Recent developments indicate that the economic relationship between China and Russia is experiencing significant strain. A crucial natural gas pipeline agreement between the two nations appears to have stalled, and the Industrial and Commercial Bank of China has halted the processing of Russian payments in yuan. Meanwhile, Alibaba has stopped accepting ruble payments or supplying goods to Russia. The setbacks come just 20 days after Russian President Vladimir Putin visited Beijing, dealing a substantial blow to his strategic plans, analysts say.
Signs of strain were evident during Mr. Putin’s state visit last month. There was a visible moment of hesitation from Mr. Putin before he accepted an embrace from Chinese leader Xi Jinping, a moment that was highlighted and widely reported by media outlets worldwide, suggesting that Mr. Putin’s visit to Beijing may not have gone as planned. Further, a joint statement signed by the Russian and Chinese leaders during the visit significantly omits any mention of the two countries’ much-touted “no limits” partnership.
Analysts have noted that China and Russia have historically faced challenges in maintaining mutual trust, often experiencing strains in their alliances. As a result, it is not surprising that Beijing might reconsider its alliance with Russia in response to pressure from Europe and the United States.
On June 12, the United States imposed new sanctions on over 300 Russian entities and individuals, including more than two dozen based in China, aiming to intensify pressure on Russia’s war economy amid its ongoing conflict in Ukraine.
Since last year, Washington has intensified its focus on financial institutions in third countries that assist Russia in evading sanctions. Reflecting this trend, the Industrial and Commercial Bank of China, the country’s largest lender, has recently refused to process Russian transactions in yuan. It is estimated that 80 percent of settlement services have been temporarily halted, severely impacting Russia’s procurement of electronic materials and dealing a blow to its wartime economy.
A Chinese businessman, speaking on condition of anonymity, revealed to The Epoch Times that he had been purchasing energy and raw materials from Russia for the past two to three years. However, about a month ago, he received domestic orders prohibiting procurement from Russia because many transactions could no longer be settled through banks. Consequently, current business activities have been redirected to other countries.
On May 29, during a visit to Brussels, U.S. Deputy Secretary of State Kurt Campbell emphasized the urgency for European and NATO countries “to send a collective message of concern to China about its actions, which we view are destabilizing in the heart of Europe.”
US Expands Sanctions to Curb Russian War Economy
The United States announced a wave of new sanctions against Russia on June 12, targeting over 300 entities and individuals, including more than two dozen based in China, just a day before the G7 leaders are set to convene in Italy to deliberate on strategies to stifle Russia’s burgeoning war economy amid its ongoing conflict with Ukraine.The U.S. Treasury Department announced these sanctions, emphasizing their intent to intensify the consequences for foreign financial institutions that engage with Russia’s war economy. National security advisor Jake Sullivan stated, “[The measures] will ratchet up the risks that foreign financial institutions take by dealing with Russia’s war economy.”
While aboard Air Force One, Mr. Sullivan told reporters, “[The Treasury] is making clear that foreign banks risk being sanctioned for dealing with any entity or individual blocked under our Russia sanctions, including designated Russian banks.”
Additionally, the Treasury and the Department of Commerce are set to implement “complementary prohibitions” aimed at hindering Russia’s access to specific U.S. software and IT services. Furthermore, the Department of Commerce will take measures to more stringently control the distribution of U.S.-branded goods, irrespective of their production location.
Treasury Secretary Janet Yellen articulated the strategy’s objectives, stating, “We are increasing the risk for financial institutions dealing with Russia’s war economy and eliminating paths for evasion, and diminishing Russia’s ability to benefit from access to foreign technology, equipment, software, and IT services.”
Significantly, more than two dozen of the 300 entities and individuals newly sanctioned are based in China.
US Sanctions Target Sino-Russian Trade
On May 28, Daleep Singh, the White House deputy national security adviser for international economics, announced that the United States and its allies are prepared to implement sanctions and export controls to prevent any threatening trade interactions between China and Russia amidst the Ukraine conflict.Following this, on May 31, U.S. Deputy Treasury Secretary Wally Adeyemo, during a speech in Berlin, Germany, emphasized that while Beijing may not directly supply tanks and missiles to Russia, the role of Chinese companies and financial institutions is crucial for Russia’s weapons production and its ongoing conflict in Ukraine. Mr. Adeyemo warned that if China continues to sell dual-use items to Russia, the security of European allies would be significantly jeopardized, potentially emboldening Mr. Putin to further challenge NATO.
Mr. Adeyemo delivered a clear message: “Chinese firms can either do business in our economies or they can equip Russia’s war machine with dual-use goods. They cannot do both.
“We must make clear to Chinese companies that we are all prepared to use our sanctions and export controls to hold them accountable. And the United States, Europe, and all of our allies have to act together in following through by using our economic tools so that there is no daylight between our policies.”
This consistent pressure from the United States appears to be in line with Secretary of State Antony Blinken’s warning during his visit to Beijing: “I told Xi, if China does not address this problem, we will,” Mr. Blinken said, referring to China’s supplying the Russian defense industry.
Subsequently, several Chinese companies have started to sever ties with Russia.
On May 28, AliExpress, the international e-commerce platform under Alibaba, reportedly stopped accepting payments in Russian rubles and suspended shipping orders to Russia.
Setbacks for Putin’s Most Anticipated Project
Mr. Putin concluded his visit to China in early May without clinching a deal on the hoped-for “Power of Siberia 2” pipeline. Notably absent from Mr. Putin’s state visit to Beijing was Gazprom’s chief executive, Alexei Miller, who would have been essential for substantive negotiations on the pipeline with China.Kremlin Press Secretary Dmitry Peskov stressed that energy supply cooperation remains a crucial part of the Xi-Putin talks agenda.
“It’s totally normal for each side to defend their own interests. Negotiations will continue, because the leaders of both countries have the political will for it, and commercial issues will continue to be worked out, and we have no doubt all the necessary agreements will be made,” he told reporters on June 2.
On this topic, Tang Jingyuan, a U.S.-based current affairs commentator, remarked that although Mr. Putin finds it challenging to endure Mr. Xi’s opportunistic “harvesting,” Beijing is currently his only major buyer. Ultimately, Mr. Putin may be forced to acquiesce to Beijing’s demands due to his lack of alternatives. Mr. Xi has recognized this leverage, maintaining a tough stance in the natural gas pipeline negotiations.
Long-Standing Mutual Distrust Between China and Russia
Throughout modern history, scholars have characterized the relationship between China and Russia as one of “mutual distrust,” preventing them from forming a true alliance.Japanese scholars often describe Sino-Russian relations as being akin to “foxes and raccoons,” deceiving each other.
Takashi Okada, a former editorial board member of Kyodo News, wrote shortly after the Russia-Ukraine war began, emphasizing the deep-rooted “mutual distrust” between China and Russia, resulting in only superficial cooperation. He cited a Chinese diplomat who highlighted one of the reasons: the Soviet Union once betrayed Beijing during a time of need.
The Chinese diplomat stated, “We have not forgotten that in the 1960s, when China was hit by natural disasters, China’s ally the Soviet Union withdrew its engineers. Therefore, China is opposed to any kind of alliance and is instead signing partnership agreements.”
Examining the history of interactions between China and Russia (including the former Soviet Union) over the past few decades reveals a pattern of “mutual distrust” and “betrayal” due to ideological differences, strategic interests, and changes in the international landscape.
In the early 1950s, the Chinese Communist Party (CCP) and the Soviet Union were close allies. However, significant ideological and strategic differences soon emerged. Soviet leader Nikita Khrushchev’s denunciation of Joseph Stalin’s personality cult displeased Mao Zedong, who fostered a similar cult in China, leading to a Sino-Soviet rift.
In 1960, the Soviet Union withdrew all its technical experts from China, causing Sino-Soviet relations to deteriorate rapidly and eventually break down completely by the mid-1960s.
Tensions peaked in 1969 with the Sino-Soviet border conflict on Zhenbao Island, where both sides massed troops along the border, threatening to escalate the conflict into a large-scale war.
During this period of heightened tensions, the CCP chose to “betray the alliance” and sought to improve relations with their common enemy, the United States, to counterbalance the Soviet Union.
The CCP’s “Ping-Pong diplomacy” with the United States was successful, leading to President Richard Nixon’s visit to China in 1972, marking a significant shift in Sino-American relations. This event implied that the Soviet Union’s two main adversaries in the Cold War might form an alliance, placing significant strategic pressure on the Soviet Union.
On NTD’s Pinnacle View program, Du Wen, a Chinese legal scholar based in Belgium, said that Mr. Xi’s visit to France highlights the CCP’s current internal and external troubles and its urgent need for Western support. He suggested that China might privately compromise with the West while simultaneously finding ways to support Russia in order to gain leverage in Europe.
Mr. Du, a former legal adviser to Hu Chunhua, a prominent figure in the CCP’s Youth League faction, has studied the CCP’s strategies toward Europe. “Xi is aware that the overall outcome of the Russia-Ukraine war is already determined, and Russia’s prospects are bleak. Continuing to support Russia is not only futile but also risky. Xi may compromise on issues related to European security to maintain China’s position in the European market,” he said.
