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China May Be Biggest Winner From Ukraine Crisis

  • Mike Eckel

Talks in July between Russia's President Vladimir Putin, second from left, with his Chinese counterpart, Xi Jinping, right, in Fortaleza, Brazil, came as the two countries find an increasing number of areas of policy overlap.

Talks in July between Russia's President Vladimir Putin, second from left, with his Chinese counterpart, Xi Jinping, right, in Fortaleza, Brazil, came as the two countries find an increasing number of areas of policy overlap.

Thousands of miles away from the Ukrainian battlefields of Donetsk and Novoazovsk sits the country that may end up being the largest beneficiary of the turmoil along Russia’s southwest border: China.

With Russian President Vladimir Putin rewriting the playbook on security in post-Cold War Europe, Beijing has watched warily 3,700 miles to the east, though without protest or interference.

Its abstention from a U.N. Security Council resolution vote in March that condemned Russia’s annexation of Crimea was unusual, given Beijing’s traditional stance on such votes, but it comes as bilateral ties have been on the upswing for years now.

Two generations ago, ties between Leonid Brezhnev’s Soviet Union and Mao Zedong’s China were fraught. The two fought small-scale skirmishes in 1969 along the Ussuri River border (the Wusuli in Chinese) that almost resulted in war.

That’s a distant memory now.

“China may win out” from the Ukraine crisis? asked Martha Brill Olcott, a longtime scholar of Russia and Central Asian politics. “I think the word is ‘will.’ China ‘will’ absolutely benefit.”

Strategic goals

Where neighboring countries are concerned, the only nation with a military currently capable of taking on Russia’s full scale is China.

Russia has plenty to be wary of: tens of millions of Chinese live across the border from a Russian region that is virtually devoid of people and home to an astounding wealth of natural resources.

Most of the population is packed into the tiny sliver of land on the Pacific coast known as Primorye, a sliver that blocks China from having access to the Sea of Japan.

Goodwill with Beijing is important, and by keeping China unthreatened, Moscow helps secure its “strategic rear,” said Andrew Kuchins, director of the Russia and Eurasia program at the Center for Strategic and International Studies.

“It’s important for them, and I think particularly for Russia, to create mutual vulnerabilities which helps to secure those rears so that China will not move in the direction of Russia in a military way,” Kuchins said at a recent roundtable discussion in Washington.

Where China benefits from the Ukraine crisis most is because of the distraction, said Robert Daly, who heads the Wilson Center’s Kissinger Institute on China and the United States.

Russia’s actions divert attention from China’s own simmering internal conflicts.

Equally, Beijing benefits because Washington is focused on the security needs of its European allies, rather than the four-year-old “pivot to Asia” that some in China viewed as threatening.

“The single biggest benefit is that for China, events in Ukraine, Iraq, Syria; these are the latest major events that distract the United States from carrying out the rebalance to the East,” Kuchins said.

Geographic aims

In former Soviet Central Asia – home to countries like Kazakhstan and Uzbekistan – Russia and China, and to a lesser degree the United States, Turkey and Europe, have been engaged in a slow-motion chessboard shuffle, trying to build new relationships or bolster old ones.

The Kremlin’s influence over its former republics isn’t what it used to be, but Moscow has sought to build on longstanding cultural, linguistic, economic and social ties to make sure it can still pull levers when it has to.

China joined a Russia-led security group comprised mainly of Central Asian nations known as the Shanghai Cooperation Organization.

Set up in 2001, the SCO was ostensibly aimed at monitoring regional terrorist threats, though many analysts viewed it also as a way for the two rivals to keep a close eye on one another.

It’s also a way to minimize influence of the United States, which fostered close military ties with Kyrgyzstan and Uzbekistan after the Sept. 11 attacks but whose influence has since diminished.

The Ukraine crisis was a wake-up call for Central Asian leaders, experts say, particularly for those countries with sizable Russian populations like Kazakhstan.

“Internally, in Central Asia, at high levels, there’s really been the sense that there’s a crisis time coming in Russia, and the question was when,” said Olcott, who has ties to many of the region’s elites.

“It’s going to make it easier for the Chinese to get what they want. It certainly will change how the SCO is going to operate, leaving Russia potentially even more isolated both in the SCO and Central Asia more broadly," she said.

“The Central Asians are clearly afraid of Russia, but it’s not clear the Russians have the ability. ... The question for the Central Asians will be: Does Russia have the capacity to do this at the same time?” Olcott added.

Economic needs

The Kremlin has looked to the East for years as a hedge against the possibility that European markets might suddenly be less welcoming to Russian products.

Above all, this is about oil and gas. Russia is currently the dominant source for Europe’s energy needs. But disputes with Ukraine that predate the current crisis have led to calls in European capitals to diversify away from Russian sources.

So Russia has turned east. Gas from the Pacific island of Sakhalin is flowing via the Primorye region, and a spur cutting south from the Eastern Siberia Pacific Ocean pipeline brings more than 300,000 barrels a day south into the industrial city of Daqing.

The $400 billion, 30-year deal signed in May to bring gas from Siberian fields into China’s northern industrial regions is the biggest example to date of Russia’s turn to eastern markets. Most industry watchers, however, think Beijing got the better deal.

“With Putin, he was very much on the back foot here, big time. He wanted to say to the Europeans, we don’t have to sell it to you. He wanted to say to the Europeans that you can stick your gas where the sun don’t shine,” said Malcolm Graham-Wood, with the British energy consultancy HydroCarbon Capital.

"But “it’s massively Chinese weighted. Putin is selling Russian gas on the cheap, at a big discount… The clear winner is China. They’re taking the long view on this,” he said.

Oil and gas may be primary, but there are other trade opportunities lurking.

The Kremlin’s imposition of retaliatory sanctions last month barred many consumer products from European and North American countries.

Chinese entrepreneurs are already gearing up to fill the holes in Russian supermarkets shelves, said one executive at a company called Shandong Goodfarmer, the largest Chinese exporter of apples, garlic and ginger.

“With an entire year of the ban, the Russian produce market is bound to experience a shortage of supply in the coming year, which is a huge opportunity for the Chinese produce industry,” Lu Zuoqi told the trade publication, freshfruitportal.com, on Aug. 12.

Military means

China’s military doesn’t want for manpower. With an estimated 2.2 million personnel, the People’s Liberation Army is the world’s largest.

Where its shortcomings are is in sophisticated technologies that would make another military superpower think twice about intervening in places that Beijing considers its core strategic interest.

Russia’s military spending is on the upswing: up 92 percent in nominal terms since 2010, according to IHS Jane’s Defence Weekly. Russia’s weapons makers – think Sukhoi, MiG, Zvezda, Almaz-Antey – are happy to benefit from this largesse, but the Defense Ministry isn’t their only client.

State-run arms dealer Rosoboronexport has been expanding its customer base for years, trying to gain market share from the world’s largest arms dealer, the United States.

Moscow has sold diesel attack submarines to Vietnam and Sukoi fighter jets and Mil helicopters to India in past years.

The Stockholm International Peace Research Institute estimates that since 2009, half of all Russian arms sales went to India and China.

China is also opening the budget spigots for military spending.

Its 2014 military budget was set at 12.2 percent over previous years. Stepping up purchases is a priority, but so is developing indigenous systems, particularly for theater-specific weapons known as “access-denial.”

The idea is to build an arsenal that can keep unwanted intruders (think the United States) out of places China doesn’t want it to be (think the Taiwan Strait). Russian-built S-300 anti-aircraft defense systems or Kh-35 anti-ship missiles fit that bill nicely

Submarines as well as aircraft carriers fit that bill, too. China’s first is a Soviet ship inherited by Ukraine after 1991 and then overhauled and sold to Beijing.

The idea is “to raise the cost of US/NATO intervention virtually anywhere,” Kuchins, of CSIS, said. “That’s useful for the Chinese, that’s useful for the Syrians, that’s useful for a number of other clients. This puts an emphasis on anti-air, and anti-ship technologies, key for Russian arms sales.”

Domestic agenda

China has been less than happy about Putin’s decision to foment insurgency in another country. That’s because China has plenty of internal unrest of its own to handle: the Tibetans, the Uighurs, for example, analysts say.

The Ukraine crisis may end up changing that calculus as Russia, seeking to build goodwill with Beijing, moves to openly back China in its own territorial disputes. East China Sea, anyone?

“The Russians may move from their studied neutral opposition vis-a-vis Chinese territorial disputes in the East in order that the Chinese might support the Russians so that they have more running room in the areas that the Russians are more concerned about,” Kuchins said.

At the Security Council vote, when Western powers pushed a resolution condemning Russia for annexing Crimea, Beijing abstained rather than vetoed the measure alongside Moscow. Some experts interpreted that as a rebuke to Russia.

Others, however, said the abstention, along with Beijing’s unwillingness to join in Western sanctions against Russia, is a better indicator of the emerging policy between the two giants.

“Such a stance by China should be interpreted as nothing other than benevolent neutrality toward the Kremlin,” said Artyom Lukin, deputy director of the School of Regional and International Studies at Russia’s Far Eastern Federal University, in an article published in March.

“One may suspect that, in exchange, Beijing would expect from Moscow the same kind of ‘benevolent neutrality,’ for example, regarding its actions in East Asia and the Western Pacific,” he said.

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