Russia and China cement ties on Xi Jinping visit to Moscow

As western leaders have one by one refused invitations from Vladimir Putin to today’s Russian Victory Day parade, there has never been any question that Xi Jinping, the Chinese president, would show up at the historic event commemorating the 70th anniversary of the Soviet defeat of Nazi Germany.

Russian-Chinese relations have flourished over the past year even as the US and the European Union clashed with the Kremlin over its aggressive policies in Ukraine. As a quarter of a century of post-cold war co-operation with the West unravels, Russia has pivoted east to cement a strategic economic and political ties with China.

Putin has accused the US of putting pressure on European heads of state to skip the Victory Day parade today, when Russian troops and armoured vehicles will clatter through Moscow’s Red Square in an impressive show of military might.

In their absence, Xi, who shares Putin’s dislike of US global dominance, will be the highest-profile foreign leader at the event, underscoring Chinese political solidarity with Russia at this challenging time.

However, on his three-day visit to Moscow, Xi also has commercial objectives. In between attending the military parade, laying a wreath at the tomb of the Unknown Soldier near the Kremlin and meeting veterans of the second World Wars, he has witnessed the signing of a raft of Russian-Chinese deals covering energy, aerospace, transport and defence.

“Today China is our strategic and key partner,” Putin said after he and Xi presided over a signing ceremony yesterday in front of Chinese and Russian officials in the Kremlin.

China does not approve of annexations or foreign military interventions. However ever since the Kremlin moved to annex Crimea last year, Beijing has seen its best interests served by standing by Russia while formally adhering to neutrality. Refusing to join the US and the EU in imposing economic sanctions, China has instead used the fallout from the Ukraine crisis as an opportunity to expand business ties with Russia and wring favourable trading terms from its increasingly isolated neighbour.

In the last month alone, Russia has clinched a $3 billion contract to supply S-400 surface-to-air missiles to China and named a Chinese engineering firm to design its first

high-speed railway. Running from Moscow to the Volga river city of Kazan, it is intended as the first leg of a 7,000km line to Beijing.

With the future of its project with the US, Japan and Europe at the International Space Station in the balance, there is even talk of Russia having a stake in China’s planned $40 billion Long March-9 lunar base.

Although significant, these deals pale in comparison to a planned surge in Russian oil and gas deliveries to China that will cement the strategic alliance between the world’s biggest producer and consumer of energy.

With the EU stepping up efforts to reduce dependence on Russian gas in the wake of the Ukraine crisis, the Kremlin has raced to secure alternative markets. Energy hungry China fits the bill.

After a decade of haggling over prices, Russia finally clinched a massive contract with China last year that will see $450 billion worth of Siberian gas transported by a new pipeline to the Chinese frontier over the coming three decades.

That deal, ratified by Putin last week, looks set to be followed by another that would bring gas to China from the very same fields in west Siberia that currently supply European markets. China has already locked Rosneft, Russia's powerful state oil company, into a long-term relationship by extending multibillion loans in exchange for future oil supplies.

With western sanctions barring Russia from global capital markets, Rosneft is looking for new sources of finance and may agree to sell an equity stake to China. Although traditionally averse to sharing its big oil fields with foreign investors, Russia is showing signs of compromise with the Chinese.

“For our Chinese friends anything is possible,” Putin said as he approved negotiations last year for the sale of a stake in Rosneft’s giant Vankor oil deposit. As Xi prepared to meet Putin this week, Chinese diplomats were talking about “personal friendship” and a “good working relationship” between the two men that would facilitate even closer economic and political ties.

But both leaders know that theirs is an unequal relationship where Xi has the greater bargaining power. While China, the world’s newest superpower, is careful to remain on good terms with its multiple trading partners, Russia has forfeited relations with the West over Ukraine and is facing economic decline.

Against that uneasy backdrop “old suspicions about China taking over Russia economically and demographically – if not militarily – could gain more currency as Moscow has to rely more heavily on the Beijing connection”, says Dmitri Trenin, the head of the Moscow Carnegie Centre.