Tag: China/Russia Relationship

China’s Triangulation Of Russia And The West

The Daily Escape:

Joshua tree in bloom, Joshua Tree National Landmark SW, UT – March 2023 photo by Lisa Simer

We’re back at the Mansion of Wrong after a few lovely days in St. Helena, CA. Surprisingly, it seems that lots of things happened while we were away. From Heather Cox Richardson:

“So, for all the chop in the water about the former president facing indictments, the story that really seems uppermost to me today is the visit China’s president Xi Jinping made today to Moscow for a meeting with Russia’s president Vladimir Putin.”

In 2015, shortly after Russia intervened in the Syrian Civil War, Wrongo asked a visiting Russian author who spoke at our local library whether Putin wanted to move Russia closer to the west or to the east. He said unequivocally that Putin was a product of the west and would keep Russia in the west’s orbit.

It’s clear that he was wrong. Russia has moved away from the west, possibly permanently. Earlier in March, Wrongo said the following:

“The US is attempting to isolate both China and Russia. With Russia, we’re using ever-tightening economic sanctions. With China, we’re building a geographic containment strategy among our allies in Asia.”

And on Monday, Chinese President Xi met with Russian President Putin in Moscow. Here’s a meeting summary from the blog Institute for the Study of War:

“… [the meeting]…on March 20…offered a more reserved vision for Russian-Chinese relations than what Putin was likely seeking. Xi and Putin touted the strength of Chinese-Russian relations in their meeting…but offered differing interpretations of the scale of future relations….on March 19 Putin published an article in Chinese state media in which he argued that Russia and China are building a partnership for the formation of a multipolar world order in the face of the collective West’s seeking of domination and the United States pursuing a policy of dual containment against China and Russia.”

….Xi offered a less aggressive overarching goal for Russian-Chinese relations in his article published in Russian state media….in which he noted that Russia and China are generally pursuing a multipolar world order but not specifically against an adversarial West. Xi instead focused…on presenting China as a viable third-party mediator to the war in Ukraine….

David Ignatius concluded in the WaPo that the meeting was about:

“A strong China…bolstering a weak Russia….The Chinese aren’t providing weapons (yet), but Xi certainly offered moral and psychological support in what might be described as a get-well visit to an ailing relative….The paradox of the Ukraine war is that Putin’s bid for greater power in Europe has made him weaker. This diminished Russia will fall increasingly under China’s sway….Maybe that’s the biggest reason for Xi’s…visit: He is bolstering a flank against America and the West.”

China’s dominance over Russia will grow if Russia cannot find a way to end the war in Ukraine. Russia has lost its energy markets in Europe because of the invasion, so it must depend heavily on demand from China. China’s growing economic power in Asia coupled with its capabilities in space, cyber, and artificial intelligence will increasingly dwarf Russia’s.

Russia’s economy is concentrated on exports of energy. It also has a major population problem. The Economist reports: (emphasis by Wrongo)

“Over the past three years the country has lost around 2million more people than it would ordinarily have done, as a result of war, disease and exodus. The life expectancy of Russian males aged 15 fell by almost five years, to the same level as in Haiti. The number of Russians born in April 2022 was no higher than it had been in the months of Hitler’s occupation.”

More:

“…the life expectancy at birth of Russian males plummeted from 68.8 in 2019 to 64.2 in 2021, partly because of Covid…Russian men now die six years earlier than men in Bangladesh and 18 years earlier than men in Japan.”

And the Economist says the exodus of well-educated young people at the start of the Ukraine War also hurts Russia’s future. According to its communications ministry, 10% of IT workers left the country in 2022. Many were young men, further skewing Russia’s unbalanced sex ratio. In 2021 there were 121 females over 18 for every 100 males. More:

“Demographics is rapidly making Russia a smaller, worse-educated and poorer country, from which young people flee and where men die in their 60s.”

As Wrongo said, separating China from Russia used to be a central goal of US foreign policy. The Biden administration tried that strategy in reverse: Warming relations with Moscow at the June 2021 summit in Geneva in part to concentrate on the challenge China presented.

How did that work out?

Now it’s China trying the role of triangulator. Xi’s playing off the split between the US and Russia, helping Putin, but also keeping some distance while building China’s bona fides with the third world.

Xi’s also used China’s close relations with Iran to make a diplomatic breakthrough between the Saudis and the Iranians, something that the US could never achieve.

We seem powerless to blunt what’s happening before our eyes.

And all the while, the Republican Party of the world’s greatest superpower argues about drag queens and wokeness.

Wake up America! Check out what China, Russia, Iran and Saudi Arabia are building for us. You’re not going to like it.

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Will Sanctions Hurt the Dollar’s Role in Trade?

The Daily Escape:

Cherry Blossoms, Univ of Washington, Seattle, WA – March 2022 photo by Erwin Buske Photography

One of the most important elements in the undeclared war between the West and Russia is how sanctions are changing both international trade and the international payments system.

The West has basically frozen Russia out of both. First, by taking Russia out of the SWIFT payments messaging system, and second, by sanctioning Russian banks and the Russian Central Bank. Third, by seizing Russia’s currency reserves that were held in the West.

All of this means that Russia can’t easily accept dollar/euro payments for exports and then convert them into rubles for use at home. By losing access to the international currency markets, it’s become impossible for Russian businesses exporting their energy, goods, or commodities to get paid. This may be a historic moment in economic history.

By freezing hundreds of billions of dollars of Russian reserves, the Russians no longer can access those dollars or euros. Sanctions mean that even the dollars and euros they could create through trade cannot buy much in the countries that support the sanctions.

Naturally Russia is looking for work-arounds for this dilemma. Selling the West anything in dollars or euros no longer makes sense: They can’t use them at home without exchanging them for rubles. And sanctions make that very difficult, since they’re closed out of our banking system.

There are two ways around this. Either use Russian banks that are not banned from SWIFT or go through an informal third-country currency exchange. Russia’s first effort is to only accept payment in rubles for its exports to “hostile nations”. That is, those nations who have imposed sanctions because of Ukraine.

In order to buy Russian oil and gas which they desperately need, Europeans will have to pay in rubles. That means either selling dollars/euros for rubles or selling them for yuan (China) or rupees (India), two countries that are not part of the sanctions regime.

The West’s move has the potential to upend the world’s trading system which today relies on payments in dollars. The dollar has been the world’s principal reserve currency since the end of World War II and is the most widely used currency for settling international trade. The dollar represents about 62% of global trade, down from much higher levels before the euro was established. The other important currencies are the euro at 20.1% and the Japanese yen at 5.7%. China’s yuan is at just 2.0% of trade settlements.

It is increasingly likely that Russia’s move will result in a further “de-dollarization” of trade. Recently, there have been new attempts to abandon the dollar. Saudi Arabia and China are planning to use the yuan in a new oil deal. Russia and India are negotiating to pay for trade in rupees.

China’s energy trade with Russia uses the dollar. Chinese energy imports from Russia soared 47.4%, an increase of more than $52.9 billion from 2021. This accounts for more than 65% of China’s total imports from Russia. Since the sanctions, both countries have stated their intention to move more of this trade to yuan.

A new multilateral financial system is emerging before our eyes. Who the participants will be, and what rules they will follow, are up in the air. The dollar will remain primary between the US and its allies, but alongside it, there could develop Russia-yuan, Saudi-yuan and India-yuan arrangements for trade in oil, minerals, and industrial products. Shifting just part of the global oil trade into the yuan is potentially huge. Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s GDP last year.

We’re likely to see more trade occurring in more currencies, probably on a number of exchanges. We will see the world realign into different trading and monetary blocs, like there were in the past.

However the Ukraine war is settled, the Russian claims that the US has shot itself in the foot about the dollar’s dominating role in trade has a ring of truth. In the past, the US took Iran’s reserves after the Shah was overthrown. We froze Afghanistan’s foreign reserves earlier this year and now the West has done the same to Russia. A few years ago, the UK froze Venezuela’s gold in the Bank of England.

These systems are built on trust, and for the next few decades, trust may be lacking. So we’re looking at the possibility that there will be two quite different geo-political philosophies operating as trading partners as the non-US world develops its alternatives to the dollar as the world’s dominant trading currency.

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Sunday Cartoon Blogging – February 6, 2022

According to Worldometer data, the US Covid death toll is now at 924,000. Last year, on June 1, 2021 the US death toll was 615,000. That’s the minimum number of deaths we could have suffered prior to the widespread availability of Covid vaccines in the US.

That 600,000± pre-vaccine death toll is comparable to the deaths that occurred in the Civil War. We’ve studied the Civil War for generations, although it’s doubtful that the Republican Right wants America to study all that much about Covid. On to cartoons.

As someone (?) once said, it takes a village, and we don’t have one:

The Olympics are on TV. Should we watch? Views differ:

Supreme Court nominations of women through time:

Biden’s alternate nominating strategy:

Trump doesn’t care who knows:

Putin and Biden ridin’ around the Ukraine speedway:

The NYT said on Saturday that portions of the Russian army near Ukraine have reached full combat strength. No one knows what will happen next, but there seem to be two likely outcomes. First, that any conflict is limited to Ukraine territory or second, that it moves beyond Ukraine to other parts of Europe.

If it goes beyond Ukraine’s borders, we could quickly find ourselves again on the threshold of nuclear war, since that’s a red line for NATO. But Russia also has other cards to play. They could launch massive cyber-attacks on the US, attacking and disabling our power grids, communications systems, and/or our financial system.

We would try to do the same inside Russia.

Wrongo isn’t trying to spread fear. He’s expressing the hope that we can get past all of the hollow political posturing and take a cold, hard look at what we’re truly trying to achieve if we decide on military intervention on behalf of Ukraine.

In a sense, the world changed on Friday when China’s Xi and Russia’s Putin met in Beijing. Their joint statement is unequivocal. China & Russia are now explicitly willing to at least challenge or possibly replace, Pax Americana, in Eurasia.

Borrowing from ancient history, in 560 BC, King Croesus was considering war on Persia. He consulted the Oracle at Delphi. Famously, the Oracle’s forecast was “If you make war on the Persians, you will destroy a great empire”. Let’s hope that Biden is receiving less ambiguous advice.

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War With Russia? Over What?

The Daily Escape:

Bailey’s Island, ME – January 7, 2022 photo by Eric Storm Photo

Russia has decided the time is right to challenge the balance of power in Europe. The talks between Moscow and the US, and between the EU, NATO and Russia were motivated by two reasons. First, Russia’s long time concerns about NATO encroaching on their Western border. Second, the view in the West that Russia, after massing troops on the Ukraine border, is going to invade Ukraine and absorb it.

Putin told Biden in early December that he was looking for European security guarantees. They were later presented by Moscow in the form of two draft treaties, one a Russian-US security treaty, the other a security agreement between Russia and NATO. That led to the recent talks that seemingly went nowhere.

The pawn in this diplomatic game is Ukraine. The basic options for Ukraine are the same as were discussed in 2014: Alignment with Russia, alignment with the EU/NATO or balancing between the two.

But to Moscow, Ukraine isn’t the problem. Putin thinks it’s Washington.

We should remember that Putin laid out his position to not accept any further eastward expansion of NATO in his speech to the Munich Security Conference in February, 2007. He hasn’t changed his thinking.

Both sides know that Ukraine is an impoverished, de-industrialized, divided, and corrupt mess. Ukraine ranks 117 out of 180 countries on Transparency International’s corruption index. Why would either side want to take over responsibility for Ukraine?

Also, Russia understands that the NATO expansion hadn’t been on the table for years until Putin brought it up. Suddenly, he has the West debating an issue that wasn’t an issue for a long time. Ukraine hardly qualifies as a potential NATO member – it doesn’t have the resources to defend itself. There’s no way it could really contribute to defending other countries in Europe, even though they did send a few troops to Iraq and Afghanistan.

So why would Russia attack Ukraine? Moscow is fully aware that while its troops would be welcomed in Eastern parts of Ukraine they wouldn’t be in others. Yet, we learned yesterday that Russia withdrew its diplomats and their families from Kyiv:

“According to one senior Ukrainian security official, 18 people — mostly the children and wives of Russian diplomats boarded buses from Kyiv back to Moscow. About 30 more Russians left within the ensuing days, from the Kyiv embassy and a Russian consulate in Lviv. The Ukrainian security official said Diplomats at two other Russian consulates have been told to prepare to leave Ukraine.”

Anatol Lieven, writing in Responsible Statecraft, wonders what the US, NATO and the Europeans are thinking. They’ve rejected Russia’s conditions for an agreement since they were not willing to rule out expansion to Ukraine, Georgia, and other former Soviet republics: (emphasis by Wrongo)

“…NATO has no real intention of admitting Ukraine, nor of fighting Russia in Ukraine. Both Washington and Brussels have openly ruled this out. Indeed, NATO could not do so even if it wanted to. US forces in Europe are wholly inadequate to the purpose, as are what is left of the British and French armies.”

It’s possible that Russia is attempting to split Germany from the rest of Europe. Germany is reliant on Russia’s natural gas to a greater extent than other European countries. Assuming that Lieven is correct about NATO military weakness, it’s also possible that Russia is trying to intimidate NATO. According to Adam Tooze, Russia accounts for about 40% of Europe’s gas imports. And a rupture of relations will result in the complete embargoing of Russian gas and oil to European customers.

While the US, NATO, and the EU have all promised “unprecedented sanctions,” against Russia if they invade Ukraine, sanctions only matter if the other side cares. If Russia decides to rupture relations with the West, it will have calculated that it would survive more economic sanctions. The primary Western threat is to block Russia from using the SWIFT electronic payments system. But it’s possible that Russia could survive being blocked from SWIFT for longer than Europe can survive without Russian energy.

Despite that threat, Western allies are sending dangerously contradictory messages about their willingness to impose anything on Russia beyond a financial slap on the wrist. One variable that sums up Russia’s commanding position in a sanctions environment is Russia’s foreign exchange reserves:

With north of $600 billion in reserves, Russia is just behind China, Japan, and Switzerland. This gives Putin the capacity to withstand sanctions on the rest of the Russian economy.

Putin has a timeline. In 2024 he faces a choice as to whether to continue in power or to begin to prepare for his final exit. At that point, he will be 72. We have to assume that by then, he would like to have drawn a line on Western expansion.

Also, 2024 overlaps with the end of Biden’s first (only?) term as president. So, setting the terms of Russia-US relations on the expansion issue must be a priority for the Kremlin. Biden has clearly signaled that his priority is China and that he is willing to pay a political price for retrenching its strategic position (Afghanistan). Perhaps that opens the door for a Russian deal in Europe.

Lost in this discussion is the possibility that directly confronting Russia could drive them to sign a joint defense treaty with China. That would be a world-changing diplomatic move, assuming it included a mutual defense provision.

It would be a balance of power earthquake, a real-life demonstration Mackinder’s Heartland theory, which states that:

  • Who rules Eastern Europe commands the Heartland
  • Who rules the Heartland commands the World Island
  • Who rules the World Island commands the world

Mackinder thought of the heartland as the core of Eurasia, and he considered all of Europe and Asia as the World Island.  Think of such an alliance controlling much of the world’s natural resources, having global leadership in manufacturing, and the best of STEM education. Imagine their combined military and naval might joined in a military pact.

There is still a chance that US flexibility in two areas may avert a diplomatic meltdown with Russia. The first would be a NATO commitment to deploy no new forces in NATO countries close to Russia’s borders, in return for Russian limits on new deployments and the stand-down of the troops now deployed on Ukraine’s borders.

The second would be genuine US support for the failed Minsk II agreement which focused on autonomy for a demilitarized Donbas region within Ukraine. Donbas autonomy within Ukraine would be a serious barrier both to Ukraine seeking NATO membership and would therefore indirectly meet Russia’s key concerns.

NATO, the US, and the EU need to come to a more modest view of themselves and their role in the world. We should abandon the empty and hypocritical false promise of further NATO expansion and seek a reasonably cooperative relationship with Russia.

Otherwise, we can go on living in our world of make-believe, a world that may easily be shattered by harsh realities.

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Trump’s Tariffs Unite China and Russia

The Daily Escape:

Detail of the Peacock Gate, the City Palace, Jaipur India – photo by Miya.m – CC BY-SA 3.0

Do you know about the Eastern Economic Forum (EEF)? The EEF was started by Russia in 2015, as part of Moscow’s push to revitalize its ties with Asia after its relations with the West began to sour. The US doesn’t attend, although CA governor Jerry Brown attended in 2017.

Now, it attracts heads of state from around the East Asian region. President Xi of China attended this year for the first time. It was the third time that Xi and Putin have met in 2018, and the outcome of the EEF meetings could have significant implications for the US.

The Diplomat reported that according to Li Hui, China’s ambassador to Russia:

At present, China-Russia relations are at their best in history…the two heads of state attending significant events held by each other are important manifestations of the high-level bilateral relations.

So, why now? What’s behind China’s and Russia’s fast-developing relationship? It seems to be the US tariff war. The Asia Times says:

Xi defines the partnership as the best mechanism to ‘jointly neutralize the external risks and challenges’. For Putin, ‘our relations are crucial, not only for our countries, but for the world as well.’

At the EEF, Putin and Xi agreed to keep increasing bilateral trade payable in yuan and rubles, bypassing the US dollar. Putin also swiped at Trump’s tariff policies:

The world and global economy are coming up against new forms of protectionism today with different kinds of barriers which are increasing….basic principles of trade — competition and mutual economic benefit — are depreciated and unfortunately undermined, they’re becoming hostages of ideological and fleeting political situations, in that we see a serious challenge for all of the global economy, especially for the dynamically-growing Asia-Pacific and its leadership…

Reuters reported that Xi also appeared keen to foster closer relations with Russia:

Together with our Russian colleagues, we will increase fruitful co-operation in international affairs and intensify co-ordination…to oppose the policy of unilateral actions and trade protectionism…

Their relationship will continue to improve, since the Trump administration plans to continue ratcheting up its trade war. Trump recently threatened placing tariffs on all Chinese exports to the US.

And, on the same day as Xi arrived for the EEF, Russia kicked off its Vostok 2018 military exercises, with China taking part for the first time.

All of this is largely a giant signal to the US, since Russia can’t come close to replacing the US as a major trade partner for China. Sino-Russian trade is less than $100 billion per year, while trade between the US and China was more than $630 billion last year.

China’s strategy is to start by reducing its dependence on US agricultural imports. One example is soybeans. Econbrowser reports:

The Chinese plan is — in addition to relying on Brazil and Argentina — to switch to other sources, like palm mill, rapeseed, sunflower seed, and other countries, such as Russia, Ukraine and Kazakhstan, for soybeans. Obviously, the development of other countries’ ability to grow soybeans will take time. But that was also true for Brazil.

More broadly, attending the EEF gave Xi another platform from which to attack the US trade war, and pledge to defend rules-based trade. Our partners, the presidents of South Korea and Japan, also are watching closely. South Korea is looking to build a rail connection across Siberia, which requires help from China and Russia. The South China Post reported on Japan’s Prime Minister Abe, who attended the conference, and agreed to a summit with Russia:

Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin agreed Monday on further details of joint economic activities on disputed islands off Japan’s northernmost main island of Hokkaido

They also confirmed their close cooperation toward the denuclearization of North Korea ahead of the third summit between North and South Korea, scheduled for September 18.

The message is that the nations of Asia no longer see us as a reliable partner, and are walking toward forging new alliances with both China and Russia.

Our walking away from the Trans Pacific Partnership, which included all Asian countries except China in a free trade zone, seems to have been a geopolitical error. Trump’s tariff war seems to be another.

The US is alienated from Russia over US election interference, cyber warfare, Ukraine, Crimea and Syria. We have responded with sanctions, and truculence.

The US is alienated from China over trade, and the Trump administration’s perception that China isn’t helping our negotiations with North Korea.

We are at risk of being sidelined in Asia, and our allies are watching.

What’s this administration’s plan to succeed on all of these fronts in Asia?

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