by Hall Gardner
China's Belt and Road Initiative (BRI), which was initially said called “One Belt, One Road,” comprises the Silk Road Economic Belt and the Twenty-First-Century Maritime Silk Road. Beijing's objective has been to develop a trade and infrastructure network that connects Asia with Europe and Northern Africa along the ancient Silk Road routes.2 These routes cover more than 60 countries and regions from the Far East to Europe and the Middle East (with Egypt and the Suez a key geo-economic focal point). The BRI countries currently account for some 30 percent of global GDP and more than 35 percent of the world's merchandise trade.
By 2050, Beijing hopes that the BRI will contribute up to 80 percent of global GDP growth and bring as many as three billion more people into the middle class. In many ways, the legitimacy of the Chinese Communist Party ironically depends to a large extent on its ability to expand the share of its economic pie to as many Chinese citizens as possible. By 2020, Beijing aims to double the yearly average personal disposable income of roughly $3,000 in 2010 (20,000 yuan) to roughly $6,000 (40,000 Yuan) for at least one billion people.3 And in the process, China is straining regional, financial, and global resources (as well as the health of its population through excessive pollution)—in rivalry with US, Japanese, and European incomes and mass consumerism, while concurrently risking conflicts with its neighbors and with the United States itself.
Concurrently, Beijing has been finalizing the RCEP negotiations with the ASEAN states (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Cambodia, Laos, Myanmar [Burma], and Vietnam), plus India, Japan, South Korea, Australia, and New Zealand. If the RCEP is finalized by the end of 2017 as expected, and assuming India, Japan, South Korea, and Indonesia do not stall progress, the RCEP would create the largest trading bloc in the world, covering nearly one third of the global economy. But it would exclude the United States and Europeans.
TOWARD CLOSER RUSSIAN AND CHINESE POLITICAL-ECONOMIC AND MILITARY INTEGRATION
To achieve their long-term goals, China and Russia appear to be moving into a closer political-economic and strategic Eurasian alliance. At the roots of this Sino-Russian rapprochement was the final border delimitation of 2004. This had been the fruit of negotiations since 1986, when Gorbachev initiated the Soviet rapprochement with China. Since at least since 2005, Russia and China have been engaging in major military maneuvers in the framework of the Shanghai Cooperation Organization (SCO). By 2012, they announced their Strategic Partnership, followed by the comprehensive 2014 Strategic Partnership. The latter has been symbolized by closer Sino-Russian defense collaboration involving joint naval maneuvers in the eastern Mediterranean in May 2015—in which China appeared to backing Russian military actions in Syria.4 Russia and China likewise engaged in joint naval maneuvers in September 2016 in the contested waters of the South China Sea.
It was in Moscow on May 8, 2015, that Moscow and Beijing stated their combined intent to integrate the Chinese-led Silk Road Economic Belt and the Twenty-First-Century Maritime Silk Road with Russia's Eurasian Economic Union (EEU). This accord took place at the ceremony that commemorated the end of World War II—but which was boycotted by most US and European leaders, due to Moscow's annexation of Crimea in 2014. The boycotting of this event, at least in the Russian perspective, appeared to denigrate Moscow's crucial role in defeating Hitler.
For its part, Moscow has additionally tried to widen its markets and build a stronger economic infrastructure by forging its new Eurasian Economic Union. The EEU is to include Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. Moscow has also been attempting to press Moldova, Kyrgyzstan, Tajikistan, and Serbia into joining. Moscow, however, has failed to incorporate Ukraine, which joined the EU Association Agreement in late 2014 after the Euromaidan movement overturned the kleptocratic government of President Viktor Yanukovych, but after Russia had annexed Crimea and supported the autonomist movements in eastern Ukraine.
Moscow has also hoped to enlarge the Collective Security Treaty Organization (CSTO), which represents a Russian effort to mimic NATO. The CSTO thus far includes Russia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan, but Moscow has invited China, India, Iran, Mongolia, and Pakistan to be CSTO observers. Afghanistan and Serbia are already observers. Pakistani observer status was, however, surprisingly rejected by Armenia due to Pakistan's support for Azerbaijan and its refusal to recognize Armenia.5 (Even before 2014, Ukraine had remained out of both the CSTO and the Eurasian Union—giving preference to possibility of joining NATO and the EU Association Agreement.)
REASONS FOR A CLOSER SINO-RUSSIAN ALLIANCE
The first major rationale for closer Russian ties to China is a consequence of Russian fears of isolation in Europe in response to the double expansion of NATO and the European Union into former Soviet spheres of influence and security. In the Indo-Pacific, the US-Japanese alliance has been tightening relations with South Korea and Australia, while seeking to strengthen relations with India, if possible. In effect both Moscow and Beijing fear that Washington will reactivate its policy of containment or “encirclement.”
Moreover, both Moscow and China tend to see US and European ideological appeals to “democracy” and “human rights” as a threat both to one-party Communist leadership in the case of China and to the dynamic authoritarian duo of Vladimir Putin and Dmitri Medvedev in the case of Russia—a situation in which Putin's political party, United Russia, predominates over all other Russian political parties, with more than 3/4 of the 450 seats in the Russian Duma. From Beijing's perspective, the student-led Chinese democracy movement in Tiananmen Square and throughout the country in April–June 1989, and the more recent Hong Kong democracy movements (the Umbrella Revolution, since 2014), have been seen as backed by US and European (and Taiwanese) democratic ideology, media, and secret financial supports.
Rather than engage in necessary reforms designed to check corruption and open the decision-making processes to greater civil-society inputs, both Moscow and Beijing see these democracy movements as an essentially US-directed tool of hybrid warfare primarily aimed at undermining the Russian and Chinese power structure and ultimately aimed at breaking up both countries. (On Russian views, see chapter 3.)
THE QUESTION OF RUSSIAN ARMS SALES TO CHINA
Moscow has, for the first time in years, begun to sell China advanced weaponry. In 2016, Moscow promised to sell four advanced Russian Su-35 fighter jets to Beijing—with a total of twenty-four jets to be completed in three years. And China will probably obtain more than just the initial twenty-four Su-35s. This significant arms sale has generated tensions with India, Taiwan, and Japan.6 In addition, Moscow has also been considering the sale of Amur-class submarines to China, plus advanced aircraft engines and radars. Moreover, Russia is expected to deliver its S-400 surface-to-air missile to China by 2018. Overall, Beijing and Moscow had signed roughly $8 billion in defense contracts as of November 2016.7
In effect, Russian technology could boost China's air defense capability significantly—even though Moscow still fears Beijing could clone Russian military technology. In 2014, Beijing was seen as copying the Su-27/30 fighter—which then became the J-11. The Chinese have also been accused of cloning US military technology. The Chinese J-31, for example, looks like a US F-35—as the Chinese were believed to have hacked into the files of F-35 sub-contractors.8 Yet Russian fears of Chinese high-tech copying appear less worrisome due to the fact that Moscow expects to deploy the even more advanced S-500 surface-to-air missile and T-50 fighter in the near future. Nevertheless, these major arms sales to China are significant in that they appear to put to an end Moscow's own informal ban on selling advanced weapons systems to Beijing, which had in place since roughly 2004.9
Moscow elites do fear that Russia could, in the not so-distant future, become a junior partner of China in military terms. Already, China possesses world's largest land army, and it is rapidly developing its blue-water navy, plus ICBM missile capabilities. For this reason, many Russian elites have called for re
straining the sale of advanced military technologies to China. These elites worry that Russian arms sales to China could backfire, if Beijing eventually turns against Russia.10 By contrast with this view, other Russian elites have hoped to co-opt China by means of working closely with the leadership. They consider it futile to confront Beijing.
The dilemma is that the long-term ability of Russia (and of the United States) to stay ahead of China in the game of military innovation is not guaranteed. There are still some items Russia will not sell China—such as technology that allows the Iskander cruise missile to maneuver at extremely high speed, making it difficult to intercept. Moscow will also not supply Beijing with satellite systems that could detect ballistic missile launches.11 At the same time, Russian arms sales to China are helpful in permitting Moscow to obtain a better conception of real Chinese military capabilities. The nature of Russia and Chinese defense relations indicates that the two countries could deepen military-to-military trade through the joint development of new space technology, airplanes, and helicopters.12 Advanced Russian arms sales appear designed to support China militarily as Beijing has begun to confront the US-Japanese alliance—while both Moscow and Beijing have hoped to splinter ASEAN where possible. Cambodia, Laos, and Myanmar, but more importantly Malaysia, even Vietnam, and now the Philippines, appear to be moving closer to both Russia and China.
ENERGY COOPERATION
Russian arms deals with China were bargained just when Russia and China were finalizing their “historic” gas deal worth $400 billion in May 2014, just after the Russian annexation of Crimea. Even though there have been ongoing price disputes over the gas deal, China and Russia also worked out a series of energy agreements involving the doubling of oil supplies and the construction of a natural gas pipeline to China from Russia. Additionally, the two agreed to develop Russian coal resources for China's benefit.
In this case, Russian-Chinese rivalry could be seen in the fact that China had previously sought to block Russia's attempts to establish a Russia-based energy infrastructure in Central Asia, by establishing contracts with a number of Central Asian states to build gas and oil pipelines directly to China.13 The fact that this deal came just after the United States and the European Union imposed sanctions on Moscow after its annexation of Crimea, however, indicated that Moscow could find financing for its major projects from other sources. From the Russian perspective, defense and security issues are now overriding political-economic concerns and previous disputes with China. Likewise, major Chinese banking deals with Russia to develop the Yamal liquefied natural (LNG) gas venture in the Arctic permit Russia to reduce its reliance on gas-export sales to Europe, while supplying China and opening up LNG shipping exports to Asia. And these deals once again show that Moscow can still find financing for a major project despite US and EU sanctions, but at the risk of too great a dependence on Beijing.
In late September 2017, CEFC China Energy purchased a 14.16 percent stake ($9.1 billion) in the Russian oil producer Rosneft, a firm closely linked to Putin, which will provide China access to eastern Russian oilfields near the Chinese border. It is the first time China has acquired a significant stake in a major Kremlin-controlled corporation.14
Moreover, these deals will boost not only China's economy but also its energy security. This is because the energy supply chains, particularly over land but also on the sea, tend to avoid the maritime choke points dominated by the United States and its allies.15 This latter strategic economic fact provides a major rationale for China to sustain its close Eurasian relationship with Russia in the future.
COMMON VALUES
What appears very significant is that Russia and China have begun to enhance cooperation not only by means of cultural exchanges but also by cooperation in the actual making of domestic policies. In early 2016, Russian President Vladimir Putin and Chinese leader Xi Jinping urged the legislative bodies of their respective countries to enhance their exchanges and mutual experience so as to further strengthen China-Russia ties. This resulted in the agreement of the Russia's Federation Council and Russia's State Duma, and China's National People's Congress to strengthen their cooperation on legislative initiatives and supervision, so as “to enhance coordination on regional, municipal and industrial development policies and plans.”16
While it is generally argued that Russia and China are not compatible in ideological terms, as China is still run by the Chinese Communist Party, the above factors have tended to bring China and Russia even closer together rather than to tear them apart. While potential disputes and a “quiet rivalry”17 does exist between the two Eurasian powers, the two countries appear to be moving beyond a marriage of convenience and toward a proto-alliance in opposition to the United States and its allies—as indicated by their June 2016 joint statement on strengthening global strategic stability.18
RUSSIA AS A JUNIOR ECONOMIC PARTNER TO CHINA
By reaching out to China, Russia is not so gradually becoming to China a junior partner in political-economic and financial terms. And Moscow could become even more financially dependent on China if Russia remains isolated from US and European sources of capital for too long. It has been argued that a close Chinese-Russian relationship is probably more important to Russia than to China, but Beijing also hopes to avoid the possibility that the United States will also impose sanctions on China in the future.
In March 2013, China, along with the other BRICS countries of Brazil, Russia, India, and South Africa, set up the New Development Bank. In October 2014, China set up the Asian Infrastructure Investment Bank (AIIB).19 Founded in September 2007, the China Investment Corporation (CIC), which, with $813.5 billion in assets in June 2017, is the third largest soverign wealth fund, after that of Norway and the United Arab Emirates, and possesses a capital funding that dwarfs the Japanese-led Asian Development Bank (ADB) and the World Bank.20 China's AIIB and the CIC also possess assets that Russia cannot match—particularly with world energy prices down from their previous heights before 2008. Since 2014, and particularly in 2015, Russia has become one of the five largest recipients of Chinese outbound direct investment, in relation to the Chinese government's BRI that connects Asia with Europe. Meanwhile, China was Russia's largest bilateral trade partner in 2015.
In September 2016, the China-Russia dialogue emphasized principles such as the “rule of law.” The two countries hoped to promote new tax and legal concepts for enhancing investments, investment protection, privatization, and providing state guarantees on finance for projects. There was also dialogue on how to deal with differing interpretations of legislative concepts, such as public-private partnerships and concession agreements.21 While Washington has often reiterated that Russia and China do not accept the “rule of law,” Russia and China appear to be developing their own laws and rules!
RCEP VS. TPP
Russia has augmented its support for China to build the BRI. China is also implementing its major trade accord, RCEP, which would tighten its political-economic relationship with Russia and other Eurasian states. These trade pacts were initially forged to counter the US-led Transatlantic Trade and Investment Partnership (TTIP) and Trans-Pacific Partnership (TTP). But Trump unilaterally abandoned the TPP, while the TTIP has been in limbo—although the Trump administration talked about reviving it in May 2017 through a joint US-EU task force.22
In terms of the international political economy, the Trump decision not to implement the TPP could actually permit Beijing to play a more significant political-economic role in the Indo-Pacific relative to Japan and the United States, particularly if it can implement the RCEP. Moreover, Trump has been seeking Chinese investment in the United States, with China's CIC and Goldman Sachs promising to co-partner in a five-billion-dollar fund, which is also intended to expand US exports to China.23 Contrary to his own campaign rhetoric, Trump has looked to both Saudi Arabia and China to finance his infrastructure projects, which will augment Saudi and Chinese political-economic influence in the United States.
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nbsp; At the same time, however, Beijing could nevertheless threaten to back away from its significant financial supports for the over-indebted US economy and its promised investments in the United States—if Trump administration continues to threaten sanctions against China due to Beijing's efforts to expand its regional sphere of influence and security through the BRI—coupled with Beijing's efforts to implement a Chinese version of the US Monroe Doctrine. (See discussion on China's holding of US debt and the possibility of a trade and monetary war, chapter 1.)
As China expands its political-economic influence in the Indo-Pacific, one dilemma is that ASEAN countries find themselves caught between the promises of Chinese trade and finance versus the uncertain American promises of security and defense assistance. ASEAN countries need strong US political-economic backing if they are to also engage in military commitments. Given Trump's decision to dump the TPP, ASEAN states do not feel confident that Trump will continue to back the Obama administration's policy of “rebalancing to Asia” that sought to strengthen the US political-economic and defense role in the Indo-Pacific.
Both Singapore and Japan had essentially argued that the TPP would provide economic “substance” through trade to the US military efforts to rebalance the region. TPP had thus been seen as a means to counterbalance China's massive political-economic influence in the region that impacts all states, from Cambodia to the Philippines to Australia. It had also been hoped that the formation of TPP would have pressed China to reform its generally poor labor standards and upgrade its environmental standards, among other concerns. Seen in this way, the TPP was intended to press China to reform its own economy so that Beijing could have eventually joined.24
Ironically, now that Trump threw the TPP out the window, it is the “liberal democratic” United States that appears to be advocating economic protectionism under Trump's new America First nationalism. And it is Communist China that appears to be arguing for liberal exchange and international trade. Chinese President Xi Jinping affirmed at the Davos Forum in 2017: “We must remain committed to developing global free trade and investment, promote trade and investment liberalization and facilitation through opening-up and say no to protectionism. Pursuing protectionism is like locking oneself in a dark room. While wind and rain may be kept outside, that dark room will also block light and air. No one will emerge as a winner in a trade war.”25 After this speech, the motto of the Chinese President Xi Jinping could be called “People First.” For Trump it is “America First”—or even “Trump First.” (For French President Macron it is “Planet First.” See chapter 10.)