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Playing with Fire – China’s rise and the Russian Far East

In 2017 the Trump Administration released its National Security Strategy, a comprehensive document which highlighted the accelerating strategic competition between the US and increasingly belligerent regional powers. Amongst these powers, China and Russia were singled out as principal threats to US global influence.

This represented a fundamental shift in the foundational structures of American foreign policy. In the 1990s and 2000s, the common view was that Russia and China would converge with the West on issues such as democracy and human rights.

This notion was shattered by Russia’s armed intervention into Ukraine in 2014 and China’s increasing domestic authoritarianism which culminated in the establishment of Xi Jinping as ‘president for life’ in 2018. 

While China and Russia have separate geopolitical ambitions, they share the aim of making the world a safer place for authoritarianism – which serves as the foundation of their modern relationship. 

Despite this common objective, the two nations are not allies – elements of distrust linger and a significant power imbalance exists which grows each year as China pulls ahead. This represents a significant long-term threat to Russia.

The Primakov Institute of World Economy and International Relations - a body close to the Kremlin - recently published their global outlook to 2035. It outlined that Russia’s top priority is ‘preserving and improving its position in the world hierarchy of powers’. However, it notes that accomplishing this objective will require significant economic strength. 

Unfortunately for Russian policymakers, this strength has proved elusive since the introduction of sanctions by Western nations after itsr 2014 annexation of Crimea. Recent research has estimated that the Russian economic outlook has subsequently shrunk by more than ten per cent compared with its 2013 projections. 

Faced with poor economic conditions and concerned that this may foment domestic unrest, the Kremlin desperately searched for alternative customers and sources of funding - soon settling on the obvious solution, China.

Within months of the first round of sanctions being introduced, a US$400 billion (AUD$581 billion) gas deal between Gazprom and China National Petroleum Corp - which had been stuck in limbo for a decade - was signed off.

The lucrative nature of the deal contributed to a drive within the Kremlin to develop the Russian Far East (RFE). According to this vision, the region would be transformed into a new economic gateway to the Asia-Pacific – producing the economic growth Russia required to fund its geopolitical ambitions. 

The RFE encompasses 36 per cent of Russia’s entire territory. The strategic wealth of the region is primarily energy-producing raw materials, with 10-14 billion tons of oil and 14-15 trillion cubic meters of gas. Despite this bountiful wealth, the region has faced a chronic lack of investment, which is tied to its extremely small population of only six million.

In an attempt to rectify these problems, the Kremlin embarked upon an ambitious modernisation program. It estimated that 11 trillion rubles (AUD$251 billion) would be needed to be invested into the RFE in order to realise its full economic potential. Given its relatively poor economic situation, Russia again looked to China.

The normally intense scrutiny from Russia’s security establishment was lessened in order to facilitate this increased investment. It is a strategy which has paid dividends, with Chinese companies buying a ten per cent stake in Russia’s largest oil field and stakes in some of Russia’s largest copper and nickel mines. Russia’s trade turnover with China also boomed, climbing from around US$5 billion (AUD$7.3 billion) in the early 90’s to above US$100 billion (AUD$145 billion) in 2018.

While on the surface, this economic relationship seems broadly positive - it hides several risks to Russia. Chief amongst these is the risk that the RFE will gradually become economically dependent on the Chinese economy - providing Beijing with significant leverage, both locally and in Moscow. Aspects of this risk can be seen in the one-sided 2019 trade figures, with China as Russia's top trading partner; but Russia being only China's tenth-largest.

The low population of the region has also been identified by the Kremlin as a potential risk. This can be seen in a 2015 statement which read that, “The basis and strength of the Far Eastern region’s economy with be grounded not in its vast territory or resources. They will be grounded in its people.” Working to solve this issue, the Kremlin established the ‘Hectare in the Far East’ scheme, which promised free land to Russians willing to move east - only to see it fail dismally.

Given the significant roughly 111 million strong Chinese population on Russia’s border, the demographic fears of local Russians can be easily understood. However, extensive analysis has shown that this fear is unfounded – a stance which is supported by the fact that only 8,000 Chinese migrants have arrived per annum since 2011. 

Despite the current situation, the demographic risk cannot be discounted. Beijing has demonstrated that it is willing to use its population as a tool of state power. This can be seen clearly in Xinjiang where targeted investment and subsidies offered by the Chinese government have resulted in the mass migration of ethnic Han Chinese. In 1949, Han represented only 6 per cent of the region’s population of 22 million; in 2010 this had exploded to 40 per cent.

Thus, while Russia’s position and territorial integrity may not be under immediate risk – the pursuit of Chinese customers and capital by Russian policy makers could have dire long-term consequences for the RFE; especially if China’s maritime trade routes were to be disrupted by either sanctions or armed conflict. 

James Stevens is the Europe and Eurasia Fellow for Young Australians in International Affairs. The views expressed here are solely those of the author.


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