HESS: Xi’s visit to Russia was a failure for Putin

HESS: Xi’s visit to Russia was a failure for Putin
Chinese leader Xi Jinping's visit to Moscow garnered a lot of comment, but despite the symbolism, the visit was a failure for Putin, who gained little from the meeting. / bne IntelliNews
By Maximilian Hess in London March 27, 2023

The 20-21 March Moscow summit between Chinese President Xi Jinping and Russian President Vladimir Putin has garnered significant attention. Thirteen months on from Putin’s decision to vastly expand his war in Ukraine, the Chinese leader’s visit has been hailed as a major geopolitical moment by both the Kremlin’s boosters and detractors alike.

But despite the summit’s undeniable symbolism of the leader of the world’s second-largest economy and second greatest geopolitical power toasting Putin, it was an abject failure for Russia.

There is no new ‘axis of evil’ between Moscow and Beijing, nor did the summit represent the furthering of a ‘multipolar world order’. It doesn’t even represent China ‘tightening its embrace’ of Russia. China is the world’s second major geopolitical power, and US-Chinese competition increasingly represents a bipolar world order but the summit highlighted how Putin’s attempt to use his war in Ukraine as a springboard back to great power status has failed.

First, it is undeniable that the war in Ukraine has made Russia more dependent on China. Russian-Chinese trade rose 29.3% in 2022, to $190bn, while the West cut many economic links with Moscow and placed Russia under biting sanctions. But this trade largely represents China increasing its purchases of Russian commodities, which Moscow has had to reroute following the severing of most oil and gas links with Europe. Exports from Russia to China grew 43.4%, far greater than the 12.8% growth in Chinese exports. Moscow's trade surplus with China now stands at a record $38bn. This may help balance the Kremlin’s books – but it represents how weak Russia’s position relative to China is. After all, it is Beijing that runs trade surpluses with all major Western economies to whom it exports manufactured goods.

The imbalance highlights how Beijing is happy to take advantage of Putin’s weakened position to secure cheap resources but how large the gulf between their geopolitical agendas is. Beijing continues to see Putin’s agenda in Ukraine as more of a threat to its geopolitical and geo-economic agenda rather than an opportunity to advance them. Moscow needs China as an outlet to sustain its stumbling economy far more than China needs Moscow. Beijing can import commodities from around the world; Russia’s potential markets are increasingly circumscribed.

Xi may not want to see Russia abjectly defeated, but he is not willing to assist Putin’s agenda. This is evidenced by what was not agreed at the summit. There are three areas where Beijing could significantly help Moscow: first by finally agreeing the terms for the Power of Siberia 2 pipeline, which the Kremlin touts as its replacement for the shuttered European export routes; second, by agreeing to provide material materiel support for Putin’s war in Ukraine; and third, by offering loans to replace Russia’s lack of access to international credit markets.

China offered none of these.

An initial agreement on Power of Siberia 2 was reached in January 2022 but since then there has been no meaningful progress. In contrast, the first Power of Siberia pipeline was agreed in May 2014, just two months after Putin annexed Ukraine’s Crimea region. Construction began that September, whereas a date to begin the second route has yet to be agreed. Beijing will almost certainly eventually agree to proceed with the link, but the delays highlight its reticence to put too many eggs in the Kremlin’s basket.

There was also an uptick in Chinese loans to Russia in 2014, with a $2bn loan to Sberbank, and credit lines were opened for its trade and state development banks VTB and VEB by China’s export import bank. Russia’s banks have been placed under far tighter sanctions over the last year, but similar support from Chinese state banks has not been forthcoming. This highlights China’s reticence about overtly undermining the Western-led sanctions regime.

This hesitancy expands to Chinese arms supplies for Russia, which could help it turn the tide in its favour in Putin’s war against Ukraine. Historically, Russia has exported weapons and technology to China but with the conflict turning into a war of attrition, Chinese ammunition supplies would be coveted by Moscow. And yet there was no discussion of such an offer, while Beijing has continued to deny publicly that such supplies are even under consideration. Instead, Putin was left to discuss Xi’s proposed peace plan for Ukraine, which is sufficiently in line with the Kremlin’s rhetoric to be a non-starter for Kyiv. But this is intentional – it leaves Beijing free to argue it is pursuing diplomacy, thus sidestepping the issue of arms supplies.

Putin’s war has worked out in China’s favour. Not only is Beijing now clearly the dominant partner, but the conflict has strained Russia’s ability to sell weapons to its own regional opponents such as Vietnam and India for whom Moscow has long been the key arms supplier. Xi has no interest in interrupting Putin from his mistaken path in Ukraine – but that is not the same as endorsing it.

Meanwhile, Chinese-Western tensions continue to ratchet up entirely independently of the war in Ukraine. This is particularly true for the US, where anti-China rhetoric is one of the few things that unites Republicans and Democrats. President Joe Biden has continued the trade war launched by former President Donald Trump, and Beijing has responded in kind. Europe is more hesitant about this path, but the war in Ukraine has made it more dependent on the US for economic and security support than at any point since the Cold War, limiting its ability to act independently.

However, China is not yet seeking a full break from the West. Xi is undoubtedly aligned with Putin in wanting to limit US hegemony. But it is not on board with Putin’s effort to force this through war. Whereas Russia and China declared a ‘friendship without limits’ on the eve of last year’s anniversary, the summit highlights how it is in fact much more of a ‘partnership with constraints’.

Putin and Xi’s summit began on the 20th anniversary of the US-led invasion of Iraq. George W. Bush infamously declared victory exactly six weeks later aboard an aircraft carrier in an announcement designed to make US power and influence appear ascendent. But the war would prove to be the greatest geopolitical catastrophe for Washington of the post-Cold War era. The Xi-Putin summit was laden with pomp and declarations of the pursuit of ‘multipolarity’ by both leaders. But what was left unsaid and unagreed highlights how Putin’s war has ended the possibility of Russia being an independent pole and is proving to be the greatest geopolitical catastrophe for Russia of the post-Cold War era.

Treating China as the same kind of threat as Putin’s Russia and falling for Putin’s framing with it is a mistake that should be avoided at all costs. If the West continues to misread Russia and China’s relationship, it is likely to prove self-fulfilling.