Why Ukraine is bringing Russia and China closer

Neither allies nor friends, China and Russia find themselves in a flawed union

Russia's President Vladimir Putin disembarking upon his arrival in Beijing on February 4, 2022, ahead of his meeting with China's president and the opening ceremony of the 2022 Winter Olympic Games. AFP
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China and Russia have consolidated a common Eurasian ambition by setting aside their historical differences. The shared message of Chinese President Xi Jinping and Russian President Vladimir Putin on the opening day of the Beijing Winter Olympics was to bolster alternatives to western liberal democracy, dedollarise bilateral trade and dismantle the US dominance of the global security architecture.

A union of sorts preserves the power and interests of both nations in the face of the eastern advance of Nato and western-led security partnerships known as the Quad (involving Australia, India, Japan and the US) and Aukus (which includes Australia, the UK and the US).

Through history, there were several points of differences and distrust between the two countries. In October 1969, the Soviet Union loaded a missile with hundreds of tonnes of nuclear material aimed at China. Chairman Mao Zedong headed to Wuhan. Senior military staff lived in a bunker.

This was the closest communist China came to a nuclear peril. The then US president Richard Nixon intervened and helped save China from falling as a major nuclear casualty at the height of the Cold War by its own ally. The West preserved its victory. China earned its right to security and prosperity. The rest is history.

China and Russia have consolidated a common Eurasian ambition

But history also provides further evidence of a complicated Eurasian alliance. The Amur River forms the border between Russia's far east and north-eastern China. In 1858, imperial Russia annexed from the Chinese Qing court territory larger than Ukraine and more than 600 times the size of Hong Kong. A century later, the British returned Hong Kong to China. The Amur region remains in Russian control.

China may no longer appreciate American assistance from decades ago, but to think that it now sees Russia as a confidant is illusory. The ceded Chinese territory remains a dormant fault line, whose significance can be no smaller than Taiwan or the South China Sea islands, should tensions erupt. Nonetheless, any eruption between the two countries over the issue remains unlikely for now; their strategic alliance is a bigger gain for China.

The two countries have signed significant energy deals estimated at $137 billion, at a time when Moscow needs economic leverage.

Germany, heavily reliant on Russian liquefied natural gas supplies, may have to give up the Nord Stream gas pipeline project in the event Russia invades Ukraine. The US, meanwhile, has said it could remove Russia from the international dollar clearance system called Swift. To minimise this threat, Moscow would like to see its trade and the currency with which it trades decoupled from the West.

By expanding China-Russia trade by $60bn to $200bn in 2022, China plans to divert much of its missed purchase commitments obliged under the US-China Phase One Trade Deal to Russia.

With energy prices reaching multi-year highs, locking in purchase agreements runs the risk of paying a premium. Additionally, the oil trade will be settled in euros. Although dedollarisation fits China's national strategy, why was the trade not settled in the RMB? As the world's largest energy importer, China desires a bigger role for the RMB as a global trade currency.

On the weekend news programme Meet the Press, US National Security Adviser Jake Sullivan recently said that China will end up owning a part of the cost of Russia's invasion of Ukraine.

If Moscow does not send troops into Ukraine, both China and Russia will be better off. But if it does, the highest economic costs would still be borne by the West, where inflation has risen sharply in recent months. Another sudden surge in inflation would exacerbate the current US administration's political unpopularity, disrupt the Federal Reserve's plan with rate tightening and, if mismanaged, induce a financial meltdown.

China must also bear in mind that Russia is also smartly drawing on its relationship with India. Nearly one quarter of Russia's arms sales went to India between 2016 and 2020. Russia's defence partnership with India puts China in a precarious position – a replay of what Nixon and the then US secretary of state Henry Kissinger envisioned during the Cold War by encircling the former USSR with China. It is in Russia's interest to not see China's rise as the sole leader in Eastern Eurasia. Until China becomes one, complementarity trumps conflict of interest between the two neighbours.

It also makes sense that China and Russia have unified in objecting to Nato's eastern advance. The Shanghai Co-operation Organisation, a regional security pact centred on China and Russia, stands at the security frontier as Nato's junior counterpart to the East. This pact aims to evolve further into a free trade zone.

Beyond hard power, China and Russia have articulated a common ethos on democracy, development, security and the impending world order. Both see a "new centre of economic growth and political influence" in which stability and prosperity are inseparable, and democracy is expendable.

Both countries also harbour dreams of national rejuvenation. These two ambitious powers are looking out for each other. The meeting between their leaders at the start of the Beijing Olympics may well turn out to have reshaped Eurasian geopolitics.

Published: February 15, 2022, 4:00 AM