Putin's Got a New Problem With China

Discussion in 'Europe and Russia' started by Rowdy, Sep 3, 2015.

  1. Rowdy

    Rowdy Co ja kurwa czytam! Senior Member

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    As Chinese leader Xi Jinping welcomes Russian President Vladimir Putin to Beijing this week to celebrate the anniversary of the end of World War II, the news on the economic front for the two would-be allies isn’t nearly as positive.

    China’s market plunge over the last few weeks has added to the pressure, helping knock the ruble to the lowest levels in months. Growing doubts about China’s economic outlook have hit prices for oil, Moscow’s main export, pushing Russia deeper into recession.

    Russia, in pivoting toward China, is portraying closer relations as the emergence of a counterweight to the U.S. and Europe’s dominance. “Russian-Chinese ties have reached probably their highest level in history and continue to develop,” Putin said in a pre-visit interview with Tass and Xinhua released Sept. 1.

    Economic data tell a different story. Trade between the two nations fell 29 percent in the first half of this year to $30.6 billion. Russian government officials now say that there’s virtually no chance they will hit their target of $100 billion in trade turnover this year, a goal Putin publicly embraced as recently as October. Putin in his interview didn’t mention the drop in trade this year.

    [​IMG]
    Rhetoric Gap
    “The level of Russian rhetoric about Russia-Chinese relations and the reality are quite separate things,” Alexander Gabuyev, head of the Russia in Asia Pacific Region program at the Moscow Carnegie Center, said by phone on Aug. 31. “Russia is the supplicant partner, not China, which still has a range of choices to source resources even despite its recent economic troubles.”

    The biggest deal expected to be signed during the visit, according to Kremlin foreign policy aide Yuri Ushakov, is a memorandum of understanding for a new pipeline to take gas from Russia’s Far East to China. No binding commitments on the key issues of price or timing are expected. Ushakov said it’s unlikely that Moscow’s goal of a deal on a pipeline from western Siberia to China will be met this time, either.

    The decline in trade this year has pushed Russia out of the ranks of China’s top 15 trade partners for the first time in more than five years.

    In the interview, Putin denounced U.S. and European sanctions imposed on Russia over the Ukraine crisis as “illegitimate,” saying that they have “stimulated” Russian business to build ties with China. From Beijing, Putin heads to an economic forum in Vladivostok aimed at raising Russia’s economic profile in the region.

    Currency Woes
    Some of the Russia-Chinese deals announced to date have not worked out as hoped.

    A 150-billion-yuan swap agreement Russia’s central bank reached with People’s Bank of China in October to facilitate direct settlement between the ruble and the yuan, avoiding use of the dollar, hasn’t found much demand because it can be used only for short-term trade financing, Peter Fradkov, first deputy chairman at Vnesheconombank, said in an interview last week.

    His bank, cut off from its primary foreign markets in the U.S. and Europe by sanctions, is for the moment unable to issue yuan bonds to raise money in China because of “regulatory issues,” he said. VEB still hopes to issue them in the future, he said.

    Credit lines amounting to 9 billion yuan signed in May between Russia’s Sberbank OJSC and VTB Group and Chinese lenders are barely used because there is practically no demand in Russia for loans in yuan, said Maxim Poletaev, first deputy CEO at Sberbank. VTB First Deputy Chairman Yuri Soloviev said in June that demand is insufficient.

    Russia had much higher hopes for building economic links with its eastern neighbor last year, when it stepped up ties amid tensions with the U.S. and Europe over the war in eastern Ukraine.

    Gas Deals
    Gazprom signed a $400 billion gas contract during Putin’s visit to China in May 2014, a deal that Putin said would help to turn Russia’s eastern regions into the world’s largest construction site.

    Since the announcement, the two countries have failed to agree on advance payments from China as a possible source of financing for the $55 billion link and fields.

    Moscow’s plan for another gas pipeline from west Siberia to China has faced a cool reception from Beijing. The route is a priority for the Kremlin because it would connect Russia’s main gas fields deep in western Siberia to the Chinese market, reducing their dependence on Europe, where political pressures are squeezing demand. Analysts see little appetite in China for the pipeline because it would cross the border thousands of kilometers from its industrial centers.

    Transportation has been a bright spot for cooperation. In June, Russia brought Chinese partners into a 1 trillion-ruble project to build a high-speed-rail link from Moscow to Kazan. Before sanctions, the Kremlin had been hoping to attract European companies to the deal.

    Russian officials say they aren’t giving up hope. “When there is such an explosive growth of cooperation, there are always more intentions than results” at the start, Deputy Prime Minister Arkady Dvorkovich said Aug. 26 in an interview with state television
    @pmaitra @jouni @Gabriel92 @Yusuf @blueblood and others
    http://www.bloomberg.com/news/artic...rn-hits-potholes-as-trade-drops-markets-slide
     
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  3. blueblood

    blueblood Senior Member Senior Member

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    Jab tak aap ke pass paisa hai log poonchte hai kaisa hai.....:laugh:

    Applicable to both sides, one more than other.
     
  4. Yusuf

    Yusuf GUARDIAN Administrator

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    China has range of options including stepping into Russian "zone" of CAR. It has heavy investments there and is literally stepping on Russian toes there.

    With sanctions in place Russia has been hit pretty bad and is certainly the junior partner in the Sino-Russian relations. China will milk all it can from Russia especially in the field of weapons.
     
  5. Gabriel92

    Gabriel92 Regular Member

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    Poor Russia thinking Chinese are their allies... the day will come when theyll backstabb them... ill be here with my popcorn.
     
  6. Rowdy

    Rowdy Co ja kurwa czytam! Senior Member

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    [​IMG]
    ..........................................................................................
     
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  7. amoy

    amoy Senior Member Senior Member

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    Indians hostility to China is understandable but what they can do is indeed grab some popcorns and watCH. But u? Developed a new hobby of harping their mantra?

    Today Putin Prepares Surprise for China During Beijing Victory Parade

    Allies or non allies depend on strength of each and compatibility / convergence of interests.

    New deals have also been signed on energy, chemicals and Russia FE development fund. Indians can only keep on daydreaming to drive a wedge in between but to no avail.

    https://militarytechcooperations.wo...rise-for-china-during-beijing-victory-parade/

    India is distancing itself from Russia with its arm orders drying up. Being economically weak India has nothing else to offer.

    Sour grapes much?

    ~~Still waters run deep. ~~from my MiPad using tapatalk
     
    Last edited: Sep 3, 2015
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  8. sob

    sob Moderator Moderator

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    AS the OP shows the old deals are mired in quicksand and are sinking deeper everyday, and now the two countries are signing new deals. We all know where it is heading.

    As @Yusuf has pointed out, Chinese presence in CAR is being tolerated by the Russians for the time being because they are busy with the Ukraine situation. Once things stabilise they will swing back to their other backyard.

    things can only get more interesting from here onwards.
     
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  9. Sylex21

    Sylex21 Regular Member

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    And another thread goes straight to irrelevant, immature and unrealistic comments.

    1. It makes sense for Russia to work with China, because it is being isolated by the west.
    2. Russia working with China has limits and need not bother India. India needs to be mature and realize if India can have better relations with the USA than Russia has a right to better relations with China.
    3. This is just a temporary snag due to slowed economy in China, overall the deal is still very useful for both sides and both nations gain immensely from trade with one another.
    4. Just because you are pro ____ nation, doesn't mean you have to be anti everything else on every topic.
     
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  10. pmaitra

    pmaitra Moderator Moderator

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    Misleading title. Putin's got no problem with PRC. The problem is with the Euro-Atlanticists.

    The downward graph is downward because it is measured in USD. Measure it in Roubles, and it will be an upward graph.

    Recently, Russia displaced Saudi Arabia as the primary exporter of oil to PRC. Russia is also building a gas pipeline to PRC, Power of Siberia, like it wanted to build one to Europe, which EU tried to stall, resulting in the Turk-Stream. Putin's got a problem with the Euro-Atlanticists. Again, Putin's got no problem with PRC.

    Coming to Yuan having less demand than USD in Russia, it is a problem with Russian banks, not with PRC. The Russian banks cannot raise capital in the west because it was the west that imposed sanctions, not PRC. Again, Putin's got no problem with PRC.

    Currency swap between Yuan and Rouble is for short term. That is right, and that was the idea. Currencies are always fluctuating in value, and constant settlements are necessary to avoid countries having to hoard in large amounts of forex, with the risk of that forex losing value, because, the county has no control over forex, because, it is forex (foreign exchange). For example, let's say a country has a lot of forex in USD. Then, the US decides to do Quantitative Easing, which is printing loads of money. What happens to the forex? Well, it loses value. One way to counter that is short term swaps and frequent settlements.
     
  11. amoy

    amoy Senior Member Senior Member

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    So what is wrapped up in 3 Sept new deals?

    VTB getting a RMB credit line dedicated to trade btwn Russian FE and Manchuria of China from a Chinese banking consortium consisting of Harbin Bank, Inner Mongolia Bank and Baotou Bank.

    Rosneft would acquire 30% share of a Chinese chemical corp., which in turn may opt to hold % share of xxx oil/gas fields.

    Rosneft would award an contract to China's COSL to drill in Okhotsk Sea for its joint venture with Norwegian Statoil.

    Indeed Russia has taken a hard dive for the rouble plunge. Russians in FE who used to cross the border visa-free for shopping in rouble almost daily have to resfrain… But the crisis only causes more mutual dependence.


    ~Tapa talks: Orange is the new black.~
     
    Last edited: Sep 4, 2015
  12. prohumanity

    prohumanity Regular Member

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    There are people who love to create rift between China, India and Russia but its not happening. BRICS nations are steadfastly taking the world towards a multi polar world. Insulting India and praising China is one way these dividers use to show as if China and India are adversaries ...which is not true. Russia, China, India ...all three are partners in the emerging new world order and its not going to be easy to draw a wedge between them now.
     
  13. wegweg

    wegweg Regular Member

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    Commodities are priced in dollars, the Russians are getting more rubles but they have lost half their value through inflation.
     
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  14. pmaitra

    pmaitra Moderator Moderator

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    Commodities are priced in Roubles.

    I am not saying commodities are not priced in Dollars, but for Russia, with sanctions on food import, it is irrelevant. Russian produce and Russian consumers, so commodities are priced in Roubles.
     
  15. sorcerer

    sorcerer Senior Member Senior Member

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    Russia Has a China Problem, Too
    Chaos in China’s financial markets could have dire implications for the Kremlin’s plans.

    By Alexander Gabuev
    September 04, 2015

    During Vladimir Putin’s visit to Beijing this week, he will be at pains to downplay the ongoing chaos in Chinese financial markets, drop in global crude prices, and lackluster Sino-Russian trade figures. Taken together, these developments are a huge disappointment for a Kremlin that just a few months ago was betting on China to serve as an economic lifeline for the Russian economy in the wake of Western sanctions.

    It wasn’t supposed to be this way. After being frozen out of Western capital markets by waves of sanctions, a great many top Russian government and corporate players had loyally heeded the Kremlin’s directive, “Go east, young man!” The Kremlin’s pivot to Asia was intended not only to form a Russia-Chinese alliance of likeminded authoritarian states, but also to re-orient the Russian economy toward the East. This effort was intended to provide Vladimir Putin with financial means to sustain himself in office and his current foreign policy course. Securing “a stable Chinese” alternative to Western capital markets was the key element in this game plan.

    Now, with the devaluation of the renminbi (RMB) and the Shanghai and Shenzen indices off by roughly the equivalent of three times Russia’s current GDP, the Kremlin’s China dreams may be going up in smoke. Many in the Russian leadership are now worried sick that if Chinese growth quickly decelerates, Russian GDP and state coffers are bound to be among the biggest losers. After all, it is largely Chinese demand for oil, metals, and other commodities that drives the price behavior of the Russian economy’s main exports. The PBOC’s moves to adjust the mechanism for setting the RMB exchange rate have raised global worries about China’s prospects and triggered a selloff in global crude and commodities markets.

    Putting a brave face on the RMB devaluation, the Russian Central Bank issued a statement – which the markets swiftly ignored. “In the mid-term, it is to be expected that a weaker yuan will help China to increase exports and stimulate growth,” the Bank stated. “This will eventually have a positive impact on global commodity prices – including oil prices, which in turn will strengthen the ruble.”

    Until recently the main disappointment for Kremlin decision-makers had been the paltry flow of investment and loans from its newly discovered partner in the East. In the first half of 2014 several high-ranking officials had made the rounds in Asian financial capitals to explore opportunities for Russian debt and equity listings. The chilly reception they received nearly everywhere surprised them a great deal. Perhaps the largest disappointment was Hong Kong. Despite being a “Chinese” stock exchange, Hong Kong market participants are too internationalized to cast a blind eye toward the attitudes of U.S. government and EU regulators. To cite just one example, Hong Kong banks are currently reluctant even to open bank accounts for Russian passport holders.

    The only place where Russian officials received a warm welcome was Shanghai. Top-level Chinese officials reportedly entertained the guests by telling them that all bureaucratic obstacles for foreign listings would soon be removed. In response to these assurances, several of the largest Russian companies, including large state-owned banks like VTB, announced their interest in issuing new shares and bonds in Mainland exchanges.

    Making matters even worse is the fact that many these false Russian hopes have also rested on the expectation that a stable RMB might offset the continued volatility of the ruble. Amid persistent fears that Russia’s ability to clear transactions through the U.S. and EU-based financial system might be targeted by future rounds of international sanctions, the idea of having a Chinese escape hatch has steadily grown in practical importance throughout the Ukraine crisis.

    How important will the Chinese market turmoil and RMB devaluation be for the flagging Russian economy and Putin’s regime? It’s too early to draw definitive conclusions, of course, but Russian players now have plenty of basis to be skeptical about China’s ability to serve as a driver for global growth in the future or a trade partner, which may compensate for shriveling trade with the EU. In the first half of 2015, bilateral trade with China fell by 31 percent, and Chinese investment to Russia fell by 20 percent.

    All told the latest events are an extremely depressing reality-check for Russian companies. Beijing still has enough money to buy assets in Russia (at knocked-down prices, of course) and to provide loans for Chinese companies doing business there. But the vision of a “Chinese version” of London for Russian companies in Shanghai is almost certainly dead. And so is the Russian vision of RMB as a stable global currency that sooner rather than later, many hoped, might replaced the much-maligned U.S. dollar.

    Despite grave consequences for the Russian economy, China’s financial rout may paradoxically strengthen Kremlin’s grip over the Russian business elite – at least, for the short term. As the West closes loopholes in the sanctions regime and more Russian players wake up to the changing realities in China, many will face an uncomfortable situation of having nowhere else to turn other than the Russian government. That silver lining, of course, is probably not lost on anyone in the Kremlin.

    Alexander Gabuev is chair of the Russia in Asia-Pacific program at the Carnegie Moscow Center.

    http://thediplomat.com/2015/09/russia-has-a-china-problem-too/
     
  16. amoy

    amoy Senior Member Senior Member

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    See? Who's assessing this Russia's China problem? from Carnegie Moscow Centre.

    Yes there're plenty of bilateral problems always. But definitely not resulting from the "financial markets chaos" or RMB devaluation.

    Like Russian FE, China's NE provinces (Manchuria) have a similar crisis of manpower drain and industrial recession. Many people migrate southward to the warmer coastal south or S. Korea from the ultra cold NE particularly in pursuit of better chances. NE provinces have ranked the lowest in GDP growth these years.

    NE used to be highly urbanized but their traditional mainstay has been mining and heavy industries, which suffer from resource depletion and keen competition. Their private sectors lag behind relatively.

    Beijing's strategy now is trying to revive NE in the big framework in alignment with Russia's grand plan of Far East development. In addition to energy Russian FE ports (and N Korea, trilaterally sharing a river mouth to the Japan Sea) also can provide an gateway to the Pacific.

    ~Tapa talks: Orange is the new black.~
     
  17. pmaitra

    pmaitra Moderator Moderator

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    Russian Truck Makers Boom Thanks to Sanctions, Cheap Ruble

    Excerpts and commentaries:

    This is true, but the market has shrunk:
    What the western press would rather focus on:
    What might be missing in western reports:
    Some more details, which also shows how Russia is spending less in foreign brands, thus, we should not evaluate in dollars any commodity that is not priced in dollars. To do so is absurd.
     
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  18. blueblood

    blueblood Senior Member Senior Member

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    @amoy , we'd prefer if you dispute the facts put up by the author in relation to bilateral trade between Russia and China.
     
  19. amoy

    amoy Senior Member Senior Member

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    What to dispute? No one challenges the decline in bilateral trade. Fact being - the quantity increased by 36% YoY in 2014 of oil and gas China imported fm Russia but the prices have halfed in dollar term

    The price slump results in cash strapped Russians asking for Chinese financing pipelines construction, and selling energy becoming less lucrative for Russia. They even have to postpone a border bridge link to China though Chinese have completed our side.

    Also rouble has plummeted consequently less people come over from Blagoveshchensk to Heihe for shopping in Rouble across the Amur River. The border city that relies on trading is hit big time of course.

    Yet it is crystal clear the fall has nothing to do with stock market fluctuations or RMB depreciation by 3% (like nothing compared to Rouble and Tenge plunge)

    Do open your mind. If all is well why r Ruskis willing to sell off their shares of key oil/gas fields? Or need Chinese credit lines? Or agree to trade in RMB? They're ready to run a casino in Vladivostok to attract tourists $$

    So could u predict which way the "crisis" would lead Russo China relationship, closer or drifting apart?

    ~Tapa talks: Orange is the new black.~
     
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  20. sorcerer

    sorcerer Senior Member Senior Member

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  21. wegweg

    wegweg Regular Member

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    The Russian/Soviet concept of success: sales only fell 50%

    Reality is that Russian is a small market to foreign brands, losing even 100% of 3% of your world wide sales is nothing compared to losing 50% when your only market is Russia.
     

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