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No. 45 / 4th August 2015

China the big winner of the conflict in Ukraine?

Armin Reinartz, Julius Freiherr von Freytag-Loringhoven

Russias weakness and the non-cohesive engagement of the US and its Western
allies in the Ukrainian conflict have put China at an advantage, both politically
and economically. Russias international isolation has meant that China has been
able to negotiate favourable terms for Russian gas exports. Increasingly, Beijing
can also promote itself as a potential mediator between Ukraine and Russia. This
is another sign that China is moving away from its traditionally cautious foreign
policy approach to become a more active global player that shapes the international order. But the crisis in Ukraine could also result in unwanted consequences
from Chinas perspective. It could strengthen its neighbours feeling that diplomatic means alone are not enough to fend off a bigger, more aggressive neighbour.
Pressure for a stronger US military presence in the region, and spending on conventional and nuclear military capabilities, will likely increase. Against this backdrop, Europe should show more willingness to assert itself in Asia it must promote international law and institutions as viable conflict resolution mechanisms.

Hintergrund: China/Russia No. 45 / August 2015


Most analysts view the Ukrainian Crisis as a geopolitical collision between the West and Russia. Sanctions by the US and EU aim to isolate Russia politically and economically and thus force the country
to abide by the terms of the Minsk II Agreement. But since Vladimir Putins high-profile 2014 visit to
China, it has become clear that the Peoples Republic has entered the global stage as a third player.
China is profiting immensely from the crisis in Ukraine. From strengthening its position as an important trade partner of Russia, in exchange for supporting the Russian position on Ukraine, to increased diplomatic influence as a potential mediator in Eastern Europe, China is keen to make the
most of its new status. But what problems could Chinas gains from the crisis in Ukraine face, and do
they counterbalance its benefits?
Weak Russia equals strong China?
Putin's antics in Ukraine have benefitted China in so far as the ongoing crisis is still making headlines
in Europes newspapers. This has allowed fears of Chinas growing clout to slip off the radar of Western diplomats and more significantly, perhaps, escape from public consciousness. Pictures of Russian-backed rebels and devastation in Eastern Ukraine have revived deep-seated fears of a return to
the Cold War. Meanwhile, Chinese companies and business practises appear to face less scrutiny
abroad than ever before, simply because the world and especially Europe is occupied with Russia's
unsubtle aggression.
European sanctions have forced Russia to sell its gas to China at a much cheaper price than it had
previously done in Europe. The longer Russia remains squeezed by European sanctions, the more reliant it becomes on its new Chinese customers. Even after a considerable expansion of Russias gas export capacity to the Peoples Republic (a series of pipelines linking Siberia and China are currently
under construction) Russian gas will only make up roughly 10% of Chinas imports. Russia is used to
its customers being reliant on its gas in a dramatic twist the supplier itself has become the dependent trade partner. Russia is likely to remain in a position where a bad business deal with China is better than none at all.
Russias weakness and isolation has also been beneficial for China from a geopolitical point of view.
Chinas age-old fear of being surrounded in all directions by potential enemies may now be put to rest
for the foreseeable future. After a short period of ostentatious support of the Peoples Republic by
Stalin, Soviet and Chinese troops spent much of the 20th century facing off along their border. With
American ships patrolling the Taiwanese strait and a Japan hastily rearming to protect itself from a
growing Chinese navy, (a move China interprets as Japanese nationalism reaffirming itself) a Russia
seeking closer ties with the West would put China at a serious strategic disadvantage. Fortunately for
China, any such possibility is dead.
China plays the hand it has been dealt well. Russias dominance of the Shanghai Cooperation Organisation (SCO), a club comprising of Russia, China and the Central Asian countries, is over. China has
positioned itself, through savvy diplomacy and huge investment pledges, as the most important power
in the region. At the 2015 SCO Summit in Ufa, Russia, China promised to spend $16bn in Central Asia
over the coming few years. Pakistan, a close ally of China, is set to join the SCO and will further se-

Hintergrund: China/Russia No. 45 / August 2015


cure the Peoples Republics leading role. The only threat to Chinese hegemony comes from India joining the organisation not Russia.
Zero-Sum Mentality in Beijing and Washington
While the crisis in Ukraine has strengthened China it seems to have diminished the influence of the
United States. The US has been accused by Russia of fuelling the conflict and at the same time American diplomats have faced difficulties in keeping up an appearance of unity with their allies across the
Atlantic when responding to the crisis. America is caught in a position where it cannot really please
anyone. Arguments between the US and Europe regarding how to deal with Russia have played into
the hands of China. An ambitious China may try to deepen the rift between America and Europe, upsetting the balance of power in Eurasia.
Even more pleasing for China is the fact that heavy-handed American engagement in Eastern Europe
will almost certainly leave fewer resources available for the United States Pivot to Asia policy. Since
2000, bilateral trade between China and the Association of Southeast Asian Nations (ASEAN) has
grown from $32 billion to almost $500 billion. Rather than stepping up its efforts in the region to
match this, the US is now forced to divert its assets to the other side of the world. Even the United
States is unable to stretch itself in this way. The formation of the Asian Infrastructure Investment
Bank (AIIB), the brainchild of China, to compete with the heavily US-dominated World Bank made its
economic dominance in Southeast Asia indisputable. Despite US opposition, all ten members of
ASEAN joined up something unimaginable in a region so securely under America's thumb just a few
years ago. And European countries like Britain, Germany and France were eager to join too.
The failure of conflict resolution mechanisms has supported the rise of powers that care little for existing international organisations. China has already begun to push for a new international financial
and economic order, and the US Congress is itself partially to blame. Ignoring Chinese demands for
more of a say in the World Bank and IMF has pushed it into setting up alternatives. Its confidence has
been bolstered by the Wests poor handling of the Ukraine Crisis, alongside political and humanitarian
disasters in the Middle East. If the West is unable to maintain the current international order, China
will expect to take an important role for itself at the expense of other the great powers, Russia and
America. Xi Jinping will use these conditions to guide China back to its rightful place.
Nationalism doesnt know any friends
Whipped up by Vladimir Putin, newly-empowered Russian nationalism sees its natural enemy as the
West. In the long-term, however, China may find that competing interests make it a target. Russian
nationalism is used by Putin as a foundation to justify aggressive Russian foreign policy around the
world. This will certainly not end well with the increasingly visible inequality in Sino-Russian Relations, where China is now the main player. The Kremlin will have to bridge the gap between historical
claims which is has fostered in Russian minds and Russia's actual strategic position against its southern neighbour. Future agreements with China may contain conditions which are not acceptable to
nationalists, which in turn will put considerable domestic pressure on the Russian government. In

Hintergrund: China/Russia No. 45 / August 2015


addition, an ongoing economic recession may stir up ethnic tensions. Discrimination or attacks
against Chinese citizens in Russia may occur, given that attacks on other minorities such as Central
Asian migrants are already happening. Sino-Russian relations may further be dampened if Beijing, in
retaliation, is forced to follow the distorted nationalism that it too has fostered among its citizens.
Moreover, there is a genuine fear of a "Yellow Peril": an uncontrolled stream of Chinese migrants (encouraged by Chinese-led infrastructure projects) into the scarcely populated Russian Far East and Siberia. The Chinese New Silk Road initiative, which aims to connect Europe with China overland, has
been a real cause for Russian concern. It has brought huge sums of long-term Chinese investment into
the former Soviet Union countries, which Russia still considers as its own backyard. In turn, Russia
now feels cornered into offering considerable loans and exerting political pressure to press for more
countries in Central Asia to join its Eurasian Union a scheme that has become vital to Russia.
An economically and politically weakened Russia contains both advantages and risks for China. Should
Russia continue its trend of economic recession and international isolation, it may no longer be a reliable ally to the Chinese when countering US power, but rather become a liability. In Beijing there is
real no interest in having an aggressive Russia bringing them into conflict with the US. Moscow's aggressive foreign policy does not suit Beijings global plans.
Ukraines destiny a warning for Chinas neighbours?
The Chinese depiction of the US as a "warmonger" may appeal to countries with anti-American stances, but other countries who rely on the West to guarantee their sovereignty may come to other conclusions. China, the most powerful nation in East Asia for centuries, has neighbours who may perceive
the crisis in Ukraine as a warning of the threats to their own existence.
If there has been one clear conclusion which we can draw from the crisis in Ukraine, its that security
assurances, such as the Budapest Memorandum in 1994 in which the Ukraine was assured of its
independence are not robust guarantees. Russias incursion into Ukraine confirms the fears of those
who hold the notion that territorial integrity and national sovereignty can only be secured by nuclear
These conclusions are certainly not in the interest of China, as it increases the long-term likelihood of
a nuclear armament in Asia. China, Pakistan, India, Russia and the US are currently the only nucleararmed powers in the region. Japan and South Korea possess the technical capacities and logistical
resources to join this group, and they may have legitimate reasons for wanting to do so. South Korea
faces the constant threat of their northern neighbours, while Japan is becoming increasingly alarmed
by its clashes with China over the Diaoyu/Senkaku islands. Stirred on, perhaps, by a growing sense of
nationalism and popular revisionist attitudes in Japanese politics, rearmament of Japan's armed forces
is happening and a build-up of its nuclear arsenal is becoming an increasing probability.
Chinas neighbours in the southeast, the Philippines and Vietnam, do not possess the capacity for nuclear warfare and are unlikely to develop this in the future. Their only alternatives are conventional
defence spending (which has increased in Southeast Asia by more than 50% over the last decade) and
closer ties with the US. American allies are calling more and more vocally for a strong US military

Hintergrund: China/Russia No. 45 / August 2015


presence in the region and increasing amounts of military aid. Only this year, the Philippines and the
US agreed to open up 8 more Filipino military bases to American troops an action largely brought
about by tensions in the South China Sea.
The bottom line: China wins
The Ukrainian conflict has an unlikely winner: China. China has been following its traditional foreign
policy approach: pursuing its own interests while the foreign barbarians are busy fighting each other.
This is an ideology expressed in the Chinese idiom of sitting on the mountain and watching the tigers
fight ( ; zuo shan, kan hu dou) and one can readily be applied to Ukraine. The country
gains huge strategic advantages so long as the crisis does not dissipate and pushes a potential rival,
Russia, over an economic and political tipping point that would lead to the countries collapse. Chinas
gains result in losses for both Russia and the US. In this complex situation, the main loser is Russia,
which loses ground in Central Asia while falling behind China in the SCO hierarchy. In addition, in
what was once a balanced Sino-Russian relationship, Russian dependence on China is now significantly increased. Meanwhile, China's northern borders are more secure thanks to this rising Russian
dependence. It can also free to play a greater role in the international order, as there is no longer a
realistic chance of Russia being embedded in, or even affiliated with, the Western camp, as some had
hoped at the close of the Cold War.
The crisis in Ukraine has attracted both America's attention and resources, thus limiting its presence
on Chinas doorstep in the Pacific. In addition, different approaches between the US and various EU
member states towards the Ukrainian conflict have strained the Western alliance. China will find any
opposition to its global rise less united. There are signs, such as the founding of the AIIB, that China is
beginning to actively shape international institutions and ensure that it enjoys a large influence regionally.
China's neighbours are understandably alarmed by this increase in Chinese influence. Beijing could
have reassured countries like Vietnam and the Philippines that it seeks collaboration rather than conflict. However, this has not been the case in the South China Sea, where China has bolstered its territorial claims by establishing artificial islands and military infrastructure rather than encouraging multilateral talks to achieve a long-term peaceful solution. If China had pursued talks, it would have been
a sign of a responsible great power emerging. The phrase [China is] returning to its rightful place in
the world would then be far less frightening.
Opportunities for Europe
The current situation in Asia provides real opportunities for European countries to make a positive
difference. Chinas neighbours, viewing the situation in Ukraine as a stern warning, have tried to balance both the rising influence of China and past US interference in the region. Many have sought
economic ties with China to secure their position. An increase in European engagement in Asia could
offer these countries an economic and political alternative.

Hintergrund: China/Russia No. 45 / August 2015


Asian markets will play an even greater role in the global economy in the future. This reason alone
justifies any increase in European involvement in the region. On a fundamental level, Europe wants
international law to be upheld. This will depend on the approaches of parties involved in conflict
zones such as the South China Sea. Chinese integration into the international rule-based system is
also vital. A European pivot to Asia, with a strong focus on diplomatic mechanisms and encouraging
the application of international law, is long overdue. This could prove crucial in sustaining a liberal
world order.
Armin Reinartz, Analyst, FNF Regional Office Southeast and East Asia, Bangkok
Julius Freiherr von Freytag-Loringhoven, FNF-Project Director for Russia and Central Asia, Moscow
Further reading
Russian gas as foreign policy tool (DGAP & FNF) (German)
Gerhardt: support Ukraine (FNF) (German)
Russia: Isolation instead of dialog (FNF) (German)
Global Times party newspaper on a potential Chinese role as mediater in Ukraine (English)
Vietnam is the Ukraine of the Pacific (BBC) (English)
Chinas Silk Road influence on the SCO meeting in Tufa (English)
An alliance between Russia and China in light of the Ukraine-crisis? (European Council on Foreign
Relations) (English)
Chinese support for Putin, (Reuters) (English)
In support for a European Pivot to Asia, Global & Liberal, p.31 (German)

Friedrich-Naumann-Stiftung fr die Freiheit (FNF)
Bereich Internationale Politik
Referat fr Querschnittsaufgaben
Karl-Marx-Strae 2
D-14482 Potsdam

Hintergrund: China/Russia No. 45 / August 2015