China In Eurasia

China’s growing appetite for discounted Russian oil has made it the leading financier of the Kremlin’s war in Ukraine by giving Moscow a reliable revenue source that blunts the impact of tough Western sanctions against its economy.

Four months after Moscow’s invasion of Ukraine, China has overtaken Germany as the biggest single buyer of Russian energy, with oil sales to China -- and India, another energy-hungry Asian nation -- helping to fill a gap left by Europe, Russia’s biggest export market.

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China and India have together bought an estimated 2.4 million barrels of Russian crude oil a day in May, half of Russia's total exports.

Despite being sold at a steep discount, the purchases -- along with climbing oil prices -- have allowed Russian revenues to grow in the face of Western pressure and given Moscow a crucial financial lifeline to keep funding its war effort.

Buying cheap Russian oil has allowed China to diversify its own reserves and given India a lucrative revenue stream by reexporting refined products like gasoline and diesel from the Russian crude. For the moment, the purchases don’t risk triggering secondary sanctions while the European Union’s current oil ban remains partial, but Beijing and New Delhi’s willingness to buy Russian oil will be put to the test later this year once stricter measures come into effect.

Meanwhile, Chinese President Xi Jinping hosted a virtual summit on June 22-23 for leaders of Brazil, Russia, India, China, and South Africa, known collectively as BRICS, where he decried Western sanctions as “weaponizing” the global economy and called for the grouping to work closer together.

During his remarks at the summit, Russian President Vladimir Putin said that BRICS countries were “developing reliable alternative mechanisms for international settlements” and “exploring the possibility of creating an international reserve currency based on the basket of BRICS currencies.”

But how much can Moscow count on non-Western markets and partners, like China and India, to help it deal with the fallout of sanctions?

To find out more, RFE/RL spoke with Maria Shagina, a fellow at Britain's International Institute for Strategic Studies (IISS).

RFE/RL: Over the course of the war in Ukraine, China has now become the largest buyer of Russian oil. What does this mean for China and Russia’s relationship moving forward and is this a sign of their deepening partnership or Beijing simply making an opportunistic move to buy discounted energy?

Maria Shagina: We’ve heard on multiple occasions that Russia and China have established a “no-limits” partnership, and recently [on June 15], Xi reiterated support for mutual cooperation with Russia.

But we know that China’s rhetoric and deeds diverge quite a lot and that has been clear since 2014 [when Beijing and Moscow deepened their ties at a faster pace]. China is eager to capitalize on Russia's isolation, including purchasing Russian cheap crude oil. But when it comes to violating Western sanctions, the Chinese private sector is usually quite cautious.

In this case, we still don't have [Western] sanctions on Russian oil and the oil embargo from the European Union will start on December 5. So there is still this phase-out period before sanctions are triggered, and this is the time for China -- and also India -- to capitalize on very cheap oil that they can purchase from Russia.

RFE/RL: Apart from buying oil, China has shown itself to be very cautious when it comes to avoiding triggering secondary sanctions imposed on Russia by the West. Should we expect Beijing to give more overt support to Russia in the future, especially when it comes to advanced technology like semiconductors?

Shagina: China's balancing act is very delicate and, as the war progresses, it will be more difficult for Beijing to keep this position of so-called "pro-Russian neutrality," where they’re officially neutral but lean toward Russia.

Since 2014, Russia has had rather high expectations of Beijing to step in to help out [with] this very difficult [financial] situation for Moscow. The Kremlin has since had a more sober assessment in terms of how much help can realistically be expected from China, but even now Russia is rather disappointed by the lack of support from China.

We know that there was some discontent from the Russian side when it came to the lack of Chinese support in terms of financial assistance and technology transfers after sanctions hit [following the February 24 invasion]. Those are the two areas that Russia is now highly dependent on China and other nonaligned countries for their support, and China will be one of the main countries to watch when it comes to helping alleviate the impact of sanctions. That’s not only whether Beijing will provide any financial assistance, but also whether it will provide any technology that is now under sanctions, like chips and semiconductors.

Lessons from 2014 tell us that the Chinese private sector is very risk-averse because it's so dependent on the U.S. dollar for transactions and tends to stay away from sanctioned Russian entities and even does overcompliance with sanctions to be extra careful. So in the current situation where we have an unprecedented number of sanctions in terms of their scope and their severity, I would say that there will be even more risk-averse behavior from the Chinese private sector.

But we should know that government-backed institutions behave differently. In 2014, Chinese banks like the Export-Import Bank of China and the China Development Bank worked with [Russian] companies like Novatek, which is Russia’s second-largest natural gas producer, to finance projects. So there is room to support sanctioned entities and people, but we should be cautious of the limited scope of this support.

RFE/RL: Xi Jinping hosted a BRICS summit and spoke about the grouping being important for the global economy, while Russian commentators have said repeatedly that the grouping is crucial for blunting Western sanctions. Does the war in Ukraine give an opportunity for it to finally deliver on its potential and play a more prominent role?

Shagina: I think that rhetorically there is a very strong narrative to push back against the West, in particular the United States and EU, over their use of unilateral sanctions that haven't been supported by the UN.

India is another example [within BRICS] where Russia is also keen to expand collaboration, but we haven't seen a lot of progress beyond buying oil. For example, Russia floated the idea to use different mechanisms for payment systems and alternatives to SWIFT, which it has been blocked from using under sanctions. But none of those initiatives has taken off and they remain largely dormant.

I think rhetorically the summit [was] an opportunity to resist U.S. hegemony, but whether that will materialize into something bigger remains to be seen.

RFE/RL: Is there anything that you're expecting to happen in regard to Chinese economic involvement with Russia that perhaps you think is coming or is worth watching out for?

Shagina: One area is semiconductors and technology transfers more broadly. This is something worth watching to see whether China will help. So far, as U.S. officials have said, there has been no systematic support on the side of China, but whether China will be willing to supply them to alleviate this pressure from technology sanctions on Russia is not implausible given the level of partnership both countries have.

The other area that is worth watching is whether Chinese companies will help provide energy equipment that the EU ban on liquefied natural gas (LNG) and on LNG equipment has cut off and that Russia can’t substitute for on its own. Since 2014, Chinese engineering companies supplied up to 80 percent of this equipment, so there is room for China to step in to solidify its positions and potentially to provide additional financing for Chinese-backed [energy] projects in the Arctic.

This interview has been edited and condensed for clarity.

Welcome back to the China In Eurasia briefing, an RFE/RL newsletter tracking China’s resurgent influence from Eastern Europe to Central Asia.

I’m RFE/RL correspondent Reid Stanadish and here’s what I’m following right now.

Where Chinese Influence Is Rising And Falling

In another sign of the changing mood toward China across Europe, the Czech Republic is considering an exit from China’s “16+1” investment platform for Central and Eastern Europe.

Finding Perspective: A resolution calling for the country to quit the body has been passed by a parliamentary committee to the Czech foreign ministry and government and will then decide on whether to leave.

Launched in 2012 to include China and 16 European countries, the Chinese-led format was designed as a way to secure greater political and economic influence for Beijing and came to represent a prevailing view at the time that tighter ties with China could lead to a wave of investment and trade in former Communist Europe.

Czech President Milos Zeman helped champion this push to pull Prague closer to Beijing and even gave a lavish red-carpet welcome for Chinese President Xi Jinping in 2016. But a series of controversies over the years and a lack of investment into the region have seen the once-optimistic view in the Czech Republic and elsewhere shift.

The platform itself had even taken Greece as a member in 2019 to make it the “17+1.” But that proved to be the high-water mark for the bloc. Lithuania left in 2021 amid a diplomatic spat with Beijing, and many capitals in the region, including Prague, have begun to build up stronger ties with Taiwan in the past few years, which has further strained relations with China.

That reorientation has accelerated since Czech Prime Minister Petr Fiala’s center-right government came to power in November 2021 and pledged to reaffirm Prague’s EU and NATO ties.

China’s pro-Russian positions amid the Ukraine war have also contributed to the souring mood toward Beijing and will be in focus as the Czech Republic takes up the EU presidency on July 1.

Why It Matters: Public opinion toward China is diverging across the world as tensions rise among big powers.

In Europe, surveys show that unfavorable views about the Chinese government have steadily risen since the beginning of the pandemic in 2020, while in Central Asia -- where Beijing has invested heavily and plays a large role in the region -- polls also show a steady decrease in favorable views.

Across Africa, meanwhile, Chinese investments appear to have paved a way to greater influence, despite multiple controversies.

According to a new poll conducted by the Ichikowitz Family Foundation, 76 percent of 4,507 young Africans across 15 countries who were surveyed named China as a foreign power with a positive influence on their lives, compared with 72 percent for the United States.

Read More

● The Czech Republic could tailor its EU presidency to further focus on China. Filip Sebok, a research fellow at the Association for International Affairs in Prague, unpacks what that could look like.

Expert Corner: The European Parliament Turns to Xinjiang

Readers asked: “The European Parliament voted last week to call China's treatment of Uyghurs and other groups 'crimes against humanity and serious risk of genocide.' How significant is it, and what does it mean moving forward?”

To find out more, I asked Rikard Jozwiak, Europe editor at RFE/RL:

“It is worth stating right off the bat that the European Parliament is a foreign-policy pygmy and any resolution it passes in this field is non-binding on the powerful European Commission and the 27 EU member states. So, in that sense, there isn’t much political significance other than the purely symbolic.

“Nonetheless, there can be developments further down the road. Since MEPs really don’t have too much diplomatic skin in the game to begin with, it allows them to pass a much more outspoken text -- and this is where Chinese sensitivities come into play. Could it create a backlash from Beijing where more MEPs are sanctioned? In one way, the EP would relish such a recognition, and in return, one can probably conclude that the chamber will never give its consent to the currently frozen EU-China Comprehensive Agreement trade pact.

“The EP is also known for playing a ‘soothsaying’ role, where it often passes resolutions that seem fanciful at the time but then get implemented by the entire bloc a few years down the road as politics evolve. So, while I caution not to read too much into this for now, this isn’t the end of the road for this issue, either.”

Do you have a question about China’s growing footprint in Eurasia? Send it to me at StandishR@rferl.org or reply directly to this e-mail and I’ll get it answered by leading experts and policymakers.

Three More Stories From Eurasia

1. New Opportunities

As Central Asian governments look to limit their reliance on Russia and grapple with the fallout from economic sanctions that the Kremlin's war has brought to the region, China is seeing new opportunities to expand its ties, as I reported here.

The Details: Chinese Foreign Minister Wang Yi wrapped up a visit to Kazakhstan on June 7 and the third annual China + Central Asia foreign ministers' meeting in Nur-Sultan on June 8.

At both gatherings, Wang expressed concern about the spillover effects from the Ukraine war and took veiled aim at the United States by urging Central Asian governments to stay out of geopolitical conflicts.

For Beijing, the uptick in activity is a chance to reaffirm its influence in the region, where it has become a type of reluctant hegemon.

Central Asian countries, meanwhile, are hoping that Chinese investment and trade can help plug the hole being left by global economic fallout from the Ukraine war, although there are major questions about how much more Beijing is willing to pour into the region.

It’s for those reasons that local governments are also trying to build up trade ties with other countries, especially Turkey, which has been on a renewed push in Central Asia since the war began.

2. Orban And Hungary’s Chinese Campus

More than a year after thousands of protesters took to Budapest to demonstrate against plans to use taxpayer money to build a $1.8 billion Chinese university in Hungary, Prime Minister Viktor Orban’s government is sidelining the opposition and clearing a path for the controversial project, my colleague Akos Keller-Alant from RFE/RL’s Hungarian Service and I reported.

What It Means: The 2021 protests signaled a mounting public backlash against plans to host Shanghai's prestigious Fudan University in the capital and led to pledges from the government to hold a referendum on the issue.

But since Orban’s resounding April election win, his government is backtracking on that promise, with the Constitutional Court -- which is said to be stacked by Orban loyalists -- ruling on May 18 that the referendum was unconstitutional as it concerns an international agreement between Hungary and China.

The decision is part of a wider set of moves by the nationalist Orban that analysts say is designed to consolidate his hold on power and use the court to sideline the political opposition while clearing the way for the Chinese project in the process.

3. Montenegro’s Long Road

After eight years of delays, a highway project in Montenegro paid for by a massive $1 billion Chinese loan is nearing completion, but it still faces lingering questions about its future, my colleague Predrag Tomovic from RFE/RL’s Balkan Service and I reported.

What You Need To Know: Once hailed by China as a landmark deal within the Belt and Road Initiative, the highway has since become a cautionary tale that fused together the perils of poor-quality Chinese construction and cursory lending practices with endemic local corruption concerns in the Balkan country.

But that long chapter looks set to close, with Montenegrin Prime Minister Dritan Abazovic announcing in May that the first 41-kilometer section of the highway would open this summer.

The remaining 122 kilometers of the originally planned road are still unbuilt and its future uncertain. At the moment, the initial stretch of road fades out into the middle of a large, forested area, and no funds are currently available to continue building the remaining portion.

Across The Supercontinent

Shopping Spree: Russia earned $96.8 billion from fossil-fuel exports during the first 100 days of its war in Ukraine, according to a new report from the Center for Research on Energy and Clean Air.

While the EU comprises 61 percent of exported fossil fuels, China overtook Germany as the biggest single-country buyer of Russian energy.

The Movable Picket: During Wang’s trip to Kazakhstan, protesters gathered outside the Chinese Embassy in the Kazakh capital, Nur-Sultan, demanding the release of relatives they say are held in camps in Xinjiang, my colleague Saniash Toiken from RFE/RL’s Kazakh Service reported.

Beyond Putin and Xi: Despite drawing closer in many respects, distrust, criticism, and a quiet rivalry remain part of China and Russia’s complicated ties.

I reported on a recent Chinese hacking campaign targeting Russian military-development institutes and what it means for Beijing and Moscow’s relationship moving forward.

A Warning: Just Finance International, an NGO focused on the environment and human rights, published a report on June 13 detailing how a “weakening of law and transparency in Serbia has provided loopholes for large-scale infrastructure investments, including from China.”

One Thing To Watch

The geopolitical ripple effects from Russia’s invasion of Ukraine are being felt across Asia and were on display at Singapore’s Shangri-La Dialogue that gathered 40 countries.

Speaking one day before an address by Ukrainian President Volodymyr Zelenskiy that generated some controversy to its illusions to Taiwan, Japanese Prime Minister Fumio Kishida said the Ukraine war should be a wake-up call for East Asia.

While he did not mention Beijing explicitly, China’s military buildup in the Pacific, as well as provocations from North Korea and growing cooperation in the region between Beijing and Moscow, all loomed behind Kishida’s comments.

That’s all from me for now. Don’t forget to send me any questions, comments, or tips that you might have.

Until next time,

Reid Standish

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