(FT) Russian RTS Index drops 14% as Russia is ready to recognize terrorist organizations in eastern Ukraine. Geopolitical analysts are reading a neutralizing stance by China over tensions in Ukraine, pointing out that Beijing’s silence is a resolve to team with Moscow. The situation gives China an opportunity to muscle up its leverage over Kremlin, strengthen its energy security.
“I think they feel quite bulletproof when it comes to those deals,” Gavin Thompson, an Asia energy expert at consultancy Wood Mackenzie said of Russia’s energy ties with its neighbor according to Financial Times. “If you can’t touch it and the pricing and the payment structures are mostly outside the standard global banking system, outside of the US dollar system, you can’t really do very much about it.”
With low transparency over the terms, experts believe Russia-China energy infrastructure deals have previously entailed Chinese loans and credit facilities. Typically, China lends in renminbi, which Russia then uses to purchase Chinese goods and services.
In case of new sanctions, the devaluation of the Russian national currency will increase the leverage from Chinese loans. Gavin Thompson, however, says if China manages to help Russia override the sanctions, it would render the US powerless in using economic tools to curtail power.
“China has the opportunity to do great deals . . . I think that is the opportunity to push hard on equity ownership of resources,” Thompson added. Geopolitical analysts say that if Russia invades Ukraine, it will present China a “gift” to leverage over Moscow and test the sanctions by the west.
The analysts also say that potential sanctions on Russia could make Moscow rely on Beijing, with any potential failures or successes a learning point on how to handle future conflict.
Geopolitical analyst at the University of New South Wales Alexander Korolev points out that China and Russia are always allies when challenging the supremacy of the US since their interests align.
International Public Opinion Research Center of the Charhar Institute secretary-general Cao Xin says the relationship between Beijing and Moscow is mutual, having navigated related crises together before, including Russia’s intervention in Georgia in 2008.
Analysts now opine that China faces a litmus test in striking a balance between support for Russia or remaining neutral for the sake of the region’s stability. Beijing also faces the risk of damaged economic and military relations with Ukraine if it stands with Moscow.
