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17 August 2022

How Putin’s Ukraine War Has Made Russia More Reliant on China

THOMAS LOW and PETER W. SINGER

Just before Russia’s invasion of Ukraine, Chinese Foreign Minister Wang Yi said that Sino-Russian strategic cooperation has no end limits, no forbidden areas, and no upper bound.

In the months following, however, Russia learned that the rhetoric does not match reality. While the wave of global sanctions on Putin’s regime and allied oligarchs have seemingly strengthened political, economic, and military ties between the two countries, the real strategic effect for Russia has been increasing reliance on China. And Chinese Communist Party leaders have shown no qualms about using this growing dependence to their advantage. China has increasingly dictated the direction of the partnership and squeezed more concessions from the Russians, hiking up prices and walking a diplomatic tightrope with Western nations from which it can’t afford to commercially detach. Rather than making Russia great again, as hoped, President Vladimir Putin’s war in Ukraine has instead deepened Russia’s position as the clear junior partner in the Sino-Russian relationship, militarily and economically.

A review of open source information shows us that the war has not just confirmed existing Sino-Russian military cooperation, but intensified potential imbalances. Despite Western outrage at the war, military cooperation between the two countries is still under way. China and Russia held their first joint military exercise since Moscow’s invasion of Ukraine on May 24, with both countries sending out nuclear-capable bombers while President Joe Biden visited the region. In July, People’s Liberation Army troops, tanks, and vehicles set out for Russia to participate in the so-called “War Olympics.” China has also indirectly supported the Russian war machine by exporting off-road vehicles for transporting command personnel, as well as drone components and naval engines.

The war’s effects are most dire in the defense market, though. In 2014, Western sanctions gave Russia’s military industrial complex new impetus to sell technology to the PLA.Today, the Kremlin has even fewer customers or partners, and its reliance on China’s technology after its Ukraine invasion could accelerate burgeoning joint development and operations, if only for a while. In the long term, Russia’s struggling arms manufacturers cannot bet on China to sustain or grow them. China’s increasingly assertive defense firms are already seeking out more customers on the world stage. The country increased its share of the global arms trade to 4.6 percent in recent years, putting it in fourth place behind the United States, Russia, and France. China is also building on what had once been a niche role in the now booming market in drone technology, and modernizing its air force with domestically built aircraft that will also increase exports.

As China emerges as a competitor in the arms export market, the effect of sanctions and the poor performance of Russian gear bodes a gloomy future for Russia. Russia’s arms sales to Southeast Asia had already declined sharply over the past seven years, dropping from $1.2 billion in 2014 to just $89 million in 2021. Chinese firms are in a good position to plug the holes that Russian firms can no longer fill.

Russia’s comparative advantage in the global defense market has been that it has been able to offer advanced military technology at relatively low prices, and its willingness—bordering on delight—to sell tanks, small arms, and fighter jets to nations regardless of the character of their governments. China has shown a similar willingness to engage with unsavory regimes in their Belt and Road initiative and existing arms sales.

Furthermore, Russia might not be able to manufacture equipment at previous rates because of sanctions. Reportedly, some Russian arms plants have halted production as they face difficulties in importing source components. Currently, only three of the world’s 40 biggest arms importers—Pakistan, Bangladesh, and Myanmar—buy a majority of their weapons from China. That could increase if China fills the market that Russian arms makers dominated, facilitating Beijing’s continued rise as a major weapons exporter—and gaining the political and economic benefits that accompany that.

In trade, the two nations have a seeming synergy. Russia supplies China with important raw materials and energy, while Russia needs Chinese investment and high-tech products. Trade between China and Russia grew by 36 percent last year, to $147 billion, clearly an effect of the sanctions. In March, after Russia launched its invasion, overall trade between the two countries rose over 12 percent from a year earlier.

But those numbers hide the enormous and growing trade imbalance favoring China. In 2013, China accounted for 11 percent of Russia’s trade. In 2021, the figure was 18 percent, while Russia represented a puny 2 percent share of China’s trade. This imbalance is even more striking when considering that 70 percent of Russia’s exports to China are energy related.

The war in Ukraine has accelerated these inequalities in their economic relationship and confirmed Russia’s subservience to Beijing. China has refused to turn its back on Moscow, but it hasn’t refrained from cashing in on its ally’s plight either. For example, after being left with a near-monopoly following the mass exodus of Western manufacturers, Chinese car makers such as Haval have jacked up their prices by 50 percent, while Russia is selling its oil to China at a 35 percent discount.

For the moment, it appears that Beijing is not keen on rescuing Moscow with substantial economic lifelines and risking secondary sanctions. Most of its major banks, including the Bank of China and the Industrial and Commercial Bank of China (ICBC), have begun to restrict dollar—and possibly yuan—transactions for Russian commodity imports. Chinese smartphone titans Xiaomi, Oppo, and Huawei have cut their supplies to Russia, and TikTok suspended services after blocking Russian state media. Huawei, which still operates in Russia, and other Chinese tech hegemons could not shore up the Russian market even if they wanted to. Huawei heavily relies on other chip suppliers, which generally employ U.S.-designed technology. In 2019, of the 50,000 5G base stations sold by Huawei, only 8 percent were free from U.S. technology or components.

The sum of these outcomes from the war in Ukraine is clear: Russia is accelerating its own decline as a world power, not just by failures to its Western border, but also in a loss of power in its relationship to its East. Yes, in trading arms and natural resources to China, Russia gets a lifeline from Western sanctions. But it also risks becoming the ever weaker ally in the military relationship, while little more than a backroom supplier to an Asia dominated by China. The war in Ukraine has not just seen the Russian military humbled, but also forced Moscow into giving the Chinese preference in trade at below market rates, losing key global arms markets and long-term defense industry sales and capability, and losing autonomy from China by decreasing its own engagement with other partners.

So far, China has only mildly cashed in on its senior status in the partnership and has refrained from publicly humiliating Russia by demanding concessions, which is partly why the partnership has remained fruitful. However, if Russia’s ultimate objective is to “get up from the knees,” as Putin’s supporters often claim, it will find that doing so on Chinese shoulders is not the way to get there.

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