Russia, disciplined by Western sanctions, is now looking for new economic growth from Asian trade, but is falling above all under China’s sphere of influence.
Russia is becoming a vassal of China, says the professor of international business at the University of Turku Kari Liuhto.
– Russia is moving into China’s economic sphere of interest. It is becoming China’s natural resource shed, Liuhto describes.
This is how other Finnish researchers interviewed by also predict Russia’s future in the world economy.
After last February’s major attack, Russia’s energy exports to the EU region collapsed, but increased significantly to China. The export and import of other Russian products also followed the same pattern.
It is not yet known how profitable the trade will be, reminds the research doctor of the Foreign Policy Institute Kristiina Silvan.
However, one thing is certain.
– China is clearly in the winning position here. Russia needs China more than China needs Russia, says Silvan.
The trade route with Iran does not inspire confidence
Russia is trying to balance the situation by creating other trade relations and alliances in Asia. It has especially found Iran – another state disciplined by Western sanctions – as its partner.
Military cooperation between Russia and Iran has increased during the war in Ukraine. Russia uses, among other things, Iranian drones in its attack.
Russia and Iran are now developing their joint trade route by land and via the Caspian Sea, reports the news agency Bloomberg (you will switch to another service). The route, which has been used quite little, is to be expanded with new connections, in Russia to the Sea of Azov and in Iran to the Arabian Sea.
Both countries are trying to circumvent Western sanctions, and Russia is trying to compensate for lost trade with the West. The trade route is also much shorter than Russia’s traditional trade route to Asia, which runs from St. Petersburg through the Baltic Sea and the Mediterranean Sea around the whole of Europe and the Arabian Peninsula.
Researchers are skeptical about the significance of the trade route between Iran and Russia.
Freight transport by land and rivers is much more expensive and smaller in volume than sea freight.
Currently, the trade route between Russia and Iran is not suitable for transporting large quantities of goods, and new large rail projects and port expansions are also in their infancy.
– The project would also make sense for Russia in peacetime, but the scale is so small that it will not replace Baltic Sea traffic even to a small extent, says a researcher at the Foreign Policy Institute Markus Holmgren.
Instead, weapons and technology products subject to sanctions can move freely on the Iran route.
– The route will certainly facilitate the kind of flow of goods that you want to keep secret, says Holmgren.
Russia’s friends are few and far between
Before long, Western sanctions may target not only Russia but also countries that help Russia evade sanctions. Because of this, Central Asian countries are reluctant to jump on Russia’s bandwagon, says Silvan.
– Russia is very alone. It is not a good place for the economy to grow if it has been subjected to extensive sanctions.
In addition to Iran, Russia has found an eager trade partner in another outcast country, Afghanistan ruled by the extremist Taliban.
Taliban Minister of Foreign Trade Haji Nooruddin Azizi announced this week with satisfaction that the agreements for the purchase of fuel, gas and grain from Russia are already nearing completion.
– There are quite a few states that want to deepen cooperation with Russia, and they are not the most technically advanced or critical actors, Holmgren formulates.
Ahead of us is a new division of interests in the global economy
The real impact of sanctions against Russia is expected to be felt properly only during this year. It seems strongly that the Asian phenomenon is taking place on China’s and not Russia’s terms.
Holmgren talks about a kind of blocking of economic systems.
According to him, the world economy is moving towards a system where countries focus their production chains on either the United States or China. In this situation, Russia would seem to be about to become part of China’s front circle.
– It will be a huge sore spot for Russia if this happens. However, in this respect, Russia is such a small country that it cannot be self-sufficient in any way, says Holmgren.
The economic blocs formed around China and the United States are interdependent. Holmgren does not consider it likely that the ties between them will be broken.
Liuhto also considers the “continental flattening” of economic systems to be inevitable. According to him, China is currently a more important trade partner for the EU and Finland than the United States, but the future promises more balancing between the two.
– The question is now whether there will be a competitive relationship or a conflict between the blocs. Hopefully just a competition, says Liuhto.
“The great fight between the bear and the dragon”
Under the New Year, the presidents of Russia and China Vladimir Putin and Xi Jinping talked via video call.
The setting of the call reflected Russia’s growing dependence on China and China’s attempt to balance between supporting Russia and compliance with sanctions, writes New York Times (you will switch to another service).
Russia exports the most energy to China. In 2019, Russia completed its first gas pipeline from Siberia to China.
Two new pipes are planned. However, building a new large gas pipeline is at least a decade-long and hugely expensive project.
In the coming years, however, Russia will strive to create mutual dependence between itself and China with its energy supplies. On the other hand, China is not going to allow itself to depend on Russian energy, Liuhto estimates.
– When China starts putting pressure on Russia in the coming decades, a big fight will arise between the bear and the dragon. But China has time to wait for the day when Russia depends on it.
You can discuss the topic until Monday 9 January. until 11 p.m.
Sources: Reuters, AFP