Are US tariffs pushing China and Russia together?

Why We Wrote This

Russia has felt exiled from the West for years, barred by economic sanctions. With China now facing U.S. tariffs and Western suspicions over Huawei, the Kremlin has a potential partner for the future.

Sputnik/Alexei Druzhinin/Kremlin/Reuters
Chinese President Xi Jinping and Russian President Vladimir Putin attend a ceremony dedicated to the 70th anniversary of diplomatic relations between Russia and China in Bolshoi Theatre in Moscow on June 5.

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As Presidents Xi Jinping and Vladimir Putin meet this week, the circumstances could be right to create a breakthrough for economic integration between China and Russia.

Russia has been in the equivalent of a defensive crouch for five years now, since the annexation of Crimea, and has come to view its alienation from the West as a permanent condition. But for China, the U.S. tariffs against Chinese goods and what it sees as a campaign against some of its leading companies, including Huawei, are something quite new.

Now, the roads, high-speed railways, and agricultural enterprises that have been discussed for years may find new impetus. Mr. Putin and Mr. Xi are also likely to discuss carrying out their mutual trade in currencies other than the U.S. dollar. And Russia has recently engaged Huawei to build its 5G infrastructure.

“In both Russia and China, everything is decided by decisions made at the top. If Putin and Xi decide to increase bilateral trade, it will be done,” says Yury Tavrovsky, a China expert in Moscow. “If they want to integrate our financial systems, or invest in Russian infrastructure and agribusiness, that will happen when they say so.”

Call it “panda diplomacy.”

Chinese President Xi Jinping arrived in Russia for a three-day visit and unveiled the loan of two carrot-munching giant pandas for the Moscow Zoo. It was a symbol, he said, of his growing “close personal friendship” with Vladimir Putin.

The charismatic and uniquely Chinese creatures are already wowing Muscovites, who have not had the chance to see a panda up close since Mao Zedong gave one to Nikita Khrushchev back in the 1950s, to cement a similar moment of intense rapprochement between the two Asian giants.

In those days, it was a shared belief in communism that drew them together. Though both remain authoritarian states, the ideologues are long gone and pragmatic technocrats now rule. The dynamic driving them to seek closer integration today is the need to forge a geopolitical common front and hedge their economic bets in the face of escalating hostility, sanctions, and trade war from the West, particularly the United States.

Russia has been in the equivalent of a defensive crouch for five years now, since the annexation of Crimea, and has come to view its alienation from the West as a permanent condition. But for China, the recent piling on of U.S. tariffs against Chinese goods and what it sees as a campaign against some of its leading companies, including Huawei, is something quite new and unnerving. Some experts say that economic integration between Russia and China, which has been the subject of much talk but very little action over the past few years, could be set for a breakthrough.

“The Chinese are calling it a ‘new situation,’” says Yury Tavrovsky, a China expert with Peoples’ Friendship University of Russia in Moscow. “It’s not new for us, but it is for them. The Chinese seem very surprised. They had gotten used to having the doors open for them, being greeted as economic partners in the West, and not being treated as a great threat. Now, suddenly, they are enemy No. 1. The kind of conversation Putin and Xi will be having behind closed doors this week is likely to be different from the past.”

Pushing China and Russia together?

Russia and China have a 2,600 mile border, and a very troubled history that’s been punctuated by periods of intense hostility. Mr. Tavrovsky says many Chinese still resent Russia’s expansion across Asia to the Pacific in past centuries, and see it as having taken place at China’s expense. The two came together in the mid-20th century amid a burst of communist solidarity, but soon fell apart as mutual suspicion and ideological discord took hold. In a major strategic coup, President Richard Nixon traveled to Beijing in 1971 and sealed a deal that effectively split the communist world and brought China into the Western camp against the USSR.

“Now we are looking at a kind of reverse situation unfolding,” says Sergey Karaganov, a senior Russian foreign-policy hand. “The USSR lost, in part, because it had China and the West against it. Now it is Russia and China coming together, with all the vast resources of Eurasia, increasingly in opposition to the West. It’s not a good thing; it’s not the world we would wish for. But it is looking more possible all the time.”

During the Putin era, Russia has settled its long-standing border disputes with China, improved economic cooperation, and established a joint geopolitical playbook that opposes U.S. hegemony and appeals for a multipolar world order in which Russia, China, and other emerging powers would have more say in global institutions. Mr. Putin and Mr. Xi have indeed built a strong personal relationship; the two have met 30 times in the past six years alone.

But the promise of economic integration has not yet materialized. Bilateral trade has grown rapidly, to about $110 billion last year. But that’s a tiny fraction of China’s trade with the West – Russia holds tenth place in China’s list of trading partners – and, despite years of sanctions, barely half of Russia’s trade with the European Union.

Mr. Putin and Mr. Xi will be talking about merging China’s ambitious Belt and Road Initiative with Russia’s Greater Eurasian Partnership plan for the former Soviet Union, but so far those ideas remain largely on paper.  The only big developments are in the energy sector, which will see the $400 billion Power of Siberia gas pipeline come onstream this year. But the roads, high-speed railways, and vast agricultural enterprises that have been discussed for years have yet to materialize.

Mr. Karaganov says there are plans to make Russia a key agricultural supplier for all of Asia by developing the vast unused arable lands of Central Siberia and building transport links to the south, but they will take time.

“Agricultural exports, mostly grain and soybeans, are increasing,” he says. “But this is Russia, these things take time. And we will proceed cautiously. We do not want to develop a one-sided dependence on China. We have been in that position with the West, putting all our eggs in one basket, and no leadership in Moscow is ever going to repeat that mistake.”

If Putin and Xi say it, it will be so

Experts say that Russia and China could step up their military cooperation, which has already seen huge joint war games in the Far East, although they add the prospect of a full-blown military alliance remains remote.

Russia might become a destination for smaller Chinese businesses seeking to avoid U.S. tariffs, some experts say. High-tech cooperation seems set to increase as a result of U.S. pressures as well; this week Huawei signed a deal with the Russian telecommunications giant MTS to develop 5G technology in Russia.

Another thing Mr. Putin and Mr. Xi are likely discussing is dumping the U.S. dollar and carrying out their mutual trade in other currencies. Russian and Chinese leaders have been advocating this step for years, but still carry out most of their own bilateral trade in dollars.

“All these ideas are hampered by ongoing political mistrust between Russian and Chinese elites,” says Mr. Tavrovsky. “In both Russia and China, everything is decided by decisions made at the top. If Putin and Xi decide to increase bilateral trade, it will be done. If they want to integrate our financial systems, or invest in Russian infrastructure and agribusiness, that will happen when they say so.

“This has not happened yet. But if the Chinese conclude that it’s hopeless to fix these problems with the U.S., and they are looking at being permanently blocked in their Western economic relationships, then Russia is likely to be the biggest beneficiary in that situation.”

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