Prospects far brighter than the West thinks

President Xi Jinping’s participation in the Eastern Economic Forum in Vladivostok is the first by any Chinese leader, and during the event, Xi and Russian President Vladimir Putin are expected to expand trade and cooperation, including in Russia’s Far East, and explore ways to advance cooperation on energy, agriculture, high-tech and infrastructure.

Many Western business and theoretical free market circles may deride these developments, but the long-term potential of Sino-Russian relations is immense and highly sustainable. Even climatic and environmental factors now favor its impressive growth.

The intensification of the US’ unilateral and policies, seen as unpredictable and threatening both Russia and China, now make economic partnership essential for the two giant Eurasian powers.

For Moscow, the remorseless tightening of US sanctions, clearly intended to starve Russia of foreign direct investment and destabilize it, make China an attractive partner to provide the capital for investment and industrial products that the US will not.

For Beijing, Washington is becoming an alarmingly volatile power in its financial and industrial policies. From China’s perspective, rapidly expanding trade relations with Russia can provide access to rich resources of raw materials and agriculture within the Eurasian heartland, and boost energy security by diversifying sources of imports.

Climate change is unlocking the resources of Siberia and the Arctic Basin in ways inconceivable even a decade ago. Moscow and Beijing are the obvious partners to develop the new opportunities on offer. But to focus on economic development in Central Asia, especially in Kazakhstan, as so many studies do, is to miss the point of the long-term focus of specific Sino-Russian economic cooperation. That lies further east and far to the north, across Siberia and the Arctic and along the longest common borders in the world.

For Russia, locking in expanded long-term energy deals with Beijing would be a most welcome buffer against further wild fluctuations in global energy prices. Russia is also looking to diversity its domestic economy and expand industries such as food processing. And Chinese resources in these sectors offer bright prospects.

The enormous distances, lack of infrastructure and harsh climatic conditions across northern and eastern Eurasia for much of the year have always been the main factors obstructing more rapid economic development between Russia and China. Nevertheless, bilateral trade has steadily and substantially risen from a relatively paltry $15.8 billion in 2003 to $84 billion in 2017. It is expected to reach $100 billion this year.

That would still be just one-fifth of China’s $500 billion a year total trade volume with the European Union in the past decade. But an increasingly unstable EU is likely to require considerably less imports from China in the next few years while Russia, cut off from the potential of partnership with the US but anxious to expand and diversify its own manufacturing and industrial base, looks likely to generate unexpectedly high positive elasticity of demand.

Russia is certainly not cash-strapped today. Oil and gas, the country’s biggest exports are trading much higher than in the recent past. Russia’s “break-even” price for oil has dropped from $100 a barrel only five years ago to $60 per barrel now, Russian Central Bank Governor Elvira Nabiullina said in Washington on Thursday.

The economies of Russia and China are far more complementary than is assumed in the West. A great deal more investment on both sides would be required to take proper advantage of that potential, but the resources and political will to apply them clearly exist.

Such progress will not be dramatically fast but, if sustained, it will be massive and play a major role in fulfilling the visions of presidents Xi and Putin to create a global, booming economic bond across the heart of Eurasia. So the deals that will be signed in Vladivostok should be taken seriously by the rest of the world.

The author is a senior fellow of the American University in Moscow and former senior foreign correspondent for The Washington Times.