Paper Dragon Vladislav Inozemcev on why the Russia-China union is nothing more than an illusion
In my view, the invasion of Ukraine has yielded some rather jarring results—though the shock stems from the realization that nothing fundamental has actually shifted. Under the weight of Western sanctions, Russia has naturally "pivoted toward China," which, at least rhetorically, remains a steadfast ally by condemning the "arbitrary nature" of sanctions imposed by the USA and NATO. However, I wouldn't go so far as to say this has resulted in anything mutually beneficial.
If one examines the landscape that has emerged after four months of conflict, a clear pattern emerges: Moscow has become significantly more dependent on China in three specific ways.
The first is financial: in recent years, Sberbank has aggressively increased its investments in Chinese securities denominated in yuan. If you weigh official data regarding these investments against global statistics on yuan usage as a reserve currency,
it turns out that Sberbank has been holding nearly a quarter (!) of all global yuan-denominated reserves. Prior to the seizure of Russian assets in the West, these funds accounted for roughly 13% of Sberbank's reserves; now, they represent at least 25%, and if we are looking strictly at liquid assets, the number is likely even higher. The Russian authorities can deploy these funds quite freely, for instance, to finance Chinese imports.
The second dependency is trade: China seems perfectly willing to continue purchasing Russian resources in ever-increasing volumes (a factor that becomes vital given Europe's attempts to enforce an energy embargo). Between April and June, Russian oil exports to China surged by a quarter, climbing from 1.59 to 1.98 million barrels per day, while gas supplies through Siberia continue to grow; China shows no hesitation in buying LNG, and there is a noticeable uptick in coal trade as well. But let us not forget that Russian gas and oil shipments to China constitute about 15-18% of their total imports of these commodities. More importantly, this growth is occurring alongside steadily declining prices, which suggests Chinese pragmatism rather than any genuine desire to assist a "friend and partner."
Following a certain dip—in March and May of 2022, Chinese exports to Russia fell by over 40% compared to the previous quarter—trade in technological goods has begun to recover. By the end of the year, it is highly probable that the market share of Chinese smartphone brands in the Russian market will exceed 80%; one can expect similar dominance in other product categories.
The third pillar of cooperation will be technology: China is almost certain to serve as Russia’s primary partner for importing critical tech goods, ranging from automobiles and spare parts to office equipment, industrial machinery, and mobile communication systems. Furthermore, there is little doubt that Beijing will attempt to facilitate "parallel imports" by selling Russia versions of Western products that haven't directly fallen under sanction, all while obscuring the final destination. Yet, all of this is so standard for any major global economic partner that it can hardly be presented as evidence of a deep strategic alliance between the two nations.
This is further evidenced by the fact that Beijing has not truly "moved closer" to Russia following the invasion of Ukraine. China has not endorsed Putin's "special operation," has not recognized the "sovereignty" of the "LPR," and consistently calls for a cessation of hostilities and a return to the negotiating table. According to some reports, they even rebuffed Moscow's requests for military-technical assistance (though the Kremlin actively denies such requests were ever made).
However, it is well known that
Chinese banks have refused to finance deals involving Russian oil companies; Chinese authorities have not supplied Russia with sanctioned spare parts for Airbus aircraft (despite those being manufactured in a plant in Tianjin); and the Chinese payment system UnionPay has not offered its cards in Russia to clients of banks that have been hit by sanctions. Chinese leasing and shipping firms have started pulling containers used in Russia;
Chinese tech giants have begun officially winding down their operations in our country , intending instead to import their products via Customs Union nations; and...
The Chinese government has officially notified the Russian side that they won't be allowing any aircraft "stolen" by lessors to land at Chinese airports. Consequently,
China is starting to pivot rapidly toward Belt and Road Initiative projects that bypass Russia entirely, aiming to significantly ramp up freight transit through Kazakhstan and the Caucasus to reach Europe.https://theins.ru/opinions/inozemtsev/253041
