Russia’s loan shark

LET nobody say that international politics is dull. The ménage á trois being played out presently between the West, Russia and China will likely set the international political tone for years to come, and also fundamentally influence the nature of international economic relations.

When President Vladimir Putin last week proudly sat on the podium on the Red Square in Moscow to watch the thousands upon thousands of troops marching by to commemorate the end of the Second World War 70 years ago, the absence of nearly all Western leaders was striking. They stayed away in protest against his aggression in the Ukraine and his violent annexation of the Crimea.

Not that it bothered him overly. For right next to him sat President Xi Jinping of China, leader of the second strongest country in the world after America. This was a powerful challenge by both leaders to Western dominance of world politics. In fact, in his speech Putin said as much.

They went even further. Putin and Xi signed 32 agreements, worth billions. Among them are an investment fund drawing $25bn in Chinese projects to Russia, a $6bn investment by China in a high-speed rail link between Moscow and Kazan, $2bn for agricultural projects, and a joint venture, worth $3bn, to build 100 long-range Sukhoi passenger jets for lease to airlines throughout Asia.

The two also continued their negotiations for China to buy Russian fighter jets and to upgrade military helicopters.
Another agreement vaguely called for co-operation in gas- and oil-rich Central Asia. These countries mostly used to be part of the Soviet Union, and Putin’s foreign policy is to a large extent geared to keep them within the Russian sphere of influence.

In addition, the military co-peration between the two was symbolically emphasised by the participation of Chinese troops in last week’s triumphant parade in Moscow, and by collective exercises of Russian and Chinese warships in, of all places, the Mediterranean.

This points to the rekindling of the traditional Russian aspiration to gain access to “warm waters”, which for Moscow has always been the highway to international influence and power projection.

Even more remarkable is China’s role here, as this country traditionally has always been a continental power, and its desire to project power with its rapidly growing navy dates only from the last few years. Its naval presence in the Mediterranean is an announcement to the world that China has arrived on the podium of the powerful, and that it has no plans to evacuate that place any time soon.

This does not mean that all is moonshine and roses between the two. Moscow is definitely the weaker of the two and more dependent on Beijing than the other way round. The Western sanctions have hurt the Russian economy badly, and the Chinese are therefore driving a hard bargain.

While Europe is rather dependent on Russia for its gas supplies, Russia is also dependent on the West for its sales. The Russian-Chinese massive energy deal of a year ago, worth $400bn, has still not been signed. The Chinese simply will not pay what the Russians want, in spite of the fact that the Russian offer is less than what the West pays at the moment.

Fact is, the Russian negotiating position is rather weak, and China is exploiting this to the hilt. In fact, one observer described China as “Russia’s loan shark”.

Central Asia is another potential sticking point. At present, Russia has the upper hand there, but China is not satisfied to play second fiddle. And therefore, the leaders of Tajikistan, Usbekistan, Kirgizia, Kasakhstan and others are deftly playing the two in order to extract the maximum profit for themselves.

The point is that the rapprochement between Moscow and Beijing is very much a hard-nosed affair, based on their interests. In contrast with NATO or the European Union, there is no natural alliance between them.

What may be in their interest today, might not be tomorrow, in which case the alliance could rapidly unravel.

The Chinese see America as their natural adversary, although the contrary is, of course, also true. The American strategic policy in the region is to build a wall around China, ideally consisting of India, Malaysia, Singapore, Indonesia, the Philippines, Taiwan, South Korea and Japan, buttressed by the overwhelming might of the American navy.

This explains the rapid expansion of the Chinese defence force, especially their navy, which includes the building of several aircraft carriers, which is the most notable instrument of power projection far from your own shores.

Against this background, it is natural for Xi and the Chinese government to draw nearer to the Russians – as long as it suits them. Throughout history, Chinese statesmen have been very cautious and pragmatic, changing partners as easily as putting on another suit.

It is clear that an alliance between China and Russia could well be a formidable one. If it holds (which is questionable) it could have the potential of altering the global balance of power drastically.