Xi Jinping and Vladimir Putin met virtually on Dec. 30, 2022, touting the usual and expected bilateral economic and political engagement, cooperation, and development between China and Russia.
But increasingly, one gets the sense that the marriage between Beijing and Moscow is one of convenience and necessity, not friendship. And Xi, the Chinese Communist Party leader, may slowly be gaining the upper hand.
Each country faces its own issues. Russia is mired in a costly and increasingly unpopular war against Ukraine. It faces international sanctions, and a sizable portion of its foreign reserves are frozen. Putin, its longtime president, has become persona non grata on the global stage.
China has more internal problems. We won’t detail all of the issues here but they’re urgent and span across the economy, the real estate market, rampant COVID-19 infections and hospitalizations, and escalating citizen unrest. Beijing is also believed to have ambitions of annexing Taiwan, and knowing the ramifications currently facing Russia, it must be prepared to face similar consequences including being cut off from global trade.
China has also sought to secure its flow of natural resources. In late December 2022, Putin touted that Russia has become China’s leading supplier of oil and gas. Almost 14 billion cubic meters of gas were sent from Russia to China during the first 11 months of 2022 between pipeline and liquefied natural gas. And thanks to the embargo on Russian oil by most of the developed world, Russia has replaced Saudi Arabia as China’s top oil supplier, and at a discounted price.
For the most part, Russia lacks pipelines to carry gas from Siberia to China or Europe. Siberia is historically underdeveloped with clusters of towns and cities, poor infrastructure, and inadequate transportation. As of December 2022, the “Power of Siberia” pipeline is now fully operational and can carry gas from Russia all the way to Shanghai, at a maximum of 38 billion cubic meters per year capacity by 2027. The Russian portion of the pipeline was completed in 2019. Moscow has plans to build “Power of Siberia II” to supply more gas to China, but it isn’t a strategic priority budget-wise given its war in Ukraine.
At this point, China is simply using Russia. Their relationship, despite today’s public harmony, has been an uneasy one for centuries. China and Russia often vie for hegemony over Eastern and Central Asia.
We’re projecting a bit here. But Russia has been among the top beneficiaries of Chinese development funding through the Belt and Road Initiative (BRI). China has now secured Russian oil and gas supplies. It benefits both nations for China to take over the development of Siberia, and Russia has very little wherewithal to challenge. China has allowed its BRI capital to dry up since the Ukraine invasion—fearing Western sanctions—but if China eventually is sanctioned itself, then the BRI would become a full go.
China craves more natural resources. Siberia has an abundance of oil, gas, coal, diamond, gold, iron ore, and rare earth minerals. Yet Russia has little capital and Moscow is too far to supply the necessary equipment. China is very close to Siberia.
Moscow needs the cash to sustain its costly war in Ukraine. Its economy is woefully undiversified and reliant upon energy and mineral exports. Russia needs China. China can provide the capital for development and take over Siberia; if not legally, then certainty in practice.
