China trade with Russia to hit US$100b next year, Xi says after meeting Putin

Two leaders head into security summit after talks, and have planned military drills and signing of strategic oil deal this week

PUBLISHED : Tuesday, 20 May, 2014, 1:52pm
UPDATED : Tuesday, 20 May, 2014, 2:44pm

President Xi Jinping today held talks with visiting Russian leader Vladimir Putin, with Xi saying that trade between the countries was expected to reach US$100 billion by 2015.

The announcement signals a boost for both countries, which are seeking to strengthen ties in the face of Western criticism and territorial disputes. Trade between the two countries was US$88.8 billion last year.

Putin today met Xi in Shanghai for a two-day Asian security summit with leaders from Iran and Central Asia. China and Russia will also show off their military prowess as 14 ships begin week-long drills in the East China Sea.

The visit is Putin’s first since Xi became head of state last year and could see a huge and long-awaited natural gas deal finally signed. The deal would give Moscow an economic and political win at a time when Washington and the European Union have imposed asset freezes and visa bans on dozens of Russian officials and several companies.

A welcoming ceremony was held for Putin before the formal talks started, China’s official Xinhua news agency said in a brief report.

The visit will give Putin, who is facing isolation in the West over Ukraine, a welcome boost as he hopes to extend his country’s dealings with Asia.

Speaking on the eve of his visit, Putin told Chinese media that ties were at their “highest level” in history.

“China is our reliable friend. To expand cooperation with China is undoubtedly Russia’s diplomatic priority,” Putin said, according to the official Xinhua News Agency.

“For the Russians, it is much more about showing ‘We have other options … We’ve got a very strong relationship with China’,” said Raffaello Pantucci, senior research fellow at the Royal United Services Institute for Defence and Security Studies.

“The Chinese are much more agitated about what happens on the sea and one sees support there from Russia,” he said.

Russia’s relations with the United States and European Union have plunged to a post-cold-war low in recent months over its seizure of Crimea and Western accusations Moscow is fomenting unrest in the east of Ukraine.

At the same time, Beijing is bickering with neighbours over maritime territorial disputes, including Vietnam, Japan and the Philippines.

The two countries are both veto-wielding members of the UN Security Council, are regularly criticised by human rights groups, and have often worked together to counter the United States on a range of issues.

They were at times close allies during the cold war, when China and the then-Soviet Union were both Communist. The two countries developed a strategic partnership after the 1991 Soviet collapse, including close political, economic and military ties in a shared aspiration to counter US influence, especially in Central Asia.

But a state-run Chinese newspaper today denied closer ties with Russia were aimed at the West, including the United States.

“Closer relations are not directed at any third party but play an important role in supporting each other in safeguarding strategic space and avoiding external pressure,” said the Global Times newspaper, which is known for its nationalistic editorial stance.

Officials from both countries say companies are close to completing a long-delayed deal for Russia to export natural gas to energy-hungry China, as Moscow diversifies away from the European market, but price has been a sticking point. In return, it would help to ease Chinese gas shortages and heavy reliance on coal.

China and Russia have not yet reached a price agreement on a long-awaited gas supply contract and talks are still continuing between both parties, the Kremlin’s spokesman Dmitry Peskov said today.

Talks on the proposed 30-year contract between Russia’s government-controlled Gazprom and state-owned China National Petroleum Corporation began more than a decade ago.

A tentative agreement signed in March last year calls for Gazprom to deliver 38 billion cubic metres of gas per year beginning in 2018, with an option to increase that to 60 billion cubic metres.

The US treasury secretary, Jacob Lew, appealed to China during a visit last week to avoid taking steps that might offset the impact of sanctions. However, American officials have acknowledged China’s pressing need for energy.

A gas deal would mean China would be in a “de facto alliance with Russia,” said Vasily Kashin, a China expert at the Center for Analysis of Strategies and Technologies in Moscow.

In exchange, Moscow might lift restrictions on Chinese investment in Russia and on exports of military technology, Kashin said. “In the more distant future, full military alliance cannot be excluded."

“It will, however, take years for China to start playing in the Russian economy a role comparable to that of the EU,” he said. “After that happens, both China and Russia will be much less vulnerable to any potential Western pressure and that, of course, will affect the foreign policy of both these countries.”

Putin’s top foreign adviser has said some 30 agreements are expected to be signed during the visit.

The Chinese and Russian leaders will attend the formal opening of the Conference on Interaction and Confidence Building Measures in Asia, a little-known Asian security forum, at a time when China has locked horns with its Asian neighbours over disputed territory.

Relations between Beijing and Hanoi have worsened after China’s move earlier this month to send a deep-water oil drilling rig into contested waters in the South China Sea, sparking violent anti-Chinese protests in Vietnam in which two Chinese were killed.

China and Japan have a long-running feud over disputed islands in the East China Sea, while the Philippines accuses China of reclaiming land on a disputed reef within its exclusive economic zone under a UN convention.

With additional reporting from Associated Press