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Russia-China ties and the new world

In June, 2019, the Chinese President Xi Jinping made his historic visit to meet President Vladimir Putin in St. Petersburg, Russia. While on a cruise along the Neva River, next to St. Petersburg, both leaders gave a new outlook to personal ties along with diplomatic ones. Xi Jinping and Vladimir Putin were also seen celebrating the birthday of Xi, which is, in normal conditions, a state secret. As a gift, Putin presented Xi with Russian Ice Cream while Xi reciprocated with presenting him with Chinese Tea. They also spent time near the birthplace of Putin near Neva River and exchanged their views on varied topics at the University of St. Petersburg where President Xi was presented with an honorary doctorate degree. Such warm relations complemented with committed economic ties are a precursor to a new era. In international relations, there is no such thing as coincidental measures. Europe is struggling with a dwindling population and declining economies. England is leaving the eurozone to safeguard its financial interests and the US is actively propagating a unilateral trade war. In such chaos, new alliances are revealing the face of a new world.

Imtiaz Rafi

Relations between China and the Russian people have not always been exceptionally cordial. The former Soviet Union was a nemesis for China. The 1960s saw a war between the two giants of Asia. The bi-lateral ties remained suspended for over two decades. Mao Zedong considered the Soviet Union as a grave threat. It is astonishing how the tables turned. After the dissolution of the Soviet Union in 1991, Russia renewed its approach towards China. In the next ten years, China and Russia signed a number of treaties and settled border disputes without any hostilities. In a world where border disputes have been unresolved and the UN has utterly failed to settle conflicts under the United Nations Security Council, the example of Russia and China is noteworthy. China and Russia continued to maintain a healthy and cordial relationship until the US unveiled its aggressive trade war strategy. Now, these two Asian giants are in a position to create a bastion that can withstand Western pressures.

As in all scenarios, the devil lies in the details. The Chinese and Russian Presidents have met each other more than 30 times since 2013. That alone speaks volumes. Between 2018 and 2019, the trade volume between the two countries grew by over 24 percent, an equivalent of 108 billion dollars.

At the St Petersburg Economic Forum, the two leaders announced to enhance the volume of trade in one year beyond 200 billion dollars. This would make Russia the top trading partner for China. It seems the old saying, enemy of my enemy. . ., holds true in the situation. Russia is heavily sanctioned by the US and European Union for its policy on Crimea while China is being targeted by the developed Western States in terms of trade volumes and the South China Sea Conflict. Donald Trump raised tariffs on Chinese imports and dealt a severe blow to Chinese trade profits. Both China and Russia, have now geared up to develop a counter-strategy, and oddly enough, it’s both promising and achievable.

China is an expanding economy having immense needs of oil and gas. Russia is more than ready to make up for the opportunity and a comprehensive plan has already initiated to enhance exports through a gas pipeline, liquefied gas containers and crude oil. Russia is now the largest supplier of crude oil to China. For an energy sufficient country, China needs Russia more than ever. And conversely, in the face of sanctions and European tariff barriers, Russia can depend on China for steady cash flows.

 

Russia and China have announced measures to de-dollarize their economies. A major step in this direction is the introduction of yuan bonds by the Russian government. In the wake of this bold step, Chinese banks have opened their doors to Russian corporations, proving vital loans and cash flows to maintain healthy operations overseas. Flow of capital has been a formidable hurdle for Russia for decades, which might be coming to an end as China has no shortage of capital or cash flows in its performing banks. In terms of trade, Moscow and Beijing have already rolled out a project for yuan-rouble payment systems, decreasing dependency on US dollars.

Another area where China and Russia are witnessing exponential growth is the food sector. Before the US-China trade war, China was importing 60 billion dollar worth of poultry, soyabean and related food items from the US. As retaliation to tariff barriers, China has shifted all of its US imports and the trade ministry of Russia has vowed to fill up the gap left the US suppliers within a matter of months. This will not only offset US pressure but complement it, with a powerful partnership. In the words of Vladimir Putin himself, “we have reached an unprecedentedly high level of co-operation with China”.

Apart from the economic and trade ties, during the June visit, Putin and Xi, jointly issued statements in favor of Iran. Putin criticized unilateral sanctions and undue pressure from the United States towards Iran and Xi, continued the shared thought by confirming that China and Russia support a common perspective that the US foreign policy towards Iran, is flawed and against UN resolutions. They ended with a clear statement directing restraint towards Washington. In a rare move, both leaders communicated their stance on Venezuela and the illegality of sanctions and diplomatic pressure.

Xi also pointed out building of a direct roadway link from Heihei area in China to the Russian city of Blagoveshchensk, a project worth 2.5 billion yuan. This relationship in the “new era” will not only be defined by the cooperation in areas such as cutting-edge technology, space, security and global governance, but also increased efforts to galvanize trade and investment as the bedrock for deeper ties in future.

These are extraordinary times. The spheres of power and dominance are shifting. There is no denying that US is losing its influence and China is making all the right moves, capitalizing on every misstep. With the advent of One Belt and Road Initiative, China and its trade prospects are set to expand. Under the leadership of Putin, Russia has aligned itself with the rise of the dragon, instead of building up a rivalry. From a unique angle, the potential of trade and profits of both these countries can undermine the progress made by regional cooperation of European Union in a matter of a few years. With the loss of dominance, miscalculated unilateral decisions and in promoting nationalism instead of globalism, the United States is set to move in recession. On the other hand, Xi Jinping and Vladimir Putin are laying the foundation of a new World, and that too with Russian Ice Cream and Chinese Tea.

(The writer is Chairman of Jinnah Rafi Foundation)

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