09 Sep War in Ukraine – And the winner is … China ?
Strange how the ideas that turn up in your head arise at the same moment in the heads of other people. We awoke this morning with the idea that China could be taking advantage of the war in Ukraine and look, several others wrote about that same thing today. So, we try to compel the situation.
It’s clear that Russia at this moment has every interest in reinforcing its economic ties with China. That Russia can do that makes clear also that the country has an advantage over “the West”: the losses generated by the mutual boycott can be compensated by the gains from better relations with other countries. That’s a possibility “the west”, as far as we know, doesn’t have.
One of the recent, and very striking, examples of these compensations is the 2500 mile pipeline connecting the Yakutia gas fields with the Chines border. Negotions over that pipeline were successfully finished in May, Putin opened “the biggest construction project in the world” in Eastern Siberia yesterday. The gas contract associated with the pipeline is worth 400 billion dollars over 30 years. Not entirely without risks for Russia because China could try to put pressure on the prices, but at the other hand there’s the fact that China really needs that gas.
Meanwhile the China National Petroleum Corporation (CNPC) holds 20 percent in a project planned on the Yamal peninsula by Russia’s Novatek Group and Total France, while it also works with Rosneft on oil deposits in Eastern Siberia and got an offer from Putin this week to gain a stake in the huyge Vankor oil field.
So Russia succeeds in replacing the money not coming from the West anymore by money newly coming from the East, China succeeds in diversifying its energy supplies. Both win.
But there’s more. China and Russia agreed today to settle a bigger part of their bilateral trade in their own currencies and to enhance the cooperation between their banks. Goal: to diminish dependence on the currency of a third country, read: the dollar. Second goal: keeping entrance to the financial market open for Russian companies despite the sanctions of the European Union and the United States. Third goal: bringing closer the ambition of China to make the yuan the global reserve currency one day and curb the risks of the investments in US government debt.
And then there’s this: China has military and economic interest in keeping open the “land road” over Russia. Because for the “maritime road” China has to take into account the US navy, while the “land road” that connects China, Kazakhstan and Russia guarantees a safe passage for Chinese export to Europe, the Middle East and Africa. While Russia has interest in exporting energy and other products via that same “land road” to China. Li Hui, the Chinese ambassador in Moscow, keeps on repeating that “China and Russia are together like lips and teeth”.
But that’s not all of it. Ukraine and Russia namely have become competitors instead of being each other’s supplier and buyer, especially concerning … military equipment. Both are thus looking for new buyers and both are looking towards China. So China finds itself in a buyer’s market, which allows the country to get military technology and expertise easier and cheaper. At the other hand Chinese suppliers could be a cheap alternative for production of certain military gear in Russia (where that gear used to be bought in Ukraine), what could be an advantage for Russia too. Finally, to the advantage of both Russia and China, there’s the fact that third countries under international pressure could resolve to buy weapons – be it or be it not made in Russia – in China.
The growing connectedness between China and Russia is – though there’s not an official alliance yet – starting to influence third countries already. Mongolia, for example, caught between these two powers, has been courted by Russia and China for weeks and is repositioning its foreign policy more and more towards its two neighbors. Mansour Moazzemi, Iranian deputy minister for Oil communicated yesterday that his country will be working closer together with Russia and China to bypass the sanctions against Iran. Interesting for Russia because Iran is buyer of military equipment, interesting for China because Iran is its third biggest supplier of crude oil. And what about the joint military exercise against an imaginary “separatist organization” that Kazakhstan, Kyrgyzstan, Tajikistan, together with Russia and China organized at the end of August ?
Well, we don’t know if the winner of the war in Ukraine will be called China, but we do have the impression that the action there led by the United States is bringing the block of potential adversaries closer together …
Talking about adversaries: Dieter and Lena have more of them then they actually would like. Read more about it in the free prequel to The Maier-Files.