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The trump card of Putin, China is not convinced Russia has nothing to offer China, except talk about friendship, oil and forests

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Russian President Vladimir Putin at the international forum in Beijing allowed the possibility of connecting the Northern sea route and the Chinese Sea silk road. However, the initiative looks at least controversial from an economic point of view and more like a political statement. It was important for the Russian leader to show that Moscow has something to offer Beijing, but in China, apparently, Russia is no longer considered as a partner in global projects, but as a supplier of natural resources.

“We pay great attention to the development of the Northern sea route. We are considering the possibility of joining it and the Chinese Sea silk road, thereby creating a global and competitive route linking North-East, East and South-East Asia with Europe,” Putin said at the round table in the framework of the international forum held in Beijing, dedicated to the global Chinese project “One belt and road”.

Recall that in 2013, Chinese President Xi Jinping announced the beginning of the project of construction of new trade routes between China and Europe. In the future, the initiative has turned from a purely economic into a great geopolitical. As assured in Beijing, China offers the States of the world not just to participate in the transit of Chinese goods, but also an alternative American project of global architecture, based not on the competition with each other, but on mutually beneficial cooperation. Last year, the country’s Constitution was amended, according to which China is building a “community of the common destiny of mankind.” currently, 124 countries and 29 international associations have joined the project. But interestingly, Russia was actually on the sidelines of the New silk road. Officially, it has not joined the project but insists on pairing the Chinese initiative with the EAEU. But also in the private enterprise’s cooperation is stalled.

Almost as soon as the initiative was announced by Xi Jinping, Moscow offered its services. According to the idea, Chinese goods could be transported through Kazakhstan, then through the TRANS-Siberian railway to Belarus to the border with Poland. This route is much shorter than all the others, in addition, it avoids a number of difficulties associated with customs, as Kazakhstan and Belarus are United with Russia under the General rules of the EAEU.

However, in reality, the main flow of cargo China decided to bypass Russia. Through Kazakhstan, Caspian Sea, Azerbaijan, Georgia, Black Sea. Although it is longer, and more checks at customs.

According to many experts, the main reason why the Celestial Empire is ready to let only a small share of goods through Russia is the bad relations between Moscow and Brussels. Despite all the talk about friendship, Chinese investors are afraid to spoil relations with the European Union, which imposed sanctions on Russia.

Will the Chinese agree to unite their Sea silk road and the Northern sea route in such conditions, as Vladimir Putin has just said? To answer this question, you need to consider several factors.

The first is that geographically the two paths are completely in different parts of the world. The sea silk road passes through the Indian Ocean and the Mediterranean sea, covering the States of Southeast Asia and East Africa. The Northern sea route runs through the Arctic ocean. It will reduce the distance from China to Europe by about half. But traveling on it suggests that the ships will have to Wade through the ice of the Arctic. It is hoped that due to global warming, a significant part of the glaciers will melt, but when exactly, no one can calculate.

The second factor is that the Maritime silk road allows China not only to trade with Europe but also to spread its influence to a large part of the world. Suffice it to say that the countries affected by the project are home to 4.4 billion people or 63% of the world’s population. And these are huge markets. Huge funds have already been invested in the construction of the infrastructure of the Sea silk road, high-speed Railways, seaports, roads are being built. And China does not intend to curtail these programs, waiting for the melting of Arctic glaciers.

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The structure of mutual trade between Russia and China shows that while Russia is interested in China mainly as a source of natural raw materials. Last year, the trade turnover amounted to 108 billion dollars, of which Russian exports accounted for 56 billion, and Chinese imports — 52 billion, 76% of exports were hydrocarbons, and another 9% – wood. And 57% of Chinese imports are machinery, equipment and vehicles, another 11% are textiles and shoes.

In principle, China, with such an imbalance, could potentially dictate its terms of trade to Russia. For example, to try to reduce prices for natural resources supplied from Russia, and Moscow will have nothing left but to agree. In the conditions of Western sanctions, Russia will still be forced to buy Chinese equipment — its, by and large, no, except for the military. About shoes and textiles and say nothing. Even Italy, the world’s trendsetter for shoes and clothing, is littered with inexpensive products labeled “Made in China.”

Deputy Director of the Institute of the Far East of the Russian Academy of Sciences Andrey Ostrovsky believes that the success of Russian-Chinese economic cooperation depends on the political will of the heads of state:

— China has long been interested in the Northern sea route, the project entrusted to the Dalian shipping company. But the project requires large investments. As you know, Russia has no money in the budget, and only NOVATEK is interested in large companies, which also does not have large funds. In this regard, China can help. The one belt and one road project is funded by two entities. The first is the Asian infrastructure investment Bank, which is already implementing a number of projects. The second is the silk road Fund. The Northern sea route project can be implemented through joint financing on the principle of 50-50 Russia and China.

“SP”: — Initially it was assumed that the project “One belt and road” will involve the Transsib, but so far the main routes bypass Russia.

— The leaders of other countries are more interested in the implementation of the project than the Russian leadership. About Transsib say very long and a lot, since the late 1990s. But to carry goods on the Transsib is considered unprofitable, as they go for a long time. That’s first. And secondly, their safety is not guaranteed. Even manufacturers from Japan and South Korea, who wanted to use the Russian railway, were forced to shift to sea routes through Southeast Asia. They changed their position 10 years ago when Russia sharply increased the fee for the protection of goods.

And how many years the Transsib was not reconstructed! In China, the main passenger traffic was allowed on high-speed highways, where trains travel at a speed of 350 km per hour. This allowed the release of parallel roads for cargo. For example, on the route Beijing-Urumqi length of about 4000 km freight trains run at speeds up to 100 km per hour. But in Russia, at best, the speed of cargo is 35-40 km per hour. In some parts of the TRANS-Siberian region, the speed does not exceed 10 km per hour. Naturally, in these circumstances, to carry goods on the territory of Russia businessmen simply expensive.

“SP”: — How do Western sanctions affect Russian-Chinese cooperation?

— This problem exists. Many Chinese banks operate in the West and it is reasonable to fear that transactions with Russian companies will complicate relations with Western firms. But China has a huge number of banks that do not work with the West. Although the main Chinese banks are not afraid of us sanctions because the business in the US depends on them.

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“SP”: — will Not Russia become hostage to the fact that China mainly supplies natural resources?

— A lot depends on the global situation. But I will say that, for example, Russian wood is the cheapest on the Chinese market today. Our forest is cheaper than Canadian or Australian. Russia became the main importer of oil for China, ahead of Saudi Arabia, which has long been a leader in the Chinese market.

Russia has long focused on Europe. Previously, 85% of Russian trade was in the Old World and only 15% in Asia. Now Asia accounts for 17%. But if we discard China, then Japan and all the countries of Southeast Asia will have only 2%.

Now we have reached a record trade with China, the volume amounted to 108 billion dollars. But the trade turnover between China and Vietnam last year amounted to 147 billion. That is, Russia is inferior even to Vietnam, although politically relations with this country in China are much worse than with Russia.

“SP”: — what is the reason?

— Cooperation is at us a little strange. On the one hand, we are constantly talking about the readiness to cooperate. On the other hand, the two countries do not have any major serious projects. In my opinion, now it would be possible to attract Chinese investors for the construction of a high-speed railway between Moscow and St. Petersburg. There is a large passenger flow, in the case of the project from the city to the city can be reached in 2.5 hours. It will be beneficial for passengers and freight traffic. The profit from the project can be invested in the construction of the Moscow — Kazan branch, which has long been talked about.

The Russian government must fundamentally decide what kind of cooperation we need with China. That’s when our leadership is determined, the projects will go. Moreover, there are prospects.

For example, we need to complete two bridges across the Amur, modernize the ports of Vladivostok and Zarubino. So far, there are problems.
To participate in the “One belt and road” project, Russia requires large investments, and the prospect of these investments is still not clear, — says the head of the economic and political sector of China IMEMO RAS Sergey Lukonin. — Russia does not want to use credit financing schemes.

The project of the Northern sea route at the official level was seriously discussed a year ago, XI Jinping said about it at the far Eastern forum. But the project needs large investments.

“SP”: — China has invested heavily in Southeast Asia and Africa.

— The project of the Northern sea route is perceived as somewhat abstract in Russia. China looks at what Moscow is doing. Proposals have been made, will now calculate the parameters. As for Africa and Asia, China does not invest much there. It’s not about investments anymore, it’s about loans. How much China really invested, we must still count.

“SP”: — Can China initiate a revision of prices for Russian energy resources?

— There is such a risk for mutual trade. I would like Russia to supply China not only with energy resources but also with products with high added value. But this is a question of the structure of the Russian economy, not the Chinese side.

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