Warmer politics, colder economics
Power of Siberia 2 frozen?
Political ties between the Russian and Chinese governments continue to strengthen. With the twentieth anniversary of the Treaty of Good-Neighborliness and Friendly Cooperation Between the People's Republic of China and the Russian Federation occurring on July 16th, some symbolic (and possibly very substantive) announcements on political, economic, and/or military ties may be forthcoming. 看看吧。
At the same time, there’s some evidence that bilateral energy ties may be cooling, limiting Russian exports to China in the medium and long-term. While rising commodity prices will likely lift Russian oil, natural gas, and coal exports to China in 2021 and 2022, negotiations over the Russia-to-China Power of Siberia 2 natural gas pipeline appear to be frozen. In mid-April the two sides did, however, highlight their cooperation in nuclear energy.
Russia is suffering from a serious public health and economic problem as surging COVID cases from the “Delta” variant lead to lockdowns. Only about 13% of the Russian population is fully vaccinated. There’s substantial discussion in the press about Russian vaccine demand and hesitancy, including this NYT article. More important, perhaps, is the woeful state of Russian vaccine supply. According to the Global Commission for Post-Pandemic Policy, Russia had produced only ~50 million vaccine doses by May 31st. According to the Commission, Chinese manufacturers are producing nearly 450 million doses per month: at current rates, China manufacturers more vaccines in a day than Russia produces in a month. Yes, Sputnik V production is ramping up internationally in Argentina, India, Serbia, and South Korea, but Russia likely won’t have sufficient first and second-dose vaccine supply for at least several months. What if Sputnik V requires annual booster shots?
Will Chinese producers ship doses to Russia later this year? The PRC will likely direct vaccine producers to prioritize the domestic market, Southeast Asia, and Russia, in that order. Would Chinese producers donate the vaccines, or charge Russia? Both options are fraught with political sensitivity. And will Putin make vaccination compulsory? The Kremlin appears to have trotted out Dmitry Medvedev to issue a trial balloon for compulsory vaccination; Putin himself shot it down a week later, probably after seeing public opinion polling – and also because Russia won’t be able to inoculate the entire population for months due to limited vaccine supply. Russia’s COVID environment will remain the most unpredictable element in the bilateral relationship for at least the remainder of the year.
As The Report noted in April, Putin may have pulled back from confrontation with the West over Ukraine after judging that additional lockdowns from the highly transmissible and deadly “Delta” COVID variant, combined with a military and financial confrontation, could have led to a financial and political crisis within Russia. Putin appears to be keeping his options open, however, as Ukraine reports that only 10,000 Russian troops have withdrawn from the border. The Russian Defense Ministry reportedly constructed a temporary 32-kilometer water pipeline to Crimea, but some are skeptical that the pipeline will work. Putin likely won’t escalate in Ukraine before the September Duma elections.
Table of Contents:
1) Energy and Trade
2) Politics
3) Military/Space/Cyber
1) Energy and Trade
Putin launches first stage of Amur Gas Processing Plant – TASS
Russian President Vladimir Putin launched the first stage of the Amur Gas Processing Plant (GPP), which is being built by Gazprom near the town of Svobodny in Russia’s Far East, on Wednesday. He took part in the ceremonial event in a video-conference mode.
[Gazprom CEO Alexey] Miller noted that Gazprom was able to complete the project on schedule. "The construction timetable was very, very tough. A tremendous amount of work was done, and today we can say that we are launching the plant strictly according to schedule. It took less than six years," the gas giant executive said.
New gas processing plant finished west of Williston – Williston Herald
A new gas processing facility west of Williston is finished — just eight months after workers broke ground. Outrigger Energy II LLC announced this week that it has finished construction the Bill Sanderson Gas Processing Plant and pipelines. The plant can process 250 MMcf of natural gas daily. The pipelines are and 80-mile, 20 and 24-inch diameter, rich gas gathering system originating in eastern Williams County and terminating at the Bill Sanderson Plant.
Comment: Gas processing plants treat natural gas and remove impurities prior to their shipment via pipeline. The North Dakota, US gas processing plant listed above is *much* smaller than the Amur gas processing plant (which can process about 4,000 MMcf each day). It’s also probably much easier, from a technical and logistical perspective, to construct projects in North Dakota than the frigid and remote Siberia. Even so, construction times are limiting the economic potential of Russian infrastructure mega projects.
According to China Energy Construction Group Co., Ltd., Russia’s largest natural gas processing plant, the Amur Natural Gas Processing Plant project, recently held its first production line commissioning ceremony, and China Energy Construction Gezhouba Electromechanical Company participated in the construction. The project is located in Svobodny District, Amur Region, Russia, about 200 kilometers away from Heihe, China. It is the source of the second large-scale Sino-Russian energy corridor-the eastern route of the Sino-Russian natural gas pipeline. After it is put into operation, the annual raw gas processing capacity will reach 42 billion. Cubic meters, 38 billion cubic meters of natural gas can be delivered to China each year.
Comment: Chinese state media outlets don’t seem to be covering the Amur Gas Processing Plant opening. That could indicate some sensitivity around the Power of Siberia 2/Altai pipeline negotiations.
On the afternoon of the 19th, President Xi Jinping used a video link in Beijing to witness the groundbreaking ceremony of the nuclear energy cooperation projects between the two countries, the Tianwan Nuclear Power Plant and the Xu Dabao Nuclear Power Plant, with Russian President Vladimir Putin.
Comment: Wondering if recent public expressions of Sino-Russian nuclear cooperation were spurred, in part, by the lack of progress developing Power of Siberia 2. I can’t recall an instance of Chinese officials or state media discussing the Power of Siberia 2 since last summer.
Foreign Ministry spokesperson Hua Chunying announced on the 18th that President Xi Jinping will be in Beijing on May 19 through a video connection to witness the commencement of the nuclear energy cooperation project between the two countries with Russian President Putin.
Comment: The PD announced the joint nuclear cooperation event before TASS
Putin Is Betting Coal Still Has a Future – Bloomberg
Russia is spending more than $10 billion on a railroad that will help it ramp up coal exports to Asia. It's even mobilizing prisoners to speed up construction.
Trade between Russia and China may reach $200 bln by 2024 — Putin – TASS
One of the key areas is economic cooperation. Several years ago, we with China’s President Xi Jinping set a task of reaching a 100 billion level in our trade," [Putin] said at a meeting with CEOs of global news agencies organized by TASS. "We have reached this level. Moreover, we managed to maintain it in the difficult conditions of the pandemic 2020 year. We did have a slight decline in trade but nevertheless it reached 104 billion [US dollars]." "I think that despite this slight decline we will be able to attain the level of 200 billion [US dollars] within the next few years, by 2024, as we agreed," he said.
Comment: Putin may be subtly pressuring Beijing to increase imports from Russia. But how could bilateral trade double and reach $200 billion in just 4 years? Short of skyrocketing commodity prices (which would lift Russian hydrocarbon export earnings but stoke Chinese inflation) or surging Russian imports of Chinese-made goods, it’s unclear how this $200 billion goal can be achieved by 2024.
It’s worth noting that a People’s Daily article from the next day didn’t mention the “$200 billion by 2024” goal in its recap of Putin’s speech at the St. Petersburg International Economic Forum (SPIEF). The article is titled “中俄关系稳定发展 达到“前所未有的高水平”” or “The stable development of Sino-Russian relations reached an "unprecedented high level." It’s listed below in the Politics section)
In the face of a century of changes in the epidemic, China and Russia firmly supported each other and cooperated closely and effectively, which vividly explained the profound connotation of the comprehensive strategic partnership of cooperation between China and Russia in the new era. Since the outbreak of the coronavirus epidemic, President Xi Jinping has made 5 calls with President Putin, leading the continuous development of the comprehensive strategic partnership of cooperation between China and Russia in the new era.
In 2020, China-Russia pragmatic cooperation will go against the trend. The bilateral trade volume has exceeded 100 billion U.S. dollars for three consecutive years. The two countries' strategic projects in the fields of oil and gas and nuclear energy continue to achieve new results, and jointly build the "Belt and Road" and the Eurasian Economic Union… Since the beginning of this year, the construction of the southern section of the Sino-Russian East Route Natural Gas Pipeline has been fully started as the two governments signed the "Memorandum of Understanding on the Cooperative Construction of International Lunar Research Stations" and started the cooperation of the International Lunar Research Stations, and now to the Tianwan Nuclear Power Plant and Xu Dabao. The nuclear power plant already started, and a series of practical cooperation results vividly demonstrated that the pragmatic cooperation between China and Russia, which has undergone the test of the epidemic, is more resilient and has more stamina.
Huawei calls on an old friend, Russia, as U.S. sanctions bite down – Washington Post
2) Politics
China and Russia, which already share many common interests, will be the strongest proponents of multilateralism under the UN framework over the next decade as they grow closer under US' arrogance and hegemonic mentality, the expert said.
China-Russia relationship under two presidents' guidance a global model – People’s Daily
MODEL FOR HARMONIOUS COEXISTENCE BETWEEN MAJOR COUNTRIES
In June 2019, China and Russia agreed to upgrade their relations to a comprehensive strategic partnership of coordination for a new era, reaching a milestone for the development of bilateral ties.
Over the past eight years, the two heads of state have maintained frequent exchanges of visits and have met on various international and multilateral occasions. All those interactions have built up confidence and momentum for the two countries to cope with the changes rarely seen in a century, setting a global model for harmonious coexistence between major countries….
China has been Russia's largest trading partner for 11 consecutive years, while Russia is China's 10th largest trading partner. Major programs, including a second line for the China-Russia oil pipeline and the China-Russia east-route natural gas pipeline, were successfully put into production. The two countries have also signed a memorandum of understanding on jointly building an international scientific research station on the moon.
Lithuania’s decision to quit China-CEEC 17+1 won’t change fundamentals of platform – Global Times
“On the political and security issues, Lithuania has certain level of fear toward former Soviet Union and today’s Russia. So when China and Russia are getting closer strategically, out of that fear, Lithuania has to keep certain distance from China,” [Cui Hongjian] said.
Xi's civilization view offers insight into today's world – People’s Daily
Russian sinologist Yuri Tavrovsky said he was impressed by Xi's remarks at the Conference on Dialogue of Asian Civilizations two years ago. "The meaning of the speech goes far beyond the cultural scope. President Xi hopes that different civilizations will strengthen exchanges and mutual learning to promote world peace and development," he said.
China, Russia eye fixing ‘global disorder’ amid US withdrawal – Global Times
China and Russia held a new round of strategic security consultations on Tuesday in Moscow, and during the frequent interactions between the two major powers in recent months, the world has showed a dangerous trend of disorder or tensions in some regions, including the Middle East, Eastern Europe, Central Asia and the Western Pacific, due to global strategic shift made by the US.
Chinese analysts said that the recent change has been generally caused by the decline of US hegemony, and not only will US pressure and hostility push China and Russia to stand closer, the decline in Washington's strength and influence in some regions will also make Beijing and Moscow consider how to figure out new regional order to stabilize the situation and protect their interests after the US pullout….
Chinese and Russian officials would focus on a range of regional and global issues, including Central Asian stability, after the withdrawal of American troops from Afghanistan, foreign interference into their internal affairs, Western threats against the political security of the two countries and their neighbors or allies, anti-disinformation campaign and cyber security, as well as the question about the biolab security, according to Chinese experts.
Among a wide range of topics, how to confront "the challenges posed by the US-led Quad alliance" that may pose security impacts to China and Russia would also top the agenda of security talks, Wang Xianju, deputy director and research fellow at the Renmin University of China - Russia St. Petersburg State University Russian Research Center, told the Global Times on Tuesday. India's shifting position caught the attention of China and Russia, given India has also been reportedly relying on the Quad to disrupt the power of Russia in the region, and China and Russia have not coordinated a position toward such regional strategy led by the Biden administration.
Blaming China for COVID-19 "groundless:" Russian media – People’s Daily
It is unfounded for the United States to accuse China of causing the COVID-19 pandemic,” a columnist of Russia's RIA Novosti news agency has said. “The only information on which the whole anti-Chinese narrative is based" is an article in The Wall Street Journal, "which claimed that even before the official start of the pandemic, some scientists in Wuhan city in central China fell ill with something similar to the coronavirus. However, this whole story is absolutely murky and groundless," Victoria Nikiforova said in a commentary this week.
US is calculating risks, begins to doubt "dual containment" of Russia, China — expert – TASS
The United States is calculating current risks and probing into whether it will be feasible to push ahead with the policy of 'dual containment' of Russia and China, the president of the Russian Institute of the World Economy and International Relations (IMEMO) under the Russian Academy of Sciences, Alexander Dynkin, told TASS in an interview.
"Washington is obviously trying to end the steep decline in Russian-US relations," said Dynkin, a member of the Russian International Affairs Council's Board of Trustees….
Alongside this, Dynkin said, Beijing's policy towards Moscow has been changing, too. Whereas before China sought tight cooperation with Russia without seeking very close relations or the creation of a military-political union with Moscow, lately Beijing has demonstrated its readiness for a greater rapprochement with Moscow.
“俄罗斯总统普京当地时间4日在俄罗斯北方城市圣彼得堡表示，俄中关系发展达到了前所未有的高水平，双方拥有广泛共同利益，俄方愿同中方在更广领域深入开展合作。
“前所未有的高水平”是对当前中俄关系的精准概括。自2019年6月中俄两国领导人将两国关系提升为“新时代中俄全面战略协作伙伴关系”以来，在两国元首的亲自擘画和战略引领下，中俄双边关系始终保持强劲发展势头。。。
俄中双边贸易额已连年超过1000亿美元，2020年在疫情影响下也仍然保持了这一水平。据中方统计，今年1至4月中俄双边贸易额为402.1亿美元，首次在前4个月即突破400亿美元。预计2021年中俄贸易将继续保持增长势头，全年贸易规模有望再创新高。”
Russian President Vladimir Putin said in the northern Russian city of St. Petersburg on the 4th local time that the development of Russia-China relations has reached an unprecedented high level, the two sides have extensive common interests, and Russia is willing to carry out in-depth cooperation with China in broader areas.
"Unprecedented high level" is an accurate summary of current Sino-Russian relations. Since the leaders of China and Russia upgraded their relations to the "China-Russia Comprehensive Strategic Partnership of Cooperation in the New Era" in June 2019, under the personal planning and strategic guidance of the two heads of state, China-Russia bilateral relations have always retained strong development momentum….
The bilateral trade volume between Russia and China has exceeded 100 billion U.S. dollars for consecutive years, and it will still maintain this level under the influence of the epidemic in 2020. According to Chinese statistics, the bilateral trade volume between China and Russia from January to April this year was US$40.21 billion, which exceeded US$40 billion in the first four months for the first time. It is expected that Sino-Russian trade will continue to grow in 2021, and the annual trade scale is expected to reach new highs.
But they have made a fundamental mistake with their wishful thinking, because today, Chinese analysts say, just as what Russian President Vladimir Putin said, the US risks walking down the same path as that of the former Soviet Union, as Washington is overly confident - threatening both Beijing and Moscow while there is no tension in the China-Russia ties. China-Russia relations are at their best in history.
Comment: Why do Chinese officials often say relations are at their “best in history? (前所未有的高水平)” This seems ahistorical and appears to ignore the period prior to Khrushchev’s speech against a cult of personality. Before Khrushchev implicitly criticized Mao in his “secret speech,” the Soviets provided important material and moral aid for the Communist Party during and after the Chinese Civil War. Chinese officials are aware of this history, of course. Beijing’s framing of relations could have several meanings.
Beijing may be encouraging Russian officials not to probe too deeply into the complicated history of bilateral relations. The Treaty of Nerchinsk was, if memory serves me correctly, the first time that Beijing recognized another state as an equal. Hundreds of years later, however, the Soviet Union considered attacking the People’s Republic of China, according to Henry Kissinger’s memoirs, and even sounded out the US Secretary of State. Obviously, contemporary officials in Beijing would prefer to ignore this part of bilateral history due to the needs of the present. By saying that relations are at their “best in history,” Beijing may be signaling its willingness to ignore some of the uglier moments in bilateral relations.
CCP officials may also seek to frame relations as at “their best in history” as a form of dominance. Beijing is no longer a supplicant in the relationship; on some issues it can even dictate terms to Moscow. Stating that relations are the “best in history” may be a subtle way for Beijing to remind Moscow of the relationship’s hierarchy.
Perhaps Chinese officials mean that relations are at their “best point in history” when viewed from Beijing’s perspective.
On [May] 28th, Yang Xiaodu, member of the Political Bureau of the CPC Central Committee and director of the State Supervision Commission, met with the Director of the Anti-Corruption Agency of the Russian President Jobotov by video in Beijing.
Yang Xiaodu said that China and Russia are each other's comprehensive strategic cooperative partners in the new era. China is willing to work with Russia to implement the important consensus reached by the leaders of the two countries, deepen their anti-corruption practical cooperation, and promote the improvement of the global anti-corruption governance system. Development and revitalization create a favorable atmosphere.
Chobotov said that Russia attaches great importance to anti-corruption exchanges and cooperation between the two countries, and is willing to further strengthen international law enforcement cooperation in the pursuit of fugitives and stolen stolen goods, close communication and cooperation under the United Nations and other multilateral frameworks, and jointly promote bilateral relations to a new level.
Comment: I’m speculating, but I suspect this meeting is connected to Jack Ma, who has ties with Russian elites and appeared (virtually) at the Russian Geographical Society in mid-April.
For Moscow, the budding partnership with Beijing is something else entirely. It provides feel-good opportunities to jab a finger in America’s eye. To members of the Russian elite, China is the place to be for marketing hydrocarbons, raw materials, and defense technologies. But where is the soul-searching about whether Putin’s frantic embrace of China after 2014 was propelled by wishful thinking? Is there a Kremlin plan for staying relevant for China after its upcoming transition to a low-carbon future or managing Beijing’s growing footprint in the former Soviet space? Your guess is as good as ours.
Russia, US maintain constructive interaction in Arctic Council, envoy notes – TASS
Russia and the United States are maintaining constructive cooperation within the Arctic Council, Nikolay Korchunov, Russian Foreign Ministry Ambassador-At-Large and Russia’s Senior Official in the Arctic Council, said on Tuesday, addressing a roundtable dedicated to Russia’s upcoming chairmanship of the council.
3) Military/Space/Cyber
A Reuters report quickly following the successful launch of the Tianhe core module on Thursday, said that in contrast, the fate of the ageing ISS - in orbit for more than two decades - remains uncertain, as the project is set to expire in 2024, barring funding from its partners. Russia said recently that it would quit the project from 2025. It is good news for humanity that China's space station will very likely fill the void, and even better news for developing countries that have yet to cultivate their own space capabilities, Wang'Yanan, told the Global Times.
Russia’s defense chief vows to strengthen military interaction with Vietnam
The defense ministries of Russia and Vietnam will continue developing military and military-technical cooperation, Russian Defense Minister Sergey Shoigu said at talks with his Vietnamese counterpart Colonel General Phan Van Giang held via a video conference at Vietnam’s initiative on Friday.
Putin signs a draft law to withdraw from the Open Skies Treaty – People’s Daily [Chinese-language]
According to the statement made by Russian officials at the beginning of this month, in order to encourage the United States to stay in the "Open Skies Treaty", Russia has made all efforts and tried all methods, but they have not worked. Therefore, the Russian side believes that the abolition of the treaty is in line with the current situation.
According to reports, NATO’s large-scale military exercise "European Defenders-2021", which lasted for more than a month, began to be held in many European countries in early May. The intention of this military exercise against Russia is obvious, which has aroused Russia's high level of vigilance. Shoigu said in April this year that Russia is paying close attention to the upcoming "Defender of Europe-2021" military exercise. If the Russian border area is threatened, the Russian army will respond quickly.
Indonesia, Saudi Arabia to participate in International Army Games for first time – TASS
As of June 1, 277 teams from over 40 countries have expressed their desire to participate in the International Army Games this year, the ministry specified. The army competitions will run on the territory of several countries. Russia will host 16 contests while Belarus, China and Iran will hold 3 competitions each. Vietnam, Kazakhstan, Uzbekistan and Mongolia will host two competitions each while Algeria, Armenia, Serbia and Qatar will hold one competition each.
Russian Navy kicks off large-scale drills in Pacific – TASS
The Pacific Fleet’s "naval tactical groups have made a transit about 4,000 km long from naval bases and combat watch areas and deployed the Fleet’s groups in the designated area of the Pacific for accomplishing training tasks," the statement says. The exercise in the distant maritime zone involves up to 20 surface combatants, submarines and support vessels, including the Fleet’s flagship, the Guards Order of Nakhimov Missile Cruiser Varyag, the ministry said.
Chinese hackers implicated in breach of Russian government agencies – Cyberscoop
Chinese hackers were likely behind a series of intrusions at Russian government agencies last year, security firm SentinelOne said Tuesday. Malicious code used in the breaches is similar to hacking tools associated with a broad set of suspected Chinese spies that have also targeted Asian governments in recent years, SentinelOne researchers said.”
Suspected Chinese state hackers target Russian submarine designer – Bleeping Computer
Hackers suspected to work for the Chinese government have used a new malware called PortDoor to infiltrate the systems of an engineering company that designs submarines for the Russian Navy.
Until next time,
Joe Webster
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.