The EU continues to dominate Russia’s foreign economic relations, though China’s role is still growing
Kari Liuhto,
Professor,
Turku School of Economics,
University of Turku,
Finland
Director,
Pan-European Institute,
Turku School of Economics,
University of Turku,
Finland
Russia reaches from Kaliningrad to Vladivostok (a distance of nearly 8,000 kilometres). Russia borders both the EU and China. Only six million people out of Russia’s population of over 140 million lived in Russia’s Far East in 2018. The population of Russia’s Far East represents just four per cent of Russia’s total population though the region forms over a third of the Russian territory – the territory of Russia’s Far East is nearly 1.5 times larger than the territory of the EU (Rosstat).
It is worth observing that despite the rapid rise of the Chinese economy, the official population of Russia’s Far East has dropped by one million people this millennium. There are constant rumours that numerous Chinese people live illegally in Russia’s Far East, but taking into consideration Russia’s strict policy towards illegal immigrants and the systematic actions of the Russian secret services against international terrorism and illegal immigrants, trustworthy evidence is needed before these rumours can be verified.
China’s fast economic growth over several decades explains why China’s share in Russia’s foreign trade has jumped from a couple of percentage points in the early 1990s to 16 per cent in 2018. On the one hand, the EU’s share is still over 43 per cent, and moreover, EU–Russia trade has grown by nearly $100 billion during 2016–2018 whereas Russian–Chinese trade has grown only by $40 billion during the same period. However, it is a well-known fact that China is now Russia’s largest single trade partner, accounting for over 20 per cent of Russia’s imports and more than 10 per cent of its exports (Customs Russia). Here, one should note that the Chinese share of US imports was as high as the Chinese share in Russian imports in 2018 (EU).
Although the sanctions of the West against Russia and Russia’s counter-sanctions against the West have decreased the share of the EU in Russian foreign trade and simultaneously given an additional boost to China’s trade with Russia, the main reason for China’s increasing share in Russian foreign trade is due to China’s extremely fast economic growth. In this context, one should bear in mind that China continues to grow much faster than the global economy and Russia aims to balance its import dependence on China with its increasing energy exports to China.
In 2018, 14 per cent of China’s crude oil and oil product imports and 12 per cent of its coal imports originated from Russia. Russia’s role as a natural gas supplier to China is presently marginal, but Russia’s share in China’s natural gas imports may well already exceed the shares of oil and coal this decade since Russia opened its first natural gas pipeline to China, Sila Sibiry, in December 2019. Despite the growth in Russia’s energy deliveries to China, one should not forget that the EU accounted for over 50 per cent of Russia’s oil exports, nearly three quarters of its natural gas exports and almost a half of its coal exports in 2018 (BP).
The investment relationship between Russia and China is still invisible in the foreign direct investment (FDI) statistics. China represented less than one per cent of Russia’s inward and outward FDI stocks as of the end of 2018. The share of the EU was 65 per cent and nearly 80 per cent respectively (Central Bank of Russia). Even if China’s real capital involvement in Russia is much larger than the statistics of the Russian Central Bank indicate due to Chinese loans, Russia still leans upon the West in its FDI cooperation.
The share of Chinese visitors in Russian inbound tourism has grown. In 2017, Chinese people accounted for six per cent of all the foreigners’ visits to Russia. Four years earlier, the Chinese share was two percentage points lower. On the other hand, visits from the EU to Russia still form nearly a fifth of all the foreign visits to Russia. The role of the EU is emphasized in the outbound travels of Russians. In 2017, over 35 per cent of Russians’ visits abroad were to the EU. The share of China was five per cent. There is no indication that the Western share of Russian outbound tourism will change any time soon since numerous Russians own second houses and holiday homes in the EU. Moreover, Russians continue to send their children to Western universities.
Russia and China have expressed their interest to intensify military cooperation, and Russia has already organised large-scale military exercises with China. It remains to be seen what will be the intensity of the military cooperation between these countries at the end of this decade. Whatever the level of the military collaboration between these countries, it seems clear that the Russian leadership has put more emphasis on Asian cooperation than before. Here, it is worth noting that
Russia founded Ministry for the Development of the Russian Far East and Arctic in 2012. Moreover, President Vladimir Putin nominated Yury Trutnev, formerly Deputy Prime Minister of Russia, to be the Presidential Envoy to the Far Eastern Federal District in 2013. As the presidential administration runs Russia, this fact could be regarded as another sign of its interest in Asia.
Russia’s geopolitical focus seems to be shifting from the West to the East, and this shift may have global consequences, including consequences in the Baltic Sea region. Therefore, the Centrum Balticum Foundation is organising a discussion panel dealing with geopolitics and the Baltic Sea region on June 15th 2020 in Turku, Finland. For more information on the panel and the National Baltic Sea Forum of Finland, visit the following website: http://www.centrumbalticum.org/en/news_room/events/baltic_sea_region_forum
More precise statistical information can be found at:
https://www.researchgate.net/publication/338411749_Foreign_economic_relations_of_Russia
https://www.researchgate.net/publication/334947535_Foreign_economic_relations_of_China
Email: kari.liuhto@utu.fi
Expert article 2698