What Economic Support China Can Offer Russia and Its Implications
By Tiyana Marie-Bassim | March 31, 2022
Russia's alliance with China may, unfortunately, prove to be useful to continue to fund and keep the country afloat while persisting its military campaign in Ukraine. Earlier this month, Russian Finance Minister Anton Siluanov said, "I think that our partnership with China will still allow us to maintain the cooperation that we have achieved, and not only maintain, but also increase it in an environment where Western markets are closing." Russia has asked China for military equipment for its efforts in Ukraine along with economic assistance to counteract the sanctions imposed by the United States, European, and Asian nations. However, the United States has warned Beijing that there, "will absolutely be consequences for large-scale sanctions evasion efforts or support to Russia to backfill them," according to U.S. National Security Advisor Jake Sullivan. Russia’s economy may not be able to sustain its military campaign in Ukraine. On approximately half of Russia's central bank reserves, there are U.S.-led asset freezes: $300 billion of $640 billion in gold and foreign currency have been frozen since the Western sanctions following its annexation of Ukraine's Crimea in 2014. The remaining Russian central bank reserves are in gold and Chinese yuan, making China Russia's primary potential source of foreign exchange. Foreign reserves are significant for making sure that the government has a backup fund if their national currency rapidly devalues. With Russia's future plans, it is not surprising in their situation that they are looking for help.
China's President Xi Jinping has strengthened his relationship with President Putin, as he has stood by Russia during its invasion of Ukraine. It is important to note that United States’ officials and intelligence are watching to see if China will ultimately act on President Putin's requests. The United States has had meetings with Chinese officials, making it explicit that there will be consequences to aiding Russia. However, Liu Pengyu, a spokesman for the Chinese Embassy in Washington, stated that he was unaware of any requests from Russia and that, "The high priority now is to prevent the tense situation from escalating or even getting out of control." Although the United States believes that China knew about the invasion before it occurred, it is possible that Russia lied to China about the extent of its ambitions.
If China does engage in these promises, it can help ease Russia's economic downturn. It can replenish Russia economically from its struggles with the West. This includes imports like technological parts and semiconductors that Russia was recently denied in sanctions. However, one has to examine whether it is truly in China's best interest to aid Russia, for they too can suffer economically. Due to the precarious state of the Chinese markets recently, among soon-to-come inflation and a major new Covid-19 outbreak within its borders, it may not be wise to help President Putin and suffer the consequences that will come with it. Maximilian Hess, Central Asia Fellow from the Foreign Policy Research Institute, states that, "[China would] be taking all the liabilities and risks of the Russian economy onto their own balance sheet at a time when the Russian economy is at its weakest in decades." It is clear that China's decision will play a critical role in the future of Russia's economy. China is Russia's top export market after the European Union. In fact, trade between the two nations reached a record high of $146 billion in 2021, where Russian exports to China were worth $79.3 billion, with 56% being oil and gas. Although China does have a standing partnership with Russia, they have to evaluate if aiding President Putin is worth the innocent lives and the consequences to their economy in their vulnerable time.
Edited by Maggie Reddington