MOSCOW, 25 Oct 2021, RUSSTRAT Institute.
The current geopolitical state of affairs in the world is characterised by the destruction of the system of international relations, first of all, by the progressive refusal of the majority of the leading states from the principle of “war only by the rules.” The economic clinch into which the United States (or, more broadly, the entire collective West) has brought itself, is forcing the American leadership to aggravate relations with China, in a sense similar to a stabbing between Siamese twins.
Both Washington and Beijing strategically want to preserve the system of an open economy, since their well-being is directly dependent on income derived from foreign trade. But at the same time, China has concentrated most of the industrial production of real goods, while the only export product of the United States is only the dollar – electronic or paper, it does not matter.
This brings the parties to a zero-sum position. America is trying to force China to open free access for American capital to the domestic market of China on American terms. This directly contradicts the Chinese strategy of building the so-called “Middle State” as the only leading economic center of the “Common Welfare Space”.
China can implement this strategy only through the creation of an economic zone that retains most of the elements of the “open market”, but is isolated from the penetration there of any kind of American influence and US-controlled capital. The victory of either side in the growing confrontation can be achieved only through the complete defeat of the enemy.
Earlier in history, such fundamental confrontations have always been resolved exclusively through direct war. The parties understand this, like they are well aware of the specificity of the risks associated with it in the context of the nuclear weapons factor. Therefore, they strive with all their might to implement it only on their own terms.
America, proceeding from its own traditional worldview, is moving through the formation of new military alliances in the Asia-Pacific region, which is trying to reformat into a wider space through its unification with the Indian Ocean. That should allow it to pull into its orbit not only its former allies, such as South Korea and Japan, but also find new ones in the person of Australia and, especially, India. The accelerated degradation of the military and political power of the European NATO allies pushes it towards this.
In turn, China is well aware of the advantages of the recommendation of the Chinese military strategist Sun Tzu, formulated in his work “The Art of War”. Among others, the main instrument for achieving victory in it is the creation of such a political and economic situation when victory in the upcoming battle is achieved even before it begins. Moreover, its achievement can force the adversary to admit defeat even without trying to carry out the battle in practice.
Now time is on China’s side. America has been torn apart by an internal fight between its largest clans. Society is plunging into a destructive abyss of “new reality and new democratic values”, undermining the integrity of even such fundamental institutions as the armed forces. And the obvious slowdown of American progress in advanced technologies no longer allows the United States to hope to maintain world hegemony based on the concept of the “silver bullet” (RUSSTRAT report on this here), which previously allowed winning wars over backward countries due to the indisputable technological superiority. Both in general and specifically in armaments.
In this regard, Russia finds itself in a unique position. On the one hand, its annual GDP of $1.66 trillion is only 1.93% of the total global economy, and 8.86-fold less than that of China. Although one can certainly argue about the degree of adequacy of estimates precisely through GDP, the final conclusions through any other parameters will, in principle, remain practically the same. The economic power of Russia does not allow it to significantly influence the world economy, as we would like it to, even taking into account its level as one of the leading exporters of energy resources.
But at the same time, on the other hand, Russia continues to remain a permanent member of the UN Security Council with a veto right, its nuclear status reliably ensures national security in the form of a “big nuclear war”. In addition, the success in modernizing conventional weapons has already brought the Russian Armed Forces to the level of one of the strongest, if not the strongest army in the world.
This creates the preconditions for military rapprochement between Moscow and Beijing. Up to the creation in the medium term of a certain military alliance, the prospects of which have already been analysed in detail by the RUSSTRAT Institute.
However, this term should not be taken too bluntly. Geopolitically, the growing closeness of rapprochement between Moscow and Beijing is caused by the coincidence of long-term interests and a common enemy striving for the political and economic absorption of both countries. But this does not at all mean the formation of a common command and control structure or a single general staff.
Moreover, there can be no talk of any transfer of at least part of its armed forces under a foreign, even if very allied, command. And the prospect of the participation of PLA units in a hypothetical Russian war with NATO “in the west”, or Russian units in the battles for Taiwan or the waters of the South China Sea, is completely fantasy.
The Russian-Chinese rapprochement is due only to the situational coincidence of geopolitical interests in the current configuration of external conditions, with the obligatory preservation of mutual independence and geopolitical subjectivity.
This makes us think about a very difficult question. Why China needs Russia is well understood. Covering Beijing with the “shadow from the Russian strategic nuclear umbrella” guarantees that America will not try to lay out its nuclear trump cards over mainland China.
And without them, Washington is forced to waste time on geopolitical maneuvers to create a very complex configuration of an extremely narrow window of conditions allowing the Pentagon to expect to defeat the Chinese army in a strictly local “war for Taiwan” (a report on this topic was published by the RUSSTRAT Institute in June 2020).
But this is why Russia needs China, and won’t Moscow’s rapprochement with it now lead to a hopeless position as a junior partner later, in the world after the United States? The answer to this question is closely related to several key aspects.
The first among them should be considered the economy. China already provides 55% of the total world production of aluminum, 49% – steel, 31% – nitrogen, and in some areas its share generally exceeds 80%. China leads in shipbuilding (45%), household appliances (64%), mobile phones (71%), personal computers (91%).
China has successfully pushed Germany as the main supplier of industrial and consumer goods to the Russian market. At the end of 2020, every second mobile phone sold in Russia, every third TV, two out of every three household appliances (microwave ovens, air conditioners, washing machines, etc.) were produced in China.
Moreover, the overall foreign trade balance of Russian-Chinese trade becomes negative. From the $103.9 billion of the total trade turnover for 2020, Russian exports amounted to 49.06 billion (a decrease in comparison with 2019 by 13.61%), and imports reached 54.9 billion (an increase of 1.44%). This ultimately led to a negative trade balance of $5.84 billion, although back in 2019 it was positive by $2.664 billion.
In the total volume of Russian sales to China, 65.4% are mineral products (nomenclature of goods subject to foreign trade code 25-27), that is, mainly energy carriers. The share of other groups is much lower: wood and pulp and paper products – 8.75%, food and agricultural raw materials – 5.62%, machinery, equipment and vehicles – 4.6%, chemical products – 3.83%. China has cut purchases of Russian fertilisers by $310 million, electrical machinery and electronic equipment by $250 million, and inorganic chemicals by $190 million.
Given the more than eightfold difference in the scale of the economy as a whole and more than fifteenfold in the size of industrial production, this result is not surprising.
The second factor is also the economy. More precisely, the difference in the volume of the solvency of domestic demand. And the point here is not so much the difference in money in terms of money as in the general ability to ensure industrial and especially scientific and technical development only at the expense of internal reserves.
China’s earnings on its own domestic market are more than enough to finance a vast program of technological research in a wide range of areas – from material processing to organic and inorganic chemistry, from microprocessors and robotics to the creation of new, more advanced and efficient materials, the development of new communication technologies (for example, 5G), progress in supercomputers and artificial intelligence. In particular, the total productivity of supercomputers already operating in China is more than 20 times higher than the Russian indicator.
Yes, in the meantime China is still noticeably lagging behind in a whole list of disciplines. Including, in the creation of modern aircraft engines, hypersonic missiles, and a number of other areas, including radar and nuclear power. But the size of the gap is rapidly decreasing.
As follows from the promulgated long-term plans and short-term targets of the 14th Five-Year Plan, in the next 15–20 years, Beijing intends to bridge the gap in nuclear energy and become a leader in the field of thermonuclear fusion.
That is, there is no longer any hope of compensating for the lag in the rate of technological growth at the expense of Russia’s existing reserve.
The third factor also lies in the economic plane. For a long time it was expected that the implementation of the Chinese “Belt and Road” global logistics project will provide Russia with great opportunities for its own economic growth in servicing the Chinese trade with Europe.
At least half of the expected growth in traffic volumes along the Northern Sea Route (NSR) and at least a third of railway traffic were laid on it. Among other things, it was believed that China’s need for a radical reduction in the delivery time of goods from China to the European Union and back would provide Russia with the necessary conditions and financial capabilities to create transcontinental lines for high-speed magnetic levitation trains.
However, it is already clear that the “Belt and Road” project reached its peak back in 2016–2017. In this regard, China has occupied everything it could, and is now moving to the development of the occupied space. And the developing economic crisis in Europe, coupled with the inadequate European project for the transition to “hydrogen energy”, directly indicates the prospect of a decrease in consumption there. That is, in the foreseeable future, transit freight traffic through the Russian Federation will tend to gradually decline. Not completely to zero, but to values below the current level.
In other words, one cannot count on the use of transit revenues as a source of growth in Russia’s domestic economy.
At the same time, there are a number of positive factors that make up the strong side of the Russian position. Among them, first of all, the energy sector should be noted. For at least the next 20-25 years, China will maintain an urgent need for energy resources. Both now traditional, such as oil and gas, and promising – the same hydrogen.
The targets outlined by Beijing for the further development of its industry, as well as raising the standard of living of the population within the framework of the program of building a “society of average prosperity” proclaimed there, are already critically running into a shortage of energy sources. And China will not be able to overcome this problem, at least until the middle, or even until the 70s of the current century: if the standard of living of the population is raised, then it will be necessary to increase the production of energy.
The next factor should be considered the urgent need of China to preserve and even deepen the military-technical and direct military partnership with the Russian Federation. Beijing needs a reliable rear and stable good-neighborly relations in the “northern” direction in order to have sufficient freedom of action to form its own closed political and economic cluster in the APR on the basis of the RCEP agreement with the ASEAN countries.
In addition, despite its superiority in financial wealth, China does not have sufficient capacity to influence international security issues in Greater Asia, the Middle East and Africa. Even Iran, which signed an agreement on political, strategic and economic cooperation with China in March, is nevertheless actively seeking rapprochement with Russia. For example, through the expansion of military-technical cooperation with the Russian Federation, from which in the near future he intends to purchase military equipment and weapons worth $5 billion.
Although, it should be noted that on the Black Continent, Russia is already quite tangibly competing with China, and in the future the competition will only intensify.
Summarising what has been said, we can conclude that the question of the further depth of the Russian-Chinese rapprochement for Moscow becomes the task of passing “between Scylla and Charybdis.” Russia strengthening its partnership and even, in a sense, allied relations with China is necessary. However, this process must be carried out taking into account the awareness of the “price” of this kind of relationship, and China’s readiness to similarly support Russia on those topics that are important to us.
This requires the development of a comprehensive, multidimensional strategy that ensures the possibility of such an “exchange” that will not eventually lead Russia into the trap of China’s “junior partner” in the new world.
As the old saying goes, a service that has already been provided is worthless. This means that the provision of the “support” that China needs, primarily in the political, strategic nuclear and energy fields, should be directly linked today with the performance by Beijing of reciprocal services, primarily of an economic nature.
It is undoubtedly necessary to try to develop Russian-Chinese trade more strongly, however, it is possible to expect eventually to return the positive foreign trade balance with it only through the outstripping expansion of trade relations with other ASEAN countries.
China will not allow Russia to become a full member of the RCEP. Otherwise, it will destroy the basis of the concept for the creation of this Agreement. However, now is the time to demand from China to grant special rights and preferences for Russia’s access to the ASEAN economic space within the RCEP framework.
Moreover, these demands should be concentrated in two directions.
Firstly, in terms of conditions for expanding Russian trade, and even certain guarantees of obtaining a market share in the areas of technological goods (fertilisers, chemical products, agricultural machinery and equipment, infrastructure construction, energy, primarily nuclear).
Secondly, Russia should be able to invest its capital in the infrastructural development of the region with the right to subsequently receive a share of the income from its further economic use.
This should be the basis for the process of the “final turn to the East” of the Russian economy as a whole.
It should also be understood that the era of the single global market is ending. Most likely, by the middle of this century, the common planetary trade space, especially under the control of the WTO, will cease to exist. Based on the emerging dynamics of the development of events, including thanks to Russian assistance and support, China will be able to form its own closed cluster.
A similar space, regardless of the outcome of the US-China confrontation, can be created by the United States. Europe will (or will not) be included in it, and if so, in what form or to what extent, it does not really matter. In any case, the concept of a common Eurasian economy “from Vladivostok to Lisbon” is obviously not being implemented even now.
For Russia, this creates a particularly important task of accelerating the formation of its own cluster, capable of providing the domestic market with a solvent capacity sufficient to maintain the ability for further economic and, more importantly, technological development, mainly at the expense of domestic financial resources.
Moreover, territorial expansion for solving such a problem has extremely limited application. Russia can potentially include only Belarus in its cluster. It is no longer advisable to do this with Ukraine in its present form. In the direction of Central Asia, Russia also has rather limited opportunities. Although they, of course, should also be used in every possible way.
However, the main thing should be internal expansion in the economic and infrastructural development of the central and eastern regions of the country. The necessary prerequisites for this exist. As well as the required financial resources to start the process. Only the size of the population and the level of its mobility remain in deficit. Especially in terms of labor resources.
For this, it is necessary to actively improve the logistics connectivity of the country’s territory. It is naive to count on success in this matter, when, conventionally, from Moscow even to Novosibirsk, not to mention Vladivostok, it is much more expensive and more difficult to get from Moscow than to Turkey or Greece. And also to expand programs for resettlement to Russia (including obtaining Russian citizenship) for both “compatriots” and in general for everyone who wants to live and work with us, including citizens of European countries.
Moreover, the destructive economic and cultural processes taking place in Europe (migration, LGBT ideology, etc.) are quite conducive to this. Although, of course, on the condition “to take not everyone, whoever gets in,” but people with the competencies we need and the corresponding internal motivation, should, of course, be a priority.
And, naturally, Russia needs to do everything it can to strengthen and expand its financial and economic expansion in Africa. This is the last of the remaining “still no-man’s” region, the development of which is capable of providing the necessary conditions for increasing the domestic production and economic power of the Russian Federation, as well as increasing its international weight.
To top it all off, it should be noted that Russia desperately needs a new “big goal”, able to not only inspire the inner society, but also become attractive to the outside world. As such, it is possible and necessary to use space.
More than 7 billion people live on the planet today, of which only a little more than a billion are at a relatively high or sufficient material level. The rest, primarily 4.5 billion of the population of the Indo-Pacific region, are actively striving for it. This has already caused a sharp rise in prices for many types of minerals. In particular, non-ferrous and rare earth metals, as well as technologies for efficient production and, more importantly, efficient storage of energy. Both can be obtained through the development of mining technologies in outer space, and hence, astronautics in general.
Once before it has already provided a powerful impetus to the development of science and technology. The vast majority of everything we know and use, from the Teflon coating of pans to plastics, material processing technologies, precision engineering, computing, programming, communications and the global Internet, is a direct result of the “space race” of the second half of the last century. …
The existing resource base does not allow Russia to develop on a large scale all areas of science and technology at once. Moreover, all those in which we have already significantly lagged behind China. But their concentration on a limited list of areas is quite capable of making Russia the undisputed world leader again. Providing points of growth for the industry, and new technological competencies, and additional high-paying jobs, and new markets with high profitability.
In general, this will not only make it possible to compensate for our current “difference” with China, but also create the necessary conditions for maintaining general global equality with it, which is urgently needed for the formation of sustainable partnerships in the future world. Because mutually beneficial alliances can only be created between equal partners. All the rest, sooner or later, lead to the fact that one of the partners is in a subordinate position. And neither we nor China need this.