Russia and China together: Europe pays price for America’s strategy

Despite sanctions imposed by the West, Russia still has many friends and is strengthening ties with the world’s largest economy

February 5, 2015

World Finance speaks to Dr Marcus Papadopoulos, Editor of Politics First, on what Russia’s growing international ties mean for Europe.

World Finance: Well one of the off-shoots of the Russia-Ukraine crisis of course is the two major super-powers, Russia and China, being pushed closer together. And they’re already firming trade ties with energy. So what’s their relationship today?
Marcus Papadopoulos: Politically, relations between Russia and China are in a very, very good state. And of course you can contrast that to the 1960s onwards, when both countries fought numerous border battles, and there was a big falling out.

But since the collapse of the Soviet Union, Russia under Boris Yeltsin and under President Putin have created a very good relationship with each other. Politically there’s a lot of trust now; militarily there is an organisation between them, the Shanghai Cooperation Treaty. And also economically: Russia still supplies vast amounts of oil and gas every year to China.

[R]elations between Russia and China are in a very, very good state

And also the Chinese military, which is growing in the world. And it’s far from being a super-power, the Chinese military. But it still relies on high-tech Russian military components. So for example, the Chinese a few years ago, they managed to get a fifth-generation attack plane in the air. Well, that’s very impressive. But they don’t have the components for the cockpit, and they can’t manufacture, so they rely on Russia. So Russia earns a lot of money every year with supplying China with high-tech Russian goods.

And also there’s the potential for Russia to supply China with natural water. Because China lacks water, and water as we know is vital for industry. And the Chinese have been on at the Russians for numerous years now, to start supplying China with water.

The problem for the Russians is their lakes along the Chinese border, they go north as opposed to south. So the Russians – they’re great engineers – and no doubt one day they will be able to turn those rivers southwards into China. And if they can do that, from a revenue point of view, Moscow will be onto a winner.

World Finance: And energy-wise, how are the two countries linked?
Marcus Papadopoulos: China receives the bulk of its oil and gas from Russia, and pays a great amount of money for that.

And in 2014 we had that huge, that ground-breaking gas agreement between themselves for over 30 years. Russia’s going to supply China with natural gas, and the Chinese will pay $400bn for that: so it’s a huge amount of money there.

So China heavily relies on Russia for its energy, and Russia at the moment relies to a great extent on China for revenue.

Europe is going to suffer

World Finance: So this relationship can’t be good news for Europe.
Marcus Papadopoulos: Europe is paying the price for going along with America’s geo-strategic strategy. That’s what the crisis in the Ukraine is about: it’s been brought about because of the Americans.

If you look at a modern-day map of Europe, on the western borders of the Russian federation, from the Baltic Sea to the Black Sea, you will see its borders are littered with EU and NATO member-states; with the exception of the Ukraine. And the Americans since 1991, Ukraine’s independence, have been trying to draw Ukraine into the west’s orbit.

So the Europeans – apart from the British government – were reluctant to place sanctions against Russia. But nonetheless, the European Union is a staunch strategic ally to Washington; and when it matters, allies stick together.

But nonetheless: Europe is going to lose out. Its SMEs in particular are going to lose out, because they’re suffering at the moment. JCB in Britain has complained to Prime Minister David Cameron that its sales to Russia are going down because of the sanctions. That’s hardly conducive to the British economy.

So ultimately, from a business point of view, Europe is going to suffer. And in the future, if it doesn’t receive the amount of energy that it receives from Russia at the moment, where else is it going to receive it from?