Bozen / Berlin – On Wednesday May 21 at a summit in Shanghai, China and Russia announced an historic gas deal between Russia’s Gazprom and the China National Petroleum Corp (CNPC). The much-reported agreement, good for 30 years but ten years in the making, was a cliffhanger, announced only at four in the morning China time, and many had feared it would not come off at all. The details are still secret, but the deal, reported by the BBC to be worth over $400 billion, is of great strategic importance, and not only in terms of Russia finding alternative markets for its gas in the event of European sanctions over Ukraine. It follows Putin’s announcement two days earlier of broad general agreement between China and Russia to coordinate foreign policy and pursue common priorities at the global and regional level. Putin is reported by the Voice of Russia newsagency to have declared: „We have agreed to coordinate our foreign policy steps more closely, including within the UN, BRICS [Brazil, Russia, India, China and South Africa] and the APEC [Asia-Pacific Economic Cooperation].“
Western electronic media have often failed to note that the Shanghai agreement was concluded during the meetings of the Fourth UN Conference on Interaction and Confidence Building Measures in Asia (CICA), attended by major Eurasian powers. On the same day, May 21, the UN Secretary General, Ban Ki-moon, addressing the Shanghai Institute hosting the event, warned leaders about the Syrian crisis, the spread of deadly weapons, and local territorial disputes, declaring that he was looking to China for global leadership in the face of “Longer-term Risks and Trends”. As this context suggests, then, the Sino-Russian agreement must be read as a major expression of the wider geopolitical aspirations of both powers for the Eurasian continent, made public in the important space of a UN forum.
In terms of the renewal of relations between the two old East-Bloc giants of the Cold War, the agreement is already historic. China is now Russia’s biggest trading partner, with bilateral trade flows of $90 billion in 2013, which they hope to double in ten years. But this agreement marks a collaboration that is also essential for the renewal of the “Great Game” in Eurasia. This strategic rivalry for supremacy in Central Asia had lasted officially from the Russo-Persian Treaty of 1813 to the Anglo-Russian Convention of 1907. I also discussed it in my article on Ukraine on the “English Practice” page of the SWZ of February 21, 2014.
Rain Newton-Smith, head of emerging markets at Oxford Economics is reported by the BBC as commenting that this deal will likely follow China’s pattern in Africa, where it drives a hard bargain over raw materials in exchange for providing infrastructure. In the case of the China-Russia deal there are striking synergies. Russia has a contract for 38 billion cubic meters of gas a year, which gives it leverage over other customers, particularly Western Europe and Ukraine. In return, it gets much needed immediate infrastructural support, and presumably collaboration further down the line. Following the first agreement between Gazprom and CNPC in 2004 a pipeline begun in 2007, “The Power of Siberia”, has been completed as far as the Chinese border. As the BBC notes, the $22-30 billion cost of running it into China has been a major element in the current negotiations.
Observers have noted for some time that China has a different approach to super-power status and the pursuit of hegemony. Since it has never completed the transition to democracy itself, it does not preach it to others. In fact, its approach to modernization and development is surprisingly non-ideological. It has rather a “can do” approach, similar to that of the World Bank and Western Aid agencies in the 1960s and 70s, helping developing countries, and particularly Africa, to build infrastructure, provide clean water, and ensure technology transfer. It has had such remarkable success in Africa, that Chinese factory-building and technology transfer is credited in a couple of decades with more success than Western Aid projects achieved over half a century – and all without much ideological baggage although certainly serving Chinese interests in a major way!
The Shanghai agreement of May 21 marks a major new venture. China, in partnership with Russia, is now embarking on a grand Eurasian strategy. For the millennia old Chinese trade routes through the Eurasian continent that brought noodles to Italy and silk to Damascus were called Silk Routes. These new “Silk Roads“ will combine high-speed railways, super-highways, pipelines, ports, and fibre optic networks, criss-crossing Eurasia by several routes: a Southeast Asian road, a Central Asian road, and even a high-speed rail line through Iran and Turkey that could reach as far as Germany. Not to speak of an Indian Ocean “maritime highway”, in which the regional powers of the Indian subcontinent have expressed a special interest.
Clearly, the Sino-Russian Eurasian project involves a complex set of convergences that will not be easy to manage. But one of its remarkable features, that should give it greater traction, is that it is designed in co-operation with, and in order to enhance, the regional interests of its co-partners. For instance, at the Non-Aligned Movement (NAM) meeting in Teheran in 2012, India, Iran, and Afghanistan took their own initiative to push for what might be called a new southern Silk Road, a network of roads, railways, and ports to connect oil-rich Iran more closely to Central and South Asia. India, like China, has its own designs on strategic ports: Delhi on the port of Chabahar in Iran, and China on the port of Gwadar in Pakistan, as key trans-shipment hubs linking Central Asia and the Gulf.
China’s bold move to include the BRICS (Brazil, Russia, India, China, and South Africa) as co-partners in the New Great Game, is one of the unique features of its Eurasian policy. This week’s Shanghai conference is to be followed by a BRICS summit in Brazil in July of this year, at which a $100 billion BRICS development bank, announced in 2012, will be launched as an alternative to the International Monetary Fund (IMF) and the World Bank as sources of project financing for emerging economies. This move is also designed to help erode the hegemony of the US dollar as the reserve currency.
Thus the Sino-Russian agreement has other important geopolitical aspects, not least of which is China’s project to rid the world of “petro-dollars” and support the rise of the Yuan as an alternative reserve currency. This policy has already met with considerable success, and the US dollar, which represented 55 % of foreign exchange holdings in 2000, slipped to 33 % by the end of 2013. It will be interesting to see whether the Sino-Russian Shanghai agreement is denominated in dollars or Yuan.
In sum, below the threshold of visibility for most of the newspaper reading public, a major reconfiguration of world trade hubs is quietly taking place in which Russia and China are principal players. And the picture I have painted is only part of the story. Another aspect concerns sea lanes that have been made possible by global warming. In 2011 the Alfred Wegener Institute for Polar and Marine Research reported that the ice in the Laptev Sea had sufficiently retracted to allow 33 ships to navigate Russia’s Arctic waters.
The route from Rotterdam to China via the Northern Sea Route (NSR) is some 3800 sea miles shorter than the Suez Canal and Indian Ocean route, and less politically problematic. On July 22, 2013, Richard Milne, Nordic Correspondent for the Financial Times reported that permissions for ships to use the NSR rose from 4 in 2010 to 46 in 2012 and 204 in 2013, and are predicted to rise ten-fold by 2021. The South Korea’s Maritime Institute forecasts that by 2030 one quarter of the Asia-Europe trade will be via the NSR. The Captain of Russia’s Atomflot, the fleet of atomic icebreakers that make passage possible, notes that 1.26 million tonnes of natural gas were transported by the NSR in 2012 and forecasts 25 million tonnes to Europe and 15 million tonnes to Asia by 2021.
The US, which like Britain once had its own grand strategy for a “Greater Central Asia” under its control, this time centred on Afghanistan and India, is now largely a bystander, due to its latest succession of disastrous wars in the region, as Pepe Escobar points out. Its attempt to create energy routes that bypass Russia and Iran has met with no success. As Escobar comments: “The only version of a Silk Road that the Obama administration has been able to devise has been war-related: the Northern Distribution Network, a logistical marathon of routes crisscrossing Central Asia … bringing military supplies into Afghanistan without relying fully on an increasingly unreliable Pakistan.”
As the current Ukrainian stand-off tells us, Russia’s newly defined position is that it will not tolerate a US or NATO presence on its borders. The same goes for the stand-off between China and Japan in the South China Seas. Both Russia and China have announced loud and clearly where they see their borders and strategic hinterlands to lie. The May 21 Sino-Russian agreement completes the picture with the statement that these powerful hegemons intend to ensure, working through the UN and other international organizations (in this case through the Shanghai Cooperation Organization), that the US is well and truly locked out of any future Great Game in Eurasia.
It is ironic that, if this is the case, the US will be seen to have failed to heed the warning of one of its most famous political advisors, Zbigniew Brzezinski, former National Security Advisor to President Carter. Brzezinski, in his 1997 book The Grand Chessboard, argued that “the struggle for global primacy [would] continue to be played” on the Eurasian “chessboard”, for which “Ukraine was a geopolitical pivot”. “If Moscow regains control over Ukraine”, he wrote, Russia would “automatically regain the wherewithal to become a powerful imperial state, spanning Europe and Asia.”