3 initial reactions to the Putin visit
No surprises. Yes to trade & institutionalizing ties. No Power of Siberia-2 deal.
Some initial reactions to the Xi-Putin meeting are below. I’ll have more analysis soon, hopefully over the weekend, but there seem to be no surprises.
1) Putin came seeking support on trade. He received commitments from Xi. According to the FT, Chinese exports to Russia fell about 16 per cent y-o-y in March and 13.5 per cent in April. That’s due in large part to tighter sanctions that the U.S. imposed on Russian banks in late December.
Due to Beijing’s continued prioritization of ties with Moscow, Chinese exports to Russia will likely rise in the near term, relative to current levels. In the People’s Daily readout and the Kremlin’s English-language announcement, both Xi and Putin identified trade, economic, investment, energy, and cultural cooperation as key priorities, in that order. The People’s Daily readout also reported that the two figures inked a joint agreement on trade cooperation.
The details of trade cooperation will take shape in the coming days and will be important. It’s possible that the recent tightening of Western sanctions will continue to limit Chinese exports to Russia, at least on the margins – and every little bit matters for Ukraine. Still, it is highly likely that Beijing will continue to provision exports to Russia that fall short of lethal assistance but are nevertheless critical for the Kremlin’s war economy.
2) Beijing continues to frame the relationship as one motivated by fundamental interests – not just personal, leader-to-leader ties (although that is an undeniably important element). Xi repeated that bilateral ties serve the “fundamental interests of the two countries and peoples.” [两国和两国人民的根本利益] Beijing first adopted this formulation in July 2023, after the Prigozhin mutiny, in an apparent effort to depersonalize and institutional bilateral ties. With the events in the summer of 2023 raising concerns in Beijing about Putin’s (eventual) successor, the CCP is attempting to communicate to the Russian political system that it wants strong ties regardless of who sits atop the power vertical.
Beijing may figure more prominently in Russian domestic politics in the coming years. China is Russia’s single largest source of trade and investment, by far. Of course, economic ties don’t necessarily translate to political influence in Russia – as Europe and the broader West can attest. Still, with China’s massive economic and financial influence in Russia set to persist and perhaps even grow, Beijing may increasingly shape the Russian domestic political system, especially in the post-Putin era. Even though a leadership succession in Russia seems unlikely over the medium-term, Beijing’s characterization of relations as serving the “fundamental interests of the two countries and peoples” appears aimed at communicating to the Russian political elite that it will work with whomever sits atop the power vertical.
3) There was no mention of the China-to-Russia Power of Siberia-2 natural gas pipeline. This wasn’t surprising, as the two sides have seemingly made no progress in negotiations in recent years. Some analysts (including the present author) hold that the pipeline faces daunting and perhaps insurmountable financing, technical, and economic challenges – although admittedly the project could be built for non-pecuniary reasons.
Conversely, Sergey Vakulenko of Carnegie estimated in June 2023 that the Power of Siberia-2 pipeline had a more positive economic profile, potentially bringing in rents of $2.5 - $4.3 billion per year (compared to about $20 billion in rents earned per year by exporting to Europe, before the war).
The future of the Power of Siberia-2 could ultimately depend on China’s ability to harness its substantial overcapacity in solar energy, (as well as Beijing’s willingness to improve urban air quality).
I’ll have much more on Chinese solar later, but, for now, a recent analysis of another, more mature solar market – California – shows that batteries can push back the “solar wall” and increase the technology’s share of total electricity generation. Additionally, and besides deploying batteries, China may ultimately adopt “solar alignment time” – that is, aligning economic activity with daylight hours. Essentially, solar alignment time would change the clocks to match economic activity and electricity demand with sunlight hours. In the summer, this could mean sundown could occur at 10 PM or later, in order to better match sunlight production with load demand, which tends to peak at around 6 PM (at least in the United States – Chinese diurnal and interseasonal electricity data is much less transparent). These measures would raise solar electricity’s share of the electricity mix.
It’s worth noting that Chinese natural gas demand – especially in north China – is primarily accounted for by heating and the industrial sector – not the power sector. Nevertheless, the mass deployment of solar and wind in north China, along with other complementary clean energy technologies – especially building efficiency measures and two-way air conditioning units, also known as heat pumps – will limit or even curtail Chinese demand for Russian natural gas imports.
Joe Webster is a senior fellow at the Atlantic Council and editor of the China-Russia Report. This article represents his own personal opinion.
The China-Russia Report is an independent, nonpartisan newsletter covering political, economic, and security affairs within and between China and Russia. All articles, comments, op-eds, etc represent only the personal opinion of the author(s) and do not necessarily represent the position(s) of The China-Russia Report.