THE BLOG

On China's Victory Day, Is Putin the Loser?

02/09/2015 16:22 BST | Updated 02/09/2016 10:59 BST

Russian President Vladimir Putin will be the guest of honour at China's Victory Day parade in Beijing on 3 September, just as President Xi Jinping was the guest of honour for Russia's parade in May. The two men are happy to use the 70th anniversary of the end of the Second World War to celebrate old triumphs and to hint (none too subtly) that they are still fighting today's fascists - whether in Ukraine or Japan. But are Russia and China really the bosom friends they like to claim? Is Russia's 'pivot to Asia' more than a piece of theatre for Western benefit?

Economically, the countries seem a good fit: China imports raw materials and exports finished goods; Russia mostly exports raw materials (especially oil and gas, which made up over 70 per cent of its exports in 2013) and imports finished goods. The Chinese economy dwarfs the Russian, however: $10.3 trillion versus $1.8 trillion in 2014.

After the West imposed sanctions on Russia last year, Russia had a stronger incentive to develop its economic ties with China quickly. A 30-year gas deal, signed when Putin and Xi met in Shanghai in May 2014, had been under negotiation for more than ten years. What changed? Russia wanted to scare Europe with the thought that its gas might be shipped east; and China saw the opportunity to bargain for much better terms.

In addition, Xi and Putin agreed a joint declaration in May 2015 on harmonising the development of the Russian-dominated Eurasian Economic Union (EEU) and China's Silk Road Economic Belt, an ambitious infrastructure programme to develop a variety of transport and trade links from Western China via Russia and Central Asia to Europe.

Before the Ukraine crisis, Russia's attitude to China's plans was frosty, but now the Kremlin's priority is to keep China friendly; so the Russian side proposed linking the Silk Road Economic Belt and the EEU - a proposal which China welcomed (even if neither side can yet explain what it would mean to link two such different projects).

There are limits, however, to how far they can take their relationship.

First, their economic ties are not developing as well as Putin likes to claim. While trade between Russia and China grew rapidly in 2009-2011, it then levelled off and is now shrinking rapidly as a result of the economic slow-down in both countries and the fall in oil and gas prices. China continues to play hard ball in negotiations to increase gas supplies from Western Siberia. What is more, the EU remains a far more important trade partner for both Russia and China than they are for each other.

Second, bilateral irritants hamper mutual trust. Russia continues to sell arms to China's regional rivals, India and Vietnam. Russia's attitude to Chinese investment, especially near the border between them, is deeply ambivalent, with Russian nationalists worrying that Chinese settlers will take over Siberia. And Chinese nationalists bring up the 19th century "unequal treaty" by which China ceded more territory to the Russian Empire than to any other power.

Third, and most important, the two countries are on different development trajectories. For Russia, 'convergence' between the EEU and the Silk Road Economic Belt is a tactic born of weakness, designed to delay China's takeover of Central Asia, and to retain some Russian leverage. For China, connecting the two projects is a matter of managing Russia's fears. It allows Beijing gradually to build the infrastructure it wants in Russia's neighbourhood without provoking confrontation with Moscow.

Russia and China also differ in their approaches to international problems. Chinese officials and academics punctuate conversations on relations with the West with assurances that China seeks win-win outcomes; in private, they contrast this with Russia's zero-sum approach to its relations with the US and Europe.

Chinese experts are very clear that China does not want to get dragged into a confrontation with the West by Russia, and least of all over Ukraine (a country in which China has a significant economic stake). Despite current maritime tensions with Washington, Beijing is very conscious that a good economic relationship with the US is more important to China's development than access to Russian gas is. And China has no quarrel with the EU; in fact, it is keen to strengthen economic and political ties with Europe - the ultimate destination of the Silk Road.

In the end, Russia and China want very different things out of their relationship. Russia wants an alternative to Europe; China wants a road to Europe. Putin may pretend that he is using China as a weapon against the West; but as he watches China showing off its new military power in Tiananmen Square, he will know who the dominant power in Eurasia really is.

You can read a longer version of this piece on the website of the Centre for European Reform.