In 1997, then–Chinese leader Jiang Zemin and then–Russian President Boris Yeltsin jointly declared that a new, multipolar world order had begun. No longer will any one country or group of countries “monopolize” global affairs and “determine the fate of other nations,” Jiang said.
China and Russia’s relationship was warming and the two nations’ strategies aligning after several tumultuous decades in which Communist China clashed with Soviet Russia owing to personal spats between their leaders and disputes along their shared 4,209-kilometer border. In 2001, China and Russia signed the Treaty of Good Neighborliness and Friendly Cooperation, the first pact between the two countries since 1950. China and Russia will “remain friends forever and never become enemies,” the treaty said.
China and Russia have largely lived up to the treaty terms. By 2012, China had become Russia’s largest trading partner with bilateral trade flows growing 11% year on year to reach nearly $50 billion.
Yet the key turning point for contemporary Sino-Russian ties came in 2014 when Russia annexed Crimea, then a Ukrainian territory with a majority Russian population. Subsequent Western sanctions pummeled the Russian economy. Since 2014, Russia’s economy has grown by an average of 0.3% per year (compared with the world’s 2.3% uptick). The sanctions also reduced foreign credits and direct investment into the country, costing the nation $50 billion annually, according to the Atlantic Council.
Western sanctions post-Crimea were the “secret sauce” that made cooperation with China a key priority for Russian leaders, despite Russian policymakers’ misgivings over China’s encroachment in the Russian Far East and Central Asia, Alexander Gabuev, senior fellow and Russia chair at the Carnegie Moscow Center, said during a recent virtual forum hosted by the center. China never endorsed Russia’s annexation of Crimea, but it also didn’t condemn Russia’s behavior, calling on πall parties [to] exercise restraint.” As the West sanctioned Russia, China deepened its economic ties with its neighbor, signing a series of energy deals—including the $400 billion Power of Siberia deal just three months after the annexation—that helped Russia bounce back economically.
By 2018, Chinese President Xi Jinping and Russian President Vladimir Putin cooked pancakes together at a forum in Vladivostok, Russia. The next year, Xi called Putin his “best friend.”
Sino-Russian cooperation has only grown since 2014. Last year, bilateral trade flows hit an all-time high of $147 billion—with oil products accounting for the majority of Russian exports to China. The two countries want to reach $200 billion in bilateral trade by 2024. Russia’s invasion of Ukraine this week and accompanying Western sanctions will likely push China and Russia closer together. With Russian ties to Europe all but severed, Russia will lean even more on its friendship with China, says Brantly Womack, senior fellow at the Miller Center and professor of foreign affairs at the University of Virginia.
Energy convergence
China and Russia developed at wildly different trajectories in the past several decades. From 1950 to 1980, China’s and Russia’s GDP were largely on par. But by 1990, the two nations’ growth diverged. The Soviet Union’s collapse in 1991 shattered its economy. Russia had to build a new country and new economic system. Meanwhile in the 1980s, China, under the leadership of Deng Xiaoping, began pursuing a new, open-door economic policy to bring investment and technology into the People’s Republic.
China is now the world’s second-largest economy; Russia is No. 12, lagging behind countries like Germany, France, Italy, Japan, and South Korea. Many scholars have noted the “asymmetrical” nature of Sino-Russian cooperation: China has ranked as Russia’s top trading partner for many years, while Russia doesn’t factor into China’s top ten. Russia’s status compared with China’s makes it the “junior” partner in the relationship, “a status Putin [endures] for now, but which will chafe with time,” says Robert Daly, director at the Kissinger Institute on China and the United States. Geopolitically, “Russia needs China more than China needs it,” he says.
Still, energy is one area in which China depends heavily on Russia and where the two countries’ interests converge. China is one of the world’s top consumers of oil and Russia one of the key producers.
In China’s eyes, Russia is viewed as valuable and reliable—and is arguably its most important energy partner, Erica Downs, senior research scholar at Columbia University’s Center on Global Energy Policy, said at the Carnegie event.
Russia is China’s second-largest supplier of crude oil (Saudi Arabia ranks first), its second-largest supplier of coal, and third-largest supplier of liquefied natural gas (LNG). And Russian oil holds a critical advantage: It’s supplied to China via overland routes or short distances by sea, which brings a “level of security” that’s invaluable to the Asian nation, Downs says. In the event of conflict between the U.S. and China, overland shipping routes mean that the U.S. Navy wouldn’t be able to block Russian oil flows to China, says Artyom Lukin, an international relations scholar at Vladivostok’s Far Eastern Federal University who focuses on Russia’s Far East and its ties with Asia.
Conversely, China’s oil imports from other suppliers in the Middle East and Africa travel long distances by sea. Seventy percent of China’s petroleum and LNG supplies pass through the Strait of Malacca, the shortest sea route connecting the Middle East and East Asia. But China has long been concerned about its dependence on the Malacca passageway. The U.S. Navy is the strait’s main security provider, which exposes China to a potential naval blockade, according to the Warsaw Institute.
China isn’t beholden to Russia’s energy since it’s increasingly importing oil from Central Asian and Middle Eastern sources and is committed to green power in the long term, says Daly. But for now, Russia has proved that it can deliver in times of crisis. China badly needed coal last year, but since 2020, it had unofficially banned one of its major coal suppliers, Australia, owing to a diplomatic spat. As a result, China boosted its Russian coal imports to 3.7 million tonnes in September 2021—a 28% jump from the month prior, and a 230% surge from September 2020, says China’s customs data.
Last year, Russia accounted for nearly 5% of China’s coal imports at 15.25 million tonnes. China’s natural gas imports from Russia grew almost 51% year on year in 2021. Pipeline gas in particular surged 154% from 2020.
Sanctioned, again
On Monday, Putin ordered Russian troops into eastern Ukraine and acknowledged the “independence” of two separatist regions in the area, Donetsk and Luhansk. And on Wednesday evening, the Russian president announced a “special military operation” in Ukraine to “demilitarize” the country, which amounts to an invasion. Putin said his plans don’t include occupation of Ukrainian territory. Explosions have been heard in several Ukrainian cities, including capital Kyiv, and Ukraine’s second-largest city, Kharkiv.
Putin’s Monday actions triggered fresh sanctions from the U.S., U.K., and EU that have cut Russia off from Western financing. On Tuesday, Germany—the biggest buyer of Russian gas—moved to halt approval of the Nord Stream 2 pipeline, an $11 billion project jointly financed by Russia and Western energy companies. The Biden administration on Wednesday announced additional sanctions on Nord Stream 2 and the company behind it, a Swiss firm owned by Russia state-owned gas giant Gazprom.
China’s reaction to Russia’s incursion into Ukraine echoed its response in 2014. On Monday, the Chinese envoy to the United Nations called on all parties to exercise restraint and avoid “fueling tensions.” China this time around also hasn’t condemned Russia’s recognition of eastern Ukraine’s two breakaway territories. China won’t openly criticize Putin’s actions, but Russia’s invasion of Ukraine still threatens Beijing’s interests “[since] China has good relations with Ukraine and other Eastern European countries,” says Womack.
Yet this new round of Western sanctions will only deepen Russia’s economic dependence on China, primarily in the energy space, says Lukin. Damaged ties with European markets mean Russia will focus on increasing its share of energy exports to China. Meanwhile, China will be “happy to exploit Russia’s predicament with the West to get better commercial terms for Russian oil, gas, and other commodities,” he says. The sanctions could also make Russia more reliant on Chinese investment to finance its Siberian and Arctic oilfields, says Yongjing Zhang, an associate professor of international affairs at the University of Ottawa who studies Chinese economic governance. Earlier this month, Putin revealed new Sino-Russian oil and gas deals worth $117.5 billion.
Russia is already “accustomed to deprivations” from sanctions, says Daly. After 2014, Russia braced for new sanctions and worked to “sanctions-proof” its economy, paring down debt and reducing Russia’s dependency on the U.S. dollar, Gabuev said during the Carnegie event. China will be an integral part of Russia’s strategy to mitigate the effects of the sanctions. Any Sino-Russian energy deal translates to cash flows that will go “straight to the Kremlin coffers,” he noted.
More than a partnership of convenience
China and Russia’s economic intertwinement is tight in sectors beyond energy.
China in recent years has bought weapons, timber, and food items such as fish from Russia. It’s even leased thousands of hectares of farmland in Russia’s Far East for agricultural purposes, like growing soybeans. Just as in 2014, China’s economic ties with Russia will help mitigate the consequences of Western sanctions, giving Russia “more flexibility” in case Western actions target Russian exports, Maria Snegovaya, a visiting scholar at George Washington University, told the New York Times.
China and Russia have also cooperated to build their own financial infrastructure to protect against Western interference. The U.S. had mulled blocking Russia from SWIFT, the global payments communication system—but is now no longer considering this option over fears of bolstering China- and Russia-led alternative payment systems.
In 2015, China launched its Cross-Border Interbank Payment System (CIPS), an independent clearing system using the RMB as its quote currency. Russia is developing its System for Transfer of Financial Messages (SPFS), says Chris Devonshire-Ellis, founder of consultancy Dezan Shira & Associates. The majority of China-Russia transactions are still denominated in U.S. dollars and traded via SWIFT, but “both systems are now in position, making it relatively easy to build an independent Russian-Chinese financial system by linking the two,” Devonshire-Ellis says.
Womack cautions that the Sino-Russian relationship is “mutually useful, but not warm and cozy.” The West feels threatened by “China’s rise and Russia’s assertiveness, but their interests and capacities are very different,” he says. Both countries have concerns about the U.S., but NATO is Russia’s greatest worry, while Taiwan is the key issue for China.
Still, China and Russia’s adherence to a common principle of “not always with each other, but never against each other,” have allowed relations to reach an important juncture, Gabuev noted. As Russia shuttles soldiers toward Ukraine, Russian troops at its shared border with China are at a historic low—a clear byproduct of stronger bilateral ties.
Much has changed since 1997 when Jiang and Yeltsin declared a new, multipolar world order: The U.S. is now no longer the world’s superpower that can unilaterally call the shots, says Lukin. Sanctions helped bring Beijing and Moscow together, and Xi and Putin have fostered a close relationship “in hopes of establishing new narratives and new rules,” says Daly. “They’re tired of having their choices shaped by the U.S. and their reputations defined by Western media.”
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