Russia's reliance on China rises amid Ukraine sanctions

Like a salesman buttering up his best customer, President Vladimir Putin gushed about China's economic success as he welcomed Chinese leader Xi Jinping to the Kremlin.

“We even feel a bit envious,” Putin said Monday as Xi grinned.

That was more than idle flattery. China isn't just Moscow's diplomatic partner in opposing what they see as US domination of global affairs.

Its thriving economy is the biggest buyer of Russian oil and gas exports, pumping billions of dollars into Putin's treasury and helping the Kremlin resist Western sanctions over its invasion of Ukraine.

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Putin welcomes the lifeline, but that reliance is accelerating Russia's slide into the junior role in an uneasy relationship with Xi's government. Beijing has ambitions that diverge from Moscow's and sometimes conflict.

“Russia may worry about increasing reliance upon China, but it has no other good options,” said Li Xin, director of the Institute of European and Asian Studies at the Shanghai University of Political Science and Law.

The current Beijing-Moscow partnership dates to the 1990s, when they set aside border disputes and other strains that led to the 1961 Sino-Soviet split, forging a post-Cold War diplomatic front to push back against Washington.

For both sides, the importance of that relationship increased as Washington imposed sanctions on Russia and restricted Chinese access to US technology on security grounds. Xi accused the United States this month of trying to block China's economic development.

“There's a feeling that the US and American allies are out to contain the two countries,” said Li Mingjiang, an international relations expert at the S. Rajaratnam School of International Studies at Singapore's Nanyang Technical University.

Despite “strategic mistrust” stemming from conflicts dating back to the 19th century, they share a “common political interest" of "resisting American challenges,” Li said.

Before last year's invasion, Xi and Putin declared they had a “no limits friendship.” But Beijing already has shown there are limits. It says they aren't allies and has avoided openly giving Russia military help in Ukraine, a step President Joe Biden and other Western leaders warn would trigger unspecified consequences for China.

Beijing once called the Soviet government “Big Brother,” but Moscow's lead in political influence eroded as China's economy raced ahead following market-style reform in the 1980s.

Russia had oil riches, but the post-Soviet economy failed to create competitive companies. Meanwhile, Chinese auto, tech and other industries expanded into global markets.

In the mid-'90s, Russia's economy was half the size of China's but its smaller population had four times the output per person.

By 2020, China's lead had multiplied. Its economy was 10 times the size of Russia's and edged ahead in output per person, $10,525 to Russia's $10,115, according to the International Monetary Fund. Russia's $1.7 trillion economy was about three-quarters the size of that of Texas.

Russia also is losing its lead in arms technology, its biggest non-oil export.

China paid billions of dollars in the early 2000s for fighter jets and other weapons. But in another sign of the limits to cooperation, Russia suspended sales after 2004 due to complaints Beijing was copying its missile and other technology. Sales didn't resume until 2014.

China's imports from Russia, mostly oil and gas, rose 49 per cent last year to $76.4 billion, according to customs data. The Global Times newspaper reported Russia overtook Saudi Arabia as China's biggest foreign oil supplier in January and February.

China can buy Russian energy without triggering Western sanctions that prohibit or limit imports into the United States, Europe or Japan.

Beijing values relations with Moscow so highly that it has avoided using that economic power as leverage, said Li Mingjiang.

"We've seen Chinese caution not to do anything or say anything that may make the Russians upset or suspicious,” he said.

Moscow is uneasy that its dominant role among former Soviet republics in Central Asia might be undermined by Xi's multibillion-dollar Belt and Road Initiative to expand trade by building ports, railways and other infrastructure.

Putin's government shares worries with Washington, Tokyo and New Delhi that China is using Belt and Road to expand its strategic influence at their expense.

Beijing tried to mollify Putin's government by agreeing Moscow would be in charge of security affairs in Central Asia while China would focus on trade.

To sweeten the deal, Beijing invested $1 billion to keep an oil project in Siberia alive after it lost access to Western financing due to sanctions imposed over Moscow's 2014 seizure of Crimea from Ukraine.

Beijing wants to keep Putin's government as a viable diplomatic partner but has avoided doing anything that might trigger sanctions against Chinese banks or other companies or shut them out of Western export markets.

The potential losses for China's exporters if it crosses Western governments are immense.

The United State bought 15 per cent of Chinese exports last year, even after tariff hikes in a feud with Beijing over technology and security. The 27-nation European Union bought almost 13 per cent.

And Russia? It accounted for 1.3 per cent. Less than Thailand.

“To China, the importance of Russia is lower than the West in technology and economic cooperation,” said Li Xin. “But politically, the importance of Russia to China is on the rise, because of the geopolitical and military suppression of China from the United States.”