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B'rer Putin in the Briar, er, Bamboo Patch


Update: Bloomberg reports that Russia is seeking Chinese investment. What Bloomberg has a very superficial idea of what is at work: Russia and China now are collaborating on strategic technology. For example, Putin has approved the same of Russia's new S400 air defense system to China, brushing aside past Russian rancor about Chinese reverse engineering of Russian systems. Russia has opened the door to Chinese tech investments in China which it previously prohibited.

"An historic investment-for-resources deal between Russia and China will neuter Europe's punitive efforts over Ukraine and redraw the world's energy map, but more importantly create a Eurasian dynamic that otherwise would take decades to evolve. In the 1970s, former US president Richard Nixon used the region's complexities to divide Cold War enemies. Now his doctrine is being used against America," write my Asia Times Online colleague Francesco Sisci today. I hope he's wrong. Last month I noted in this space that Germany fears a Russian turn towards Asia more than any other outcome of the Ukrainian sitcom.

Sisci writes:

BEIJING -- It has not happened yet, but expectations are already enormous. A massive strategic and economic shift is expected to result from Russian President Vladimir Putin's to China in May.

After decades of fruitless talks, Moscow and Beijing are now likely ready to sign a sweeping deal which will see China invest billions of dollars in Russia, with vast resources being sold in the other direction. This correspondent first saw the agreement signed 20 years ago, when Boris Yeltsin and Jiang Zemin were the presidents, and not much occurred since. However, this time things seem to be real.

In the past, the two parties failed to finalize the fine print of the deal. There were too many differences on the price of gas, the route of the pipeline, the ownership of resources in Russia and on the distribution network in China. Now all these problems are solved -- or so it appears -- because of a sudden change of heart in Russia linked to the ongoing Ukrainian crisis.

The threat for Russia resulting from the crisis is that Europe will not buy its gas and oil, or will decrease its purchases. Oil prices have remained pretty low, despite the fact that the supply from other oil-exporting countries has been low or dwindling...

Now, and for the foreseeable future, problems with the oil supply hurt the producers far more than the Western consumers, who now have access to the American hoard. This makes it an issue of life and death for Russia to find an alternative consumer to Europe. Europe may suffer somewhat without Russian oil, but Russian economy could easily crack without its sales.

Now, apparently, China could realize up to 30% of its energy needs from Russia, which would equal over a third of the latter's production. This will partially unload the European gun of not buying Russian oil and create a new dimension to ties in the whole Eurasian continent. Russian can play Europe against China and vice versa. Beijing knows this, and it is interesting to think about why China is willing to be played and help Russia in this way.

This seems a bit premature; Russia might not let its economic relations with Europe collapse so easily. Germany not only buys hydrocarbons from Russia: as The Economist reported recently, "Russia is Germany’s 11th-biggest export market, worth €36 billion ($48 billion) last year. The Committee on Eastern European Economic Relations, a lobby group representing big businesses, says that 300,000 German jobs depend on trade with Russia, 6,200 companies with German owners are active in Russia, and German companies have invested €20 billion there." Russia does not relish the prospect of economic dependency on China. That is the logic of misguided Western policy, however. We may pull defeat out of the jaws of Cold War victory, two decades after the fact. The stupidity of Western policy is epic.