Despite the pompous coverage of Russian propaganda, Xi Jinping's visit to Moscow turned out to be surprisingly empty in content. Meaningless communique with a repetition of what has been said many times before, a pile of signed declarative papers, and as an apotheosis of the Kremlin’s attempts to present relations with China as more successful than they are, Vladimir Putin’s statement about the “imminent achievement” of agreements on a new contract for gas supplies through “ Strength of Siberia – 2”, not supported by anything at all: this is not mentioned in any joint documents, the Chinese side is silent about this.
In general, Russia has a very funny story of lies about the "Power of Siberia – 2" – I really want to prove to everyone that the first gas contract is not a one-time local story of the de facto transfer of two East Siberian fields to China for use, but the beginning of some kind of global gas reversal in East. But the case with the "reversal" did not work out. Eight years ago, in May 2015, hot on the heels of the first (and so far the last) major gas contract with China, Gazprom announced that it had signed “basic conditions” with the Chinese CNPC for the supply of 30 billion cubic meters of gas via the so-called western route passing through Altai (it later became known as the "Power of Siberia – 2").
The head of Gazprom, Miller, then boasted that the allegedly signed agreement included “more than a dozen articles that are legally binding” and that “the term for the construction of the gas pipeline, the minimum annual contract quantities, daily contract quantities, the main parameters for the specification of the quality of gas supplies to China, coordinates of the point where the gas pipeline will cross the Russian-Chinese border”.
A year later, there was a major embarrassment with these "basic conditions" when the head of CNPC, Wang Yilin, said on the air of Rossiya 24 that he knew about the "coordination" of all these conditions only from the press. Well, today it becomes completely clear that Gazprom’s statements about agreeing on a large number of details on gas supplies through Altai have been a banal lie all these years, because now no one is going to build a gas pipeline through Altai, and Putin and Gazprom are talking about a completely different route – through Mongolia (the Chinese side has never confirmed this).
With this in mind, there is no credibility to Russian statements about the “advancement” of negotiations on the Power of Siberia – 2. China simply does not need so much additional gas from Russia – it has practically covered all its own needs for decades to come with its own production, LNG imports, and pipeline gas from Central Asia and Myanmar.
And what does Putin have in his portfolio besides gas? Yes, in general, nothing. Pay attention to an important point, which is not much talked about: in the 13 months that have passed since the beginning of the war, no Chinese investors have announced their arrival in significant projects in Russia. We were promised that against the backdrop of the exit of Western companies, they will be replaced by Chinese ones – but this does not happen. Why? All together – from the risks of secondary sanctions to the depression of the Russian domestic market (you can’t earn much here now), to new draconian measures of military regulation of the movement of capital – restrictions on foreign exchange transactions, the need to obtain special permits for the purchase and sale of Russian assets, etc. Many headaches, few benefits.
There is another, more fundamental problem. Unlike the West, which we love to vilify all and sundry, the countries of Asia – and China above all – are in no way interested in becoming the same donors to Russia's development as the countries of the West have been in the past three decades. No matter how much the West is portrayed in Russia as some kind of insidious enemy, in reality, all our development and modernization, since the 1980s, has been carried out at the expense of Western capital, technology, and knowledge. Is Asia ready to become a donor of Russian modernization on a similar scale? Definitely not. None of the Asian countries is interested in the appearance on the market of a new powerful competitor in the manufacturing sector in the form of Russia, no illusions about this are out of place.
Is Asia ready to become a donor of Russian modernization on a similar scale? Definitely not
The brightest in this regard is an attempt to make a joint high-tech project with the Chinese – to create a new wide-body aircraft CR929. 11 years ago, when this project arose, we were promised that the tandem of Russia and China would create a competitor to Boeing and Airbus. And what is the result? At first, the Russians were confronted with the fact that they would not be allowed to participate in the marketing of the aircraft on the Chinese market – it became unclear what was the point of Russian participation in the project then. Last year, then Deputy Prime Minister Yuri Borisov acknowledged that the Chinese were gradually moving away from cooperation with Russia in this project: “The project is not going in the direction that suits us … China is less and less interested in our services … decreases ." And recently, Deputy Prime Minister Denis Manturov said that Russia is reducing its status in the project from a full-fledged partner to just a supplier of units and components. The plane will be, but without us.
In essence, Russia is left with only the role of a limited supplier of raw materials – and at bargain prices. Although they are not disclosed, but a simple calculation, based on the known volumes of pipeline deliveries through the Power of Siberia ( 15.5 billion cubic meters ) and revenue ( $4 billion ), allows us to estimate the cost of gas supplies to China in the region of $ 260 per thousand cubic meters – moreover that LNG in Asia traded on average around $1,200 per thousand cubic meters, while prices in Europe (TTF Hub) averaged over $1,300 last year. Coal is also supplied with huge discounts: according to SUEK CEO Maxim Basov, in Asian markets, including China, “our discount compared to similar products from Australia can reach 50 percent or more.”
Economic cooperation with China is built extremely one-sidedly. We sell mainly cheap raw materials to this country – often at prices significantly lower than international ones, and in return we receive consumer goods and industrial goods of not the best quality at prices higher than usual (not least because of logistics – China is much further from traditional European suppliers from Western parts of Russia where the main economic activity is concentrated).
Can China Help Putin Bypass Western Sanctions? This is partly happening, but there is a limit here: recently, our officials and merchants have been loudly complaining about the difficulties in working with Chinese counterparties – Chinese banks are deeply integrated into the global financial system, and, for example, if a Russian bank was disconnected from SWIFT, it simply cannot they will work.
The deafening emptiness following Xi Jinping's visit shows that the relatively easy potential for reorienting economic flows to China has been chosen, and these relations have reached a certain ceiling. Basically, Russia is trying to develop them by increasing the physical volumes of supplies of raw materials – but the price situation in this market is often the most unfavorable, and this will do nothing for the Russian economy and budget. By the way, gas supplies through the Power of Siberia are exempt from all taxes, so increase them, do not increase them – all this will not help the growing budget deficit .
Most importantly, China is making clear to Russia that we are not planning to help you develop in the way the West helped you. With regard to Russia, we will only deal with life support, but no more, do not expect donations from us, and as a competitor in the market of technological goods, we do not need you.
This does not mean that China will refuse to cooperate with Russia – Xi Jinping needs Putin as a “bad cop” against the West, who is ready to take such radical offensive actions against Western democracies that China, seeking to maintain its own good image, is not ready for. In Russian terminology, this is called “if you don’t agree to my terms, I will call the bandits” (Vladimir Putin and his clique act as bandits). China loves that Putin is shackling vast Western resources to fight Russian aggression against Ukraine.
China loves that Putin is shackling vast Western resources to fight Russian aggression against Ukraine
On the other hand, the Chinese partners are standard pragmatic, and they did not plan and did not are planning. The same applies to the discussed supply of Chinese weapons to Russia: this will be a serious blow to China's international reputation, but it will not help Putin win the war. At the very least, China will not be sure of this until it manages the situation itself – and, as we know, Putin wants to manage the course of hostilities only personally.
Hence the empty visit. Xi Jinping probably wanted to listen to Putin and find out what kind of plan he has for getting out of the situation he got himself into. Judging by the emasculated final communiqué, Putin did not convince the Beijing master. Therefore, a certain minimum support for the "useful bandit jumping to the West" will continue, but no more. Saving and ensuring the prosperity of Putin's Russia is not in the plans of the pragmatic Xi Jinping.