The headlines are full of China’s support for Russia and mutual admiration based on a phone call between Putin and Xi. That’s all very nice, but frankly, how does it translate into anything in practice? Will China now be the banker for Russia? If so, how good a deal is that for China? It doesn’t look too impressive at face value.
There’s a cash flow issue here. Russia made $100 billion in exports over the 100 days of the Ukraine war and spent most of it in the same period. Russian exports are vulnerable, and China needs energy, so you’d think it was a win-win. It’s not.
China is likely to become the main source of Russian revenue by default. This means China can make demands and get discounts. The actual revenue value may decrease. Add to this the fact that other players have equity in Russian energy. They may not be too happy with being marginalized in any deals.
In terms of security, China doesn’t have to do anything much. No Chinese military tech is showing up in Ukraine unless it’s well-vetted and under the radar of the media.
Digression – China is otherwise occupied, anyway. China is currently expanding its reach with a possible military base in Cambodia and security deals with the Pacific islands. Yep, geopolitics is such fun… If you think it’s achieving anything, which it usually isn’t.
China is looking like a business where the military projects are running the business. There don’t seem to be too many real ideas in this mix. This sprinkling of bases looks exactly like Japan’s island empire and has exactly the same future. The irony is that the South China Sea is literally covered in shipping sunk by the US Navy. Those sunken ships were doing what Chinese ships would have to do to support this idiotic string of largely useless over-extended bases.
Dictators’ Tea Party? No.
The economic fact is that Putin is taking on a partner that will have a majority vote. If China doesn’t fund it, it can’t happen. Maybe they could trade nukes, but how long could that go on? Russia’s ancient stockpiles may not be that much use, and largely obsolescent, too, another little detail.
This is going to be a bit simplistic, but some clarity is required. This arrangement may not work on a personality basis alone. Generally speaking, autocrats don’t play fair with each other. Somebody has to be the top dog. Chinese input into Russia’s military hobbies may not be appreciated.
A Chinese economic deal is certainly convenient, and simple. In practice, however, It means Russia is locked in to China, a virtual dependent. To a lesser extent, it means China is funding Russia’s various disasters. Returns on investment could go very sour.
It’s far too early to say whether any countermeasures against China are appropriate, or even likely. It’s not even clear if anything short of equally tough sanctions would, or could, work. China usually does ignore anything short of actual sanctions.
However…
Russian demand for Chinese money can only go so far. China does have a few issues of its own, notably collapsing property markets, major importing needs other than energy, etc. Funding other people’s catastrophes may not be a top priority.
China needs the energy. It does definitely not need a blank check to Russia on all things. The “security and economic cooperation” thing is a virtual standard macro press release, not necessarily an indication of policy realities. You also don’t do these things with a single phone call.
Russia’s now-comatose, rotting relationship with the EU is another factor. The EU is China’s biggest export market. The EU is worth far more to China than the entire Russian economy. “Security and economic cooperation” can go only so far. If the EU doesn’t like some part of this Chinese-Russian lovefest, that could get expensive.
It could get expensive at a time when China needs to be funding a lot of things all at the same time. A neurotic capital market in China, with big money in property, is going to be capital-sensitive, and therefore cash flow sensitive.
You can read whatever you want into Russian Chinese relations. What really gets delivered will inevitably be something else.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
