Instability in oil and gas markets could affect China and Russia
Central Asia’s triple crisis could force China and Russia to react
Instability in oil and gas markets could affect China and Russia
This edition of the newsletter will cover the following China-Russia topics: oil; gas; the public health and economic crisis in Central Asia; China’s loans and regional presence in Central Asia; China-Russia interactions; China and Russia potpourri; and Moscow Mayor Sergei Sobyanin. This post is long: you may want to select the “open in browser” feature.
Collapsing energy markets could lead to economic and political chaos across Eurasia. With some traders and analysts predicting negative oil prices amid the unprecedented demand shock caused by COVID-19, Russia could face a depression on par with the 1990s, but Central Asia’s future appears even darker. A triple crisis of falling remittances from Russia, forced shut-ins of oil production, and the economically paralyzing COVID-19 virus could devastate Central Asia. Any crisis in Central Asia will likely force Russia and China to respond.
Central Asia is small, but significant. The region is home to fewer than 75 million individuals, and its combined GDP only totals ~$320 billion USD, but at least 2 million Central Asian migrants (and as many as 8 million) live and work in Russia. China also has important interests in Central Asia’s natural resources, particularly natural gas. Russian and Chinese actions in Central Asia demonstrate their concerns about regional instability.
In late summer 2017, Russian and Chinese security services may have actively disrupted an assassination plot against Uzbek President Shavkat Mirziyoyev. There are highly credible rumors that Mirziyoyev escaped an assassination attempt from his own intelligence services in Kyrgyzstan in September 2017. Notably, Meng Jianzhu, Beijing’s then-point man on security matters, met with Mirziyoyev in Tashkent a week after the purported assassination attempt. Mirziyoyev refused to fly on the Uzbek presidential plane (which was under the control of his security services) and instead used the plane of Uzbek-born Russian oligarch Alisher Usmanov. There were also highly credible rumors that a Russian intelligence service, the Federal Security Service (FSB), provided Mirziyoyev’s personal guard. While these actions cost China and Russia relatively little, they reveal a careful approach to the region.
Russia and China are vigilant in Central Asia because regional instability threatens their interests. Not only do millions of Central Asian migrants live in Russia; so do many regional elites. Political struggles or even civil conflict in Central Asia could find their way to the streets of Moscow and St. Petersburg. During the mess with Gulnara Karimova and MTS in 2012, for instance, at least one Uzbek official fled to Moscow. China had its own experience with Central Asian instability in the winter of 2017/2018, as Turkmenistan’s failure to deliver contracted natural gas volumes to China led to a supply crunch in the coldest part of the year. Finally, there is a very real risk of terrorism emanating from Central Asia, particularly Tajikistan. The former head of Tajikistan’s anti-terrorism unit defected to ISIS in 2015. If Central Asian states fail, the consequences could be serious for China, Russia, or both.
The probability that one or more Central Asian states will fail amid a global, pandemic-induced recession or even depression is very high. Turkmenistan is one of the worst governed countries on the planet: despite considerable natural gas riches, it has experienced mass hunger for years. The Turkmen government is still hosting public events despite the near-certainty that COVID-19 is spreading in Ashgabat. COVID-19 will also likely push Tajikistan over the brink. With cash remittances down 30 – 35% from a year ago, according to RBK, Tajikistan may have already lost about 10% of its GDP – and its government does not appear to grasp the virus’ dangers. Kazakhstan, Uzbekistan, and Kyrgyzstan are better governed, but severe economic downturns will test the stability of even these countries and their often-fractious societies. Central Asia is staring into an abyss.
Central Asian instability would only add to Vladimir Putin’s challenges. As noted in the last edition of The Report, Putin is facing the most serious trial of his political career. Putin’s popular support depends on his ability to deliver acceptable living standards: his last two attempts to reduce social benefits resulted in large-scale protests in 2005 and 2018. Russian living standards have been eroding for some time, however, as real median incomes have likely fallen for 6 consecutive years, before the coronavirus, the most serious world economic challenge in the post-War era. Not only is Putin’s performance legitimacy eroding, but he also appears increasingly out of touch. Amid Russia's gravest economic and public health crisis since the 1990s, he is asking to extend his rule to 2036. An indefinite extension of Putin’s rule was always going to unsettle the thin layer of elites who determine most political and economic outcomes in Russia. As Russia’s economic and public health problems metastasize and directly affect their interests and even personal safety, Russian elites may start to consider leadership alternatives. Putin could reverse these setbacks: he created Sistema and understands Russian domestic politics better than anyone. Still, he is flailing and looks out of his depth in the crisis.
There is a small but non-trivial probability that Putin is infected with COVID-19. Putin shook hands and shared an elevator ride with a COVID-19 carrier, Denis Protsenko, who heads the Kommunarka hospital in Moscow. Putin’s crisis response has been lackadaisical and distracted, his media exposure has fallen sharply, and the Kremlin is forcefully declaring that the 67 year-old’s health is excellent. This behavior is consonant with how he and the Kremlin would likely act if Sistema’s head was infected. The behavior of Russian elites will provide additional clues about Putin’s health in the coming days. IF – stressing the word if – Putin is infected, Prime Minister Mikhail Mishustin, until January the head of the obscure Federal Taxation Service, could become the most important figure in Russia by the end of the month.
In China-Russia news, there is a developing story out of Suifenhe, in Heilongjiang, China. Chinese nationals, some of them stricken with COVID-19, are trying to return home via the land border with Russia, but Chinese authorities have temporarily barred them from entering. Russian officials are predictably unenthusiastic about putting COVID-19 cases in Russian hotels. Vladivostok, home to Russia’s Pacific Fleet, was closed to foreigners during the Soviet era. It might close down again to international (read: Chinese) travelers amid COVID-19. What a mess.
Finally, I’ve included some readings on Moscow Mayor Sergei Sobyanin. Thanks for reading.
Sections this week:
1) Oil
2) Gas
3) The public health and economic crisis in Central Asia
4) China’s loans to Central Asia
5) China-Russia interactions
6) China and Russia Potpourri
7) Who is Mayor Sobyanin?
1) Oil
Oil’s Stunning Demand Collapse Threatens Closures Everywhere – Bloomberg
Comment: Watch the discussion with Goldman Sachs’ Jeff Currie. Take what he and the other oil traders are saying with a major grain of salt (they are talking their own books), but Currie lays out a compelling case for why prices could crater amid a historic collapse in oil demand.
Currie also claims that if Russia/Rosneft shut-in production due to prices falling below short-run marginal costs, they will have to permanently close some of their older, Soviet-legacy wells. I haven’t been able to confirm this. Well shut-in dynamics are technical, proprietary, and sensitive.
Currie notes a 10-to-1 ratio of water to oil. What does that mean? According to Thane Gustafson’s history of Russian oil, Wheel of Fortune, “Their [Soviet] field techniques were equally basic. To augment the natural flow of the oil wells, Soviet engineers drilled rows of injection wells and pumped massive amounts of water into the reservoirs to drive the oil forward. By the end of the 1980s, for every ten barrels of liquid that liquid that came up from the wells, nearly nine barrels were water. The Soviet oil industry became the largest water company in the world.”
Sidebar: China’s water scarcity could limit its oil production capabilities.
“The big story is Russia cutting 2.5 million b/d. Can they do that? What it means for their fields? How do they apportion that between producers? ”
The U.S.-Saudi-Russia Oil Cease-Fire Won’t Last – Julian Lee for Bloomberg
“The deal raises some even bigger questions than Mexico. Russia, for example, is to cut its output by 2.5 million barrels a day over the next three weeks. Really? Igor Sechin, head of state-controlled oil company Rosneft, was a fierce critic of Russia’s modest contribution to previous reductions. I can imagine how he’ll react when he’s told his company has to cut output by almost 1 million barrels a day by May 1.”
“For Russia this agreement represents a policy failure. Their refusal to join KSA-proposed output curbs in March was intended to punish the U.S. shale patch and flex its muscle as a global top 3 producer. By not cutting when it needed to, Russia now will cut much more. Moscow incited a price war that sent oil prices plummeting (along with the value of the ruble).”
Comment: The details of the OPEC+ agreement might change slightly by the time you read this, but note Melikishvili’s point below about compliance.
Alex Melikishvili – IHS Markit
“It's important to remember that this is a gentlemen's agreement since OPEC has no monitoring, enforcement or punitive mechanisms in place and there's plenty of room for cheating. Saudis are far better cushioned by their reserves than Russians, who have major spending commitments.”
Oil price after OPEC+ deal to stay within $30-40 per barrel - Lukoil vice-president – TASS
“"Should the deal be not reached, we will have to mothball our well all the same if the prices dropped to $15-20 per barrel, actually having no normal money flow either to the sector or to the budget, with the export duty being zeroed. Now we can expect that oil prices will stay in the range from $30 to $40 US," he said in an interview with RBC. According to [Lukoil co-owner] Fedun, thanks to the deal Russia will receive an extra of $70-80 mln dollars in revenues as day.”
“Against this backdrop, the oil price collapse will deliver some welcome relief to China’s economy as it recovers from the coronavirus. In 2019, China imported roughly 10.2 million barrels per day (bpd) of oil. At that level of imports, the plunge in the price of Brent crude from $67 per barrel in December 2019 to roughly $25 per barrel at the time of this writing would reduce China’s oil import bill by $428 million per day—about 1% of GDP—for as long as the price war lasts. Even if oil imports fall by several million barrels per day on average over the course of 2020, the savings to China’s foreign exchange accounts as a result of the price war will be significant.”
Comment: Outstanding article. Noteworthy that China filled up its crude oil storage inventory before prices started tanking. This is a piece of a trend. For whatever reason, China’s energy policy has had awful timing. The 2009 domestic stimulus invested heavily in coal and all but ignored natural gas pipelines, just as the shale gas boom started. The PRC also sank tens of billions of dollars in Venezuela before crude prices crashed (again due to shale). China may also now be investing in natural gas pipelines just in time for renewables to dominate the market…
China discovers 100 million ton oilfield in northwestern Xinjiang – Global Times
Comment: Doesn’t appear to be a significant find. Also, remember that oil production is highly water-intensive. China’s water scarcity will likely continue to constrain its oil (and gas) production.
China opens up oil and gas exploration, production for foreign, domestic firms – Reuters
“The long-awaited opening accompanies a reshuffle of the so-called “midstream” pipeline business, but experts say it may not excite immediate interest from global drillers because of the poor overall asset quality of China’s hydrocarbon resources.”
Comment: See below for more on the midstream pipeline reform regarding China Oil & Gas Piping Network Corporation (COGPC).
2) Gas
“Central Asian gas is, as of 2020, far more important to Beijing than Russian gas. The Power of Siberia Pipeline, China and Russia’s flagship joint project, came online in December 2019; it was set to deliver just 5bcm before rising to 38bcm by 2025. Russian business daily Kommersant reported on March 10 that the pipeline was taken offline for “repairs” less than three months after it had begun pumping gas. Kommersant did note that the Gazprom-CPNC contract for the pipeline does include a “take-or-pay” clause meaning that Beijing will have to pay for at least 85 percent of the gas. If Beijing does further halt Russian gas imports, then Moscow may well seek to trigger this clause. However, given the relatively small amount of gas it is set to ship this year, Moscow could well refrain from doing so as it would be hard to justify the potential the damage it would risk to the Russian-Chinese relationship.”
Chinese business briefing: Force majeure – Eurasianet
“On March 5, it came to light that PetroChina had issued a force majeure notice weeks earlier, slashing gas purchases from Kazakhstan, Turkmenistan and Uzbekistan. A few days later the Chinese Embassy in Nur-Sultan confirmed it had told producers it would buy 20-25 percent less gas in February and March. Data from a pipeline metering station at Khorgos on the Kazakh-Chinese border confirm the dip, showing that China imported only 7.6 billion cubic meters (bcm) of Central Asian gas in the year to March 7. In the first quarter of 2019 the figure was 11.5 bcm.
In January and February China’s imports from Turkmenistan and Uzbekistan fell over 17 percent and 35 percent respectively, Beijing’s data show. Trade turnover with Kyrgyzstan fell almost 12 percent.”
Comment: The Central Asia to China Pipeline (CACP) Line D is under construction, with Sputnik reporting that the first tunnel was constructed in Tajikistan in January 2020. CACP Line D will likely face severe delays, for obvious reasons.
COVID-19 could boost Central Asian Plans to Access South Asian Gas Markets – Natural Gas Markets
“China’s LNG imports overtook piped imports in 2017. Moreover, the latest Chinese gas import pipeline to be commissioned was not the 30bn m3/yr fourth Central Asian pipeline (line D), but the 30bn m3/yr Power of Siberia-1 pipeline from Russia, which entered service in December 2019.
Line D would deliver gas from eastern Turkmenistan to China along a route passing through Uzbekistan, Tajikistan and Kyrgyzstan. But Line D is heavily delayed. Originally scheduled to enter operation in 2016, completion is now slated for 2022 at the earliest.”
China sets up new central SOE to manage oil, gas pipelines – Xinhua
“A new centrally-administered state-owned enterprise (SOE), the China Oil & Gas Piping Network Corporation, has been set up, which is an important step forward in promoting the reform of China's oil and gas system.
China on Monday set up a new centrally-administered state-owned enterprise (SOE), the China Oil & Gas Piping Network Corporation. The company will partly be responsible for the investment, construction and interconnection of main oil and gas pipelines to form a nationwide network, allowing to transport crude oil, refined oil and natural gas through the network, it said. Aiming to forge an oil and gas market with effective transport through a unified pipeline network, the establishment of the central SOE is an important step forward in promoting the reform of China's oil and gas system.”
Comment: The formation of China Oil & Gas Piping Network Corporation (COGPC) could ultimately open up Chinese natural gas production and limit the need for natural gas imports from Russia or Central Asia. In fact, that may be one of its primary purposes.
Why China’s state oil company merger looks like an unusual step – FT
China’s pipeline reform: expect higher gas prices in the short-term – Wood Mackenzie
“There are two main factors supporting pipeline reform. Firstly, existing infrastructure is insufficient to meet China’s energy demand growth. Pipelines are already running at maximum capacity during peak seasons, and we expect gas demand to rise 2.5 times from 2018 to 673 billion cubic metres (bcm), accounting for half of Asia’s gas consumption by 2040. “Secondly, not everyone has fair access to infrastructure. Independent upstream producers face difficulties accessing takeaway capacity at competitive tariff rates, restricting the pace of upstream development, just when the government needs it most.”
“Another implication of a sustained period of lower oil prices is that China will likely favor cheap LNG over new pipeline imports to meet natural gas demand… As a result, Beijing is likely to put on the back burner plans to develop Line D of the Trans-Asia Natural Gas Pipeline, which delivers natural gas from Central Asia to China, or the Power of Siberia II pipeline, which would send gas from western Russia to western China, because such projects are expensive to develop. Meanwhile, the Power of Siberia pipeline likely will continue its gradual ramp-up to maximum capacity but the pace may accelerate at the margins when China’s natural gas demand recovers. The Power of Siberia, which commenced operation in December 2019 (and is offline for maintenance from March 16 until April 1), delivers gas from Russia to China’s northeast region, which has cold winters and few LNG terminals. Gazprom expects the pipeline will deliver 5 bcm in 2020 and reach its full capacity of 38 bcm by 2025, although some industry analysts suspect it will take longer to reach maximum capacity.”
3) The COVID-19 public health and economic crisis in Central Asia
Photo from Bakhti Nishanov (IRI Global) – Twitter
William Tompson (OECD Eurasia Division) – Twitter
Comment: Kyrgyzstan and Tajikistan’s “current account balance less net remittance inflows” exceeds 30%. Very grim as remittances (mostly from Russia) are drying up.
Coronavirus Exposes Central Asian Migrants’ Vulnerability - Aruuke Uran Kyzy for The Diplomat
“Closing its borders is just one of the measures Russia has taken to defend itself from the pandemic. But for Central Asian migrants, that’s created a new crisis. Hundreds of migrant workers from Central Asian countries have been stranded at different airports after Russia and other countries stopped regular flights to Kyrgyzstan, Uzbekistan, and Tajikistan. In Orenburg, 157 Kyrgyz citizens were trapped on the border for three days. Other migrants spent all their savings on plane tickets and were forced to camp out at the terminal for weeks until the issue was solved by their respective governments.”
Coronavirus diary: Can Kyrgyzstan survive this? - Nurjamal Djanibekova for Eurasianet
“The government is betraying signs of not knowing quite how to run a state of emergency – especially one instated to defend a population against an invisible virus.
…
Another lawmaker, Altynbek Sulaimanov, raised a more urgent and possibly unanswerable question during a special session of parliament. “If this quarantine lasts for more than a month, neither the population nor the country will survive. We just don’t have the means. The government will not be able to feed everyone. We took everybody’s job away. Sure, people may hold out for a month. They have neighbors, they have relatives. But then what?” he said.”
Eurasianet Coronavirus Dashboard
“A spokesman for former President Nursultan Nazarbayev, who still chairs the powerful national security council, was forced to declare on April 7 that all was well with his boss amid mounting chatter prompted by the fact that the ex-leader has not been seen in public for weeks. Rumors that Nazarbayev was suffering from ill-health were “lies” and “a provocation,” the spokesman said in a statement.”
“The overall volume of cash transfers from Russia decreased between 30 and 35 percent in March compared to last year, according to two of the major payment systems, RBK reported on April 7. Tajikistan is among the most remittance-dependent country in the world. Tajik workers in Russia send home billions of dollars per year, equivalent to about 30 percent of GDP.”
Experts doubt isolated Turkmenistan's virus-free 'show'- RFI
“Isolated Turkmenistan, which held mass aerobic exercises and a cycling event with coordinated tracksuits this week, is one of only a handful of countries to have reported no coronavirus cases. But like its authoritarian cousin North Korea, experts doubt the country can be immune to the pandemic and worry the ex-Soviet republic may not be telling the full story.”
Rubles in the Near Abroad: Testing a testy union – Maximillian Hess for Eurasianet
“[Russian] Health watchdog Rospotrebnadzor announced on March 12 that it was sending tests to fellow EAEU members as well as Azerbaijan, Uzbekistan, Tajikistan, and Turkmenistan – in short, just about everyone in the region but Georgia and Ukraine.
Rospotrebnadzor did not detail how many tests it would send each country, but pro-Kremlin media were quick to sniff out details of this humanitarian largess. Tajikistan would receive 21,000 tests; Kyrgyzstan 20,000; Uzbekistan 9,000. Russia's Embassy in Azerbaijan said Baku would receive 7,000 tests. Armenia got 1,500. Kazakhstan’s president said he’d secured 40,000.”
Uzbekistan Appears to Settle on Observing the Eurasian Economic Union – The Diplomat
“But with the spread of the coronavirus, many countries are closing off access and those arriving face enhanced scrutiny. The opportunity to travel to any of the above places to seek a job will be reduced. That could lead to more people returning home, but employment will be difficult to find in Kyrgyzstan, Tajikistan, and Uzbekistan, and the addition of thousands of working-age citizens to the ranks of the unemployed in those countries would put additional strains on the public dissatisfaction that exists in those societies.”
Q: How do you think the balance of powers will look after the coronavirus? More regionalization in CA will still mean more engagement with direct neighbors such as Russia and China and even less with the US and Europe; what would be the implications of this?
A: “I do not believe the coronavirus crisis will alter significantly the balance of powers in the region. Russia’s political and military influence will remain as will China’s economic ties. What this crisis is already highlighting are the issues that emerge when depending on China for exports, as energy-rich countries like Kazakhstan and, especially, Turkmenistan are already feeling. Hopefully it will be a wake-up call and will encourage diversification in the future. The role of both the US and Europe will remain at similar levels as before.”
4) China’s loans and regional presence in Central Asia
China's Overseas Lending – Horn, Reinhart and Trebesch for NBER
“Documentation of China’s capital exports is (at best) opaque. China does not report on its official lending and there is no comprehensive standardized data on Chinese overseas debt stocks and flows… We find that about one half of China’s overseas loans to the developing world are “hidden”
…
The main explanation for the over-proportional increase in debt servicing costs is that China tends to lend at market terms, with interest rates that are significantly higher than those paid to the other main creditors, in particular compared to the low, concessionary rates on World Bank loans or on bilateral loans by OECD governments. In addition, the maturity and grace periods of Chinese loans tend to be shorter than those on the remainder of the debt, which increases annual debt service amounts”
Comment: The authors estimate that Central Asian debt to China alone could comprise over 40% of GDP. They also estimate that debt service payment to China totals up to 10%(!) of Central Asian GDP. Expect these debt-to-GDP figures to rise substantially amid COVID-19.
“Due to the extensive efforts of independent researchers and better reporting by official sources outside of China, it is increasingly clear that the Chinese government—through its major policy banks, state-owned commercial banks, and government agencies—now represents the largest official external creditor to developing country governments worldwide. By some estimates, it is larger than World Bank and IMF individually and all of the Paris Club creditors combined (Horn, Reinhart, and Trebesch, 2019).”
“And Central Asian debt to China is a problem people are increasingly aware of, particularly in Kyrgyzstan and Tajikistan. Nearly half of Kyrgyzstan’s external debt and more than 35 percent of Tajikistan’s is owed to China. In Kyrgyzstan’s case, the issue has received added attention due to the fiasco over the repair and upgrade of the thermal power plant that powers the capital, Bishkek. China provided some $386 million for the work, but in January 2018 the plant broke down just months after operations resumed. A subsequent investigation determined nearly $100 million of the invested money had been siphoned off. And Kyrgyzstan may have to eventually pay China some $493 million to cover their debt.”
“Beijing’s crony diplomacy encourages the inception of many economically unsound projects. Kyrgyzstan’s Kara-Balta oil refinery, funded in 2013 by Chinese partners to the tune of roughly $350 million, runs at no more than 6 percent of its capacity. The refinery’s difficulty stems from insufficient crude oil sourcing, which could have been easily identified early if the Chinese sponsor had adequately planned and evaluated the project.”
Comment: Refineries are optimized to run at 90-100% of capacity, but typically are uneconomic below runs of 60-70%. Insane to finance/run a refinery at 6% of capacity.
Tajikistan: Chinese company gets gold mine in return for power plant – Eurasianet
Much of the money borrowed from China has gone toward building basic infrastructure like roads and tunnels, but some of the spending appears less than obviously indispensable. When [Tajik] President Emomali Rahmon visited Beijing in September, he returned bearing $310 million in grants and loans. The bulk of that sum — around $230 million — is being spent on a new parliament complex in central Dushanbe.
“Africa needs an immediate emergency fiscal stimulus worth $100 billion in addition to the International Monetary Fund’s already programmed $50 billion of regular support to tackle the crisis. The crisis will not be short-lived: Additional support over the next two to three years is required.”
Comment: Will China forgive debts in Africa – and Central Asia? Or will it press the IMF and the World Bank for indirect bailouts? Curiously, Prime Minister Ahmed doesn’t mention debt relief from China.
Who wins in China’s great Central Asia spending spree? – Sam Bhutia for Eurasianet
“Kyrgyzstan and Tajikistan – the smallest, poorest and most Beijing-dependent economies in Central Asia – have seen their exports to China fall since 2010. Combined, the two exported $475 million of goods to China in 2010; by 2018 these were valued at $337 million. Over the same period, imports from China rose by $1.4 billion. (By comparison, Turkmenistan’s exports to China increased by $6.8 billion in the same period.)”
“The total amount of reserves in Central Asia accounts for about 16.9 percent of the world’s total uranium resources. China has commissioned 13 nuclear power projects with installed capacity of 14.7 GW and will enhance capacity to 58 GW by 2020 by constructing new 31 reactors.”
Comment: Don’t forget that an Indian helicopter detachment is stationed at Farkhor Air Base.
China Looms Large in Central Asia – Temur Umarov for Carnegie Moscow Center
“For China, security interests come first, but for a very long time, it had no military presence in the region. Beijing advocated for its interests via the Shanghai Cooperation Organization (SCO), and relied on the Russian military presence there. Now, however, China’s behavior is changing.
…
From 2003 to 2016, the Chinese army carried out a total of thirty-nine drills together with the countries of Central Asia. Of those, the most joint exercises were held with neighboring Kazakhstan (sixteen), Tajikistan (eleven), and Kyrgyzstan (ten).
…
Protests against “Chinese expansion” in Kazakhstan last fall were supported by Mukhtar Ablyazov, the exiled leader of the Democratic Choice of Kazakhstan movement, which the country’s government has labeled extremist. Then there are the repatriated Kazakhs (Oralman), who have suffered more than anyone else from China’s policy in Xinjiang. From 1991 to 2015, more than 350,000 people moved to Kazakhstan from China as part of a program to resettle the Oralman. They and their supporters make up the core of anti-Chinese sentiment in that country.
…
Moscow’s primary role in the region is that of a military stabilizer. The leaders of Central Asian countries would like to preserve Russia’s influence to counterbalance Chinese interests, resulting in the following formula: China is largely responsible for economic development and mining resources, while Russia remains the main security guarantor via the Collective Security Treaty Organization and its own power. This setup not only suits the region’s countries; it even suits China. Moscow and Beijing’s interests in Central Asia generally concur more than they conflict with one another.”
5) China-Russia
China, Russia appear to be in discord over whether to re-open land port amid pandemic – Global Times
“As epidemic wanes in China, North East China's Heilongjiang Province recently came under the spotlight as one of its border cities with Russia, Suifenhe, recorded 118 COVID-19 cases in just 5 days, all of whom were Chinese nationals returning home from Russia. The growing number not only shocked China but also overwhelmed the medical capacity of the small border city, which has a population of mere 70,000. Fearing that the pouring infections might collapse its medical system and spark widespread outbreak, China temporarily suspended the Suifenhe land port on April 7 to give itself more time to prepare for the inbound patients. The only problem is that Russia, which is under increasing pressure to contain the virus as it just witnessed a record-high single day surge of confirmed cases, may not be able to accommodate Chinese nationals aggregating at the border for long.
Comment: Vladivostok could be importing hundreds if not thousands of COVID-19 cases as Chinese nationals seek to enter over the land border. Vladivostok, notably, is home to Russia’s Pacific Fleet. The Russian authorities will likely close flights and overland transit into Vladivostok, which could prove controversial in China.
Comment 2: Russia grounded international flights on March 27th, so presumably most of these cases are Chinese nationals leaving Russia. How are so many COVID cases transiting from Moscow and St. Pete to Vladivostok? And why does the relatively small population of Chinese nationals in Russia contain so many COVID cases? Could be a very grim data point for Russia’s virus containment efforts, although air travelers face higher risks of cross infection, as Zhang notes below.
Land ports with Russia closed to passengers – Global Times
“According to [Chinese Ambassador to Russia] Zhang, about 160,000 Chinese are in Russia, including 10,000 company employees, 50,000-60,000 entrepreneurs and 27,000 students. They are basically in stable condition. It is impossible to take all 160,000 people back to China. The ideal way is for them to protect themselves at home rather than undertake the long journey that poses a high risk of cross infection, said the ambassador. Chen Gang, a Vladivostok-based Chinese national who works at a travel agency, told the Global Times on Wednesday that most Chinese in Russia choose to self-isolate at their homes in Russia. In terms of Vladivostok, city regulators have ordered all residents to stay home. Those without an official pass are not allowed to go out, or they will face a fine of up to 1 million roubles ($13,000). Facing the pressure of imported cases from Russia, rumors emerged on Chinese social media saying that the Russian authorities would expel Chinese citizens, which agitated many netizens. The Chinese Embassy in Russia slammed the rumors on Wednesday on its website.”
Russia-China Expo in Yekaterinburg rescheduled for 2021 due to Covid situation – TASS
“The sevenths Russia-China Expo in Yekaterinburg originally planned for July 2020 has been rescheduled for 2021, the coronavirus response headquarters of the Sverdlovsk region said on Monday.”
China to deliver 80 mln face masks to Russia in April-early May – TASS
“On Thursday, Industry and Trade Minister Denis Manturov said that Russia had bought 37 million masks from China over the past week and had plans to purchase 55 million more which would overlap the shortage in regions. According to Manturov, daily shortages will be closed and a stock of face masks will be ensured.”
Comment: Key word: “bought.”
6) China and Russia Potpourri
Meet the Activist-Doctor Who Has Become the Kremlin’s Loudest Coronavirus Critic – Moscow Times
“With Russia’s healthcare system facing significant cuts in recent years, medical workers began seeking her out for help. [Anastasiya] Vasilyeva realized there was demand for a union. [Alexei] Navalny offered her his lawyers at the start, but the Doctors’ Alliance has since hired its own team and begun working with political parties all across the spectrum, including the Communist Party and the liberal Yabloko party. It now has 15 full-time staff members, 40 regional offices and about 2,000 members and volunteers.”
Comment: Many observers believe Navalny is, at least partially, a Kremlin project. There’s ample speculation that Sechin has used the anti-corruption activist to assail rivals, including Dmitry Medvedev in 2017. It’s possible that the Kremlin will coopt Vasilyeva, but her turn to activism appears organic. You can bet the Kremlin is scrutinizing Navalny and Vasilyeva very, very closely.
Muscovites flee coronavirus shutdown, bringing trouble to Russia's regions – Reuters/Yahoo News
“On Friday evening, about 730,000 cars, carrying perhaps 10% of Moscow's 12.7 million population, left the capital, centre of Russia's epidemic, for the countryside, according to Moscow's transport department. The exodus, perfectly legal, has raised fears that the virus is being carelessly spread across the country, and angered the residents of outlying regions who had thought themselves at least relatively protected.”
Coronavirus Inflames Russia-Belarus Quarrel - Artyom Shraibman for Carnegie Moscow
Russia transfers 10,000 coronavirus testing systems to Belarus gratuitously [sic] – TASS
“A total of 10,000 Russian coronavirus testing systems have been transported to Belarus on a non-repayable basis, the Russian Embassy in Belarus reported on Saturday.”
Belarus receives over 2,000 coronavirus tests from China – Belta [Belarussian state media]
“Chinese Ambassador to Belarus Cui Qiming explained that the humanitarian aid that arrived in Belarus on 1 April was just the first batch. The embassy has plans to purchase 10,000 test kits to detect coronavirus, face masks, protective gowns, infrared thermometers, pulse oximeters and other medical products as a gift to Belarus. The Chinese government is going to send a group of medical experts to Belarus to share expertise and knowledge and to provide consultations.”
Russia’s Confusing COVID-19 Response - Fabrice Deprez for FPRI
‘While the decision to trust governors to handle such a sensitive crisis has little precedent, the logic behind it could be far more common: governors have, in the Putin years, regularly been used as lightning rods for popular discontent, diverting criticism away from the Kremlin and allowing Putin to be seen as the ultimate recourse rather than the source of problems. This time, however, putting them on the frontline of the pandemic means giving them increasing authority just as polls have recorded a rise in governors’ popularity. What if their response proves efficient and effective? Or, on the other hand, what if the situation quickly worsens in one or several regions outside of Moscow and the Kremlin—meaning, Putin— is forced to step in, raising the question of why it did not do that in the first place?”
Coronavirus is testing the limits of Russia's surveillance state – Washington Post
“In a televised national address Thursday, Putin transferred the responsibility of adopting coronavirus-related restrictions to local governments. That’s turned some of Russia’s regions into testing grounds for how much increased surveillance citizens will accept while also sheltering the Kremlin from any blowback.”
Comment: Putin characteristically trying to avoid any responsibility.
7) Who is Mayor Sobyanin?
Mayor Sobyanin appears to resemble former Kazakh President Nursultan Nazarbayev: effective, not very sentimental about democracy, and a modernizer.
Dour Moscow mayor сomes to fore as 'PM for coronavirus' – Yahoo/AFP
“"Sobyanin's task now is to be at the cutting edge of the main problem -- the coronavirus. That shows he is trusted by the president," said Konstantin Kalachev, who heads the Political Expert Group think tank. "He's a political heavyweight with the background and resources to help him manage and organise effectively." NeZygar Telegram, a popular messaging app that purports to have access to Kremlin insiders wrote: "Today Sobyanin is the second in power after Putin. That's the political reality."”
Sergei Sobyanin, Moscow's High Priest of Urban Renewal, Is Biding His Time – Moscow Times
“Not unlike Putin himself — who was largely an enigma when he rose to power in the early aughts — those who know Sobyanin describe him as unremarkable and difficult to read…
Central to his rise, observers say, is that, as zealous as he has been about refashioning Moscow, he has also delved equally into fashioning a propaganda empire that only Putin’s rivals. Last fall, Alexei Kovalev, a Russian journalist and media watcher, found that City Hall had instructed local Moscow outlets to mention Sobyanin’s name three times and include one of his quotes in any story about him.”
The City of Moscow Has Its Own Propaganda Empire – Moscow Times
“With bot networks, phony newspapers, its own mobile app, and more, the Moscow mayor’s office controls its own bonafide propaganda empire. And the machinery at Sergei Sobyanin’s disposal even rivals Russia’s national efforts like RT, whose state funding is only 30 percent greater.”
Moscow’s mayor squashes competition but transforms his city – The Economist
“Still, much of Moscow’s liberal intelligentsia, often highly critical of Mr Putin, has come to acknowledge Mr Sobyanin’s work at the city level. As Alexei Venediktov, editor-in-chief of the Echo of Moscow radio station, says, “Through gritted teeth, people admit that things were worse and became better.””
Until next time,
Joe Webster
The China-Russia Report is an independent, nonpartisan weekly 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.