Putin Heads to China to Cement Ties, Obstacles Remain

Chinese companies and banks also have been cautious about developing their business in Russia

With President Vladimir Putin heading to China this weekend, officials in both countries extoll a blossoming "strategic partnership" between the two former communist rivals.

But despite Moscow's push to strengthen ties with Beijing amid a bitter strain in relations with the West, Russia-China trade has shrunk sharply and a slew of ambitious projects have remained largely on paper. Observers attribute the slow progress to Beijing's hard-nosed bargaining position and the Kremlin's deep-seated suspicions about the growing power of its mighty partner.

A shared desire to counter perceived U.S. global domination and strong personal ties between Putin and Chinese leader Xi Jinping, who are to meet Saturday in Beijing, appear to be the main driving forces behind Russia-China cooperation.

The renewed push to bolster relations with China came after the United States and the European Union imposed an array of crippling sanctions on Russia over its annexation of the Crimean Peninsula in March 2014, cutting its access to world financial markets and blocking the transfer of modern technologies. Moscow was also purged from the Group of Eight leading industrialized nations.

In a bid to show the West that the ties with China could offer a viable alternative, Putin visited Beijing in May 2014, presiding over the signing of numerous deals, including a mammoth 30-year natural gas contract worth $400 billion.

A later deal saw a branch of Chinese state-owned energy company CNPC buying a stake in a project to build a giant liquefied natural gas plant on the Yamal Peninsula in the Arctic. Last December, Chinese company Sinopec bought a stake in the Russia's Sibur energy company.

China also promised to offer multibillion dollar loans to help build a high-speed rail link between Moscow and the Volga River city of Kazan.

Other ambitious deals have been expected, but most of them have floundered amid Russia's economic uncertainty.

A key factor behind Russia-China trade dropping from nearly $100 billion a year in 2014 to just over $60 billion last year has been the sharp devaluation of the Russian currency under the double impact of low global oil prices and Western sanctions. With energy resources accounting for two-thirds of Russian exports to China, trade volumes have shrunk as oil prices fell.

The devaluation of the ruble has spooked Chinese investors, and low energy prices made some prospective energy projects unfeasible. Plans to tap new oil and gas fields in Siberia and build more China-bound pipelines, which require massive investment, have stalled.

Chinese companies and banks also have been cautious about developing their business in Russia, fearing that it could adversely affect their operations elsewhere due to the spiraling Russia-West tensions and Western sanctions.

Plans for Chinese companies to invest in the giant Vankor oil and gas fields in eastern Siberia have bogged down over pricing disputes, Russia's hopes of using China as an alternative to European financial markets have failed and a prospective transport corridor between China and the European Union has remained mired in uncertainty.

Beijing's ambitious Silk Road Economic Belt project, intended to encourage infrastructure development in formerly Soviet Central Asia which Russia sees as its home turf, has caused unease in Moscow. China has promised to coordinate the project with the Russia-dominated Eurasian Economic Union, but clearly has put an emphasis on bilateral deals with Kazakhstan and other members of the bloc.

"Moscow can't preserve its economic domination in Central Asia," Alexander Gabuyev of the Carnegie Moscow Center wrote in a commentary.

At a recent Russia-China forum in Moscow, officials hailed an "unprecedented" closeness, but businessmen and experts pointed at numerous problems.

Russian tycoon Viktor Vekselberg deplored what he described as a "catastrophically low" level of Russia-China cooperation in the high-tech sector, saying that Chinese companies have shown little interest in investing in Russian industries.

While ambitious hopes for closer economic cooperation haven't materialized, Russia and China have bolstered their military ties, which have included joint war games and contacts on missile defense. Russian weapons exports to China, which peaked in the 1990s and fell dramatically in the following decade, have received a new boost recently.

"We have common interests, especially now, when the United States has put pressure on both Russia and China," said Li Fenglin, a former Chinese ambassador to Moscow who heads a government-sponsored think tank. He urged Moscow to cooperate more closely with Beijing, noting that some in Russia still fear China and seek to counterbalance its influence.

Some Russian military and political insiders view China's growing power with unease, fearing that the giant eastern neighbor could one day try to dictate its terms.

The prospect of potential Chinese expansion long has worried residents of Russia's sparsely populated far eastern regions, where many growled about the Kremlin's decision to surrender significant slices of land along the 4,200-kilometer (2,600-mile) border to China in a 2005 demarcation deal.

Reflecting such fears, Russia's state television recently aired a program hosted by famous film director Nikita Mikhalkov that included a video describing a hypothetical Chinese invasion. The video ended with China quickly overrunning all of Russia's Far East and Siberia and drawing a new border along the Urals, the mountain range that traditionally serves as the boundary between Europe and Asia.

Many in Russia also have been appalled by Chinese farmers leasing Russia's agricultural lands, seeing them as both a vanguard of potential expansion and an environmental scourge because of aggressive use of toxic fertilizers.

"Chinese farmers have poisoned our land," ultranationalist leader Vladimir Zhirinovsky ranted during recent debates in parliament. "Nothing grows after them!"

Copyright AP - Associated Press
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