilateral trade. A Chinese diplomat in Moscow told the Russian Interfax news agency that trade growth had "clearly decreased" from its 2013 level of 13 percent.

The two countries agreed on Wednesday to a 30-year contract for Russian gas supplies to China. Chinese state news agency, Xinhua, described the supply contract as a "multi-billion dollar deal."

Gas, oil and coal in exchange for investment

Gazprom's headquarters in Moscow Photo: YURI KADOBNOV/AFP/Getty Images
Gazprom would like to substantially increase exports to ChinaImage: Yuri Kadobnov/AFP/Getty Images

Apparently, Russia has decided on a strategic alliance with China. Signs for that go back to 2012 when Putin outlined Russian foreign policy ahead of winning his third term in the president's office. Russia should fill its sails with "Chinese winds," Putin wrote. In retrospect, the first long trip abroad for the newly elected president was another pointer. After quick visits to Berlin and Paris of just a few hours each, Putin traveled to Beijing for two days in June 2012.

The stronger the West pressures Russia regarding Ukraine, the more actively Russia approaches China. After the US credit card companies Visa and MasterCard threatened to stop Russian transactions, Russia announced its own credit card system similar to the Chinese model. Following the threat that the West could buy less gas and oil from Russia, Moscow hastened its plans for new pipelines to China. Russian energy giant Gazprom announced it wanted to pump just as much gas to China as is currently transported to Europe.

In addition, Russia wants to supply energy-hungry China with coal. The current supply to China could be quadrupled, a Russian minister said. Since the United States and European Union question investment and the transfer of Western know-how to Russia, the Kremlin has offered to cooperate with China in aircraft construction and the aerospace industry. While the West wants to restrict entry for Russian citizens, Moscow and Beijing have started working on easing visa restriction.

Russia in turn is eyeing Chinese money. Moscow hopes China will increase its investments in Russia by 700 percent by 2020, according to Russian Economic Development Minister Alexey Ulyukaev.

Geopolitical alliance

Interior of the UN Security Council during a vote Photo: United Nations/ Paulo Filgueiras
China and Russia tend to support each other at the United Nations Security CouncilImage: picture-alliance/dpa

Russia also wants to forge a geopolitical alliance with China, observers have said. Moscow and Beijing have the same world view, Putin has said. Both countries have expressed support for a multi-polar world and rejected the dominance by the United States. The alliance has already become evident multiple times in the UN Security Council, where both countries have veto rights. Russia and China have blocked a number of draft resolutions on the war in Syria.

"China has always hidden behind Russia's back in this," Fjodor Lukjanow, a foreign policy expert from Moscow, told DW, adding that China has behaved less anti-Western than Russia.

Russians see no more danger in China

The Russian praise for China is getting louder. "Our relationship has never been this good," Deputy Prime Minister Olga Golodets said. Even a song about the Russian-Chinese friendship has been composed. The communal piece from a Chinese composer, a Chinese poet and a Russian musician has already made its premier.

Regular Russians are also pleased with the friendship with the Chinese. About three quarters of Russians believe that a relationship between the two countries is beneficial, according to a poll published in April by polling institute FOM, which is close to the state. In 2010, the relationship was only viewed as positive by half of Russians, according to FOM.

An even more drastic change can be seen in the number of those who see China as a threat to Russia. Some 57 percent believe that a strong China does not pose a threat to Russian interests. Only 19 percent disagree. In 2009, this ratio was reversed: 39 percent didn't fear China, while 44 percent saw it as a threat to Russia.

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