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China’s growing economic support for Russia – The Diplomat

China’s growing economic support for Russia – The Diplomat

 


China’s apparent indifference to the massive economic costs of Russia’s invasion of Ukraine has been one of the most surprising and consequential developments of the past year. Soaring commodity prices have imposed significant costs on China, the world’s largest importer of energy and agricultural products, but Beijing has never condemned the invasion, nor used its economic and political clout to exert pressure. on Moscow at the negotiating table.

Indeed, there is growing evidence that the Chinese leadership, instead of seeking to end the war, is in fact stepping up their economic support for Russian President Vladimir Putin, implicitly encouraging Moscow to continue the conflict. While the war has already inflicted large and growing economic and reputational costs on Xi Jinpings China, Beijing shows no signs of backing down from its pro-Russian neutrality.

The performance of the Russian economy and Russia’s fiscal budget are closely linked to energy, especially oil. In regards to half of Russian exports are attributable to the oil and gas sector, as are 45% of the 2021 federal budget of Russia. Limiting Russia’s energy export earnings has therefore been one of the West’s top wartime priorities.

Washington and Brussels have sought to cap or cap the prices of Russian crude oil and crude oil products, such as gasoline, diesel and jet fuel. The policy aims to maintain supplies of Russian crude while limiting Moscow’s revenue. By maintaining production stability in global energy markets and thereby limiting inflation while restricting Kremlins revenues, the West hopes to limit Moscow’s ability to continue its illegal and brutal invasion of Ukraine. .

Beijing has long maintained that it will not abide by Western sanctions on Russian oil, including price caps. In September, after a G-7 meeting on price caps, the The Chinese Foreign Ministry has hinted that it opposes price caps. The Chinese opposition has become more outspoken in recent weeks. In December, the The Ministry of Foreign Affairs reiterated its implicit opposition to price caps.

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Most strikingly, however, in a February Chinese-language Xinhua article reposted in the authoritative Peoples Daily, Chinese state media have asked, How effective is the EU oil price embargo against Russia? Quoting unnamed analysts, the article concluded that price caps would undermine energy stability and drive up inflation in the European Union. People’s Daily is also repeat this story on its English-language platform. Indeed, Beijing not only refuses to comply with price caps, but also seeks to undermine European support for the measure while apparently maintaining technical compliance with Western sanctions.

Beijing’s increasingly outspoken and forceful opposition to Western price caps extends to trade in other goods and services, including those with military applications. American officials, talk to Reuters, has seen China provide non-lethal military assistance and economic support that comes to a halt before a total evasion of sanctions. While Beijing’s refusal to comply with the price cap is unsurprising, its potential extension of even non-lethal military assistance is highly noteworthy and potentially consequential.

The war is at a turning point. Analyst rating that the course of the war is more uncertain now than it has been for months. With both the Russian and Ukrainian armies facing ammunition shortages and other logistical constraints, any military support to Moscow could prove decisive, even if Chinese companies provide only non-lethal assistance.

Even if Chinese companies do not receive explicit permission to export military hardware, Beijing does very little to stop them. Chinese companies are still extremely sensitive to domestic political signals, especially in the Xi era. Their export of materials to Russia is telling. Xi Jinping’s continued and highly publicized political support for Putin and the Russian war effort, including a potential visit to Moscow this year signaled to Chinese companies that they will not be punished for exporting critical equipment to Russia.

A long war seems highly likely due to military and political conditions. The ability of the Russian economy to withstand a long war is questionable, however, especially without Chinese support. Indeed, Alexandra Prokopenko of Carnegie observes that only North Korea is more dependent on Chinese imports than Russia.

It is increasingly clear that the Kremlins’ strategy is to outlast the West in Ukraine and capitalize on the economic damage caused by the conflicts tip the scales for pro-Kremlin populists in European and especially North American elections. The Kremlin is prepared to prolong the war, in part because it believes it will continue to receive Chinese economic support. While Beijing may not support all of Moscow’s goals in the conflict, it does not oppose them either.

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