THE GENERAL FRAMEWORK OF THE SINO-RUSSIAN RELATIONS

Dr Yuri Tsyganov

The last decade has brought many remarkable historic events. Among them there is the Sino-Russian rapprochement that may be extremely important for the future development of international relations. Origins of initial changes in Soviet/Russian policy towards China may be traced from Gorbachev period in late 1980s. With the withdrawal of troops from Afghanistan, troops' reduction in the Far East and with more balanced approach to the settlement of Cambodian crisis the USSR largely responded to Chinese preconditions, laying the ground for normalisation of bilateral relations. Gorbachev's visit to Beijing in May 1989 has put the formal end to former period of mutual distrust and cautious alert.

At the same time Gorbachev's policy brought changing attitudes to China in Soviet/Russian conservative elite and military. Cooperation of Russian and Chinese defence agencies including arms sales became one of cornerstones for new partnership. Besides, China and Chinese experience in economic reforms grew in views of Gorbachev's conservative critics as an alternative - or sometime as the alternative - to his domestic political reformism and "pro-Western" orientation of his foreign policy, laying the basis for calls by wide spectre of Russian political forces from leftists to centrists to integrate Chinese lessons in Russian reforms of early 1990s¹. At the same time Russian democrats assessed China as a totalitarian Communist nation and avoided any contacts with it, putting the stress on the Western dimension of Soviet foreign policy. The Russian Foreign Ministry even asserted that China was only of secondary importance in Russia's foreign policy ²

It may be said that since Gorbachev's normalisation of relations with Beijing the slogan of closer relations with China and stress on Russian-Chinese cooperation as the top priority for Moscow's Pacific policy, the option for strategic cooperation with the PRC emerged as a characteristic of conservative influence on Russian foreign policy. In its turn, Beijing appeared to be among nations recognising the Emergency State Committee at 1991 coup d'etat and deeply cautious to new Russian reformism and possible effect of demise of socialism on their own future. Besides, Russian efforts to integrate in the democratic community coincided with a strong campaign in the West to protect human rights in China after Tian'anmen incident. That only strengthened the nihilist view by Russian democrats of China as a "communist totalitarian regime". The defeat of August 1991 coup d'etat in Moscow, Soviet Communist party loss of power and victory of anti-Communist pro-Western political forces have temporarily frozen Russian-Chinese rapprochement. Cool nature of mutual perceptions was deepened by Russian authorities romantic orientation on Western standards and constant stress of their critical view of human rights in China. Thus, the PRC in Russian international priorities got its place behind the United States, Western Europe, Japan and the ROK.

In a sense early 1992 was opening a chance for elaboration of a radically new Russian approach to Northeast Asia with major stress on relations with Japan as a member of Western community with influential voice in international institutions much needed by Russia. Yet a fierce domestic political struggle in Russia has undermined the opportunity. From the beginning foreign policy in general became a target of opposition attacks insisting on a more versatile Asian dimension as opposed to the then foreign minister Andrei Kozyrev's line for cooperation with the West. Partners to be named in Asia were primarily China and India instead of Japan.

Indeed, since 1993 the People's Republic of China has emerged as the most natural partner to promote cooperation with. First, Russian-Chinese relations in 1990s did not demonstrate important strains, unlike the dialogue with Japan perplexed by the dispute over "Northern Territories" or efforts to integrate Russia in Asia Pacific regional institutions. The ground was prepared by Gorbachev - Deng Xiaoping efforts reaching its peak by 1989. Concentration of both nations on domestic economic priorities and parallel, though uneven reduction of troops along the border, first agreement on the delimitation of the eastern part of the border signed in 1991 and eliminating territorial claims have calmed persistent threat perceptions of 1960s -1980s and removed ideological competition from the agenda. President Yeltsin's visit to Beijing in December 1992, second in Asia-Pacific after Seoul, managed to restore the atmosphere of normalised relations.

Expanding Russian arms sales to China and military technical cooperation grew as another key factor for closer relations vitally important for both. China turned out cut from Western weapons markets after Tian'anmen incident and found major supply of modern arms and military technology³. On the other hand, underfinanced Russian military industrial complex enjoyed Chinese demand under rapidly dropping national purchases of weapons, with China soon becoming its largest client in the world, the very rare one eager to expand.

Third factor promoting closer Russian-Chinese partnership should be attributed to expanding gap of perceptions and alienation from the West. Through the whole period of 1990s China meets Western challenges in issues of human rights, posture towards Taiwan, its military programs, especially around the Taiwan strait and South China sea islands. Russian concerns lay in different areas, namely in general trend for self-assertive foreign policy, periodically diverting evaluations of situation in former Yugoslavia, Iraq, Libya, Iran, Baltic nations, etc. with gradually intensified dispute over NATO expansion, i.e. areas rather remote from prior Chinese attention. Yet, a general trend for distancing from the West and rejecting the model of American-led international community, insistence on the need for multipolar nature of the post Cold War international system combined with visual lack of direct bilateral contradictions on issues separating them from the West open the way for both for at least vocal mutual support vis-a-vis their critics to prepare the ground for "strategic partnership aimed at the multipolar world".

The drift towards finding China as the most suitable Russian partner in this region is not a product of any calculated strategy. It has emerged as a final result of several rather unsuccessful attempts to formulate guidelines for a new Asian Pacific policy like a kind of last possible option to intensify cooperation with Asian neighbours, to much extend imposed on it by cautious vision and lack of political will of every other possible partner. The intensive development of Russian-Chinese cooperation after 1993 easily matched to new general trends in Russian foreign policy with her diverting from romanticism of Atlantic cooperation to new self-assertiveness, enabling Russia to find another important critic of the US-led world yet outside the club of internationally perceived "pariah nations".

However, the Russian-Chinese "strategic partnership" hardly enables Russia to find a new Asian Pacific or Northeast Asian stratagem. The stake on priority engagement with China does not make it easier for Russia to find and pursue its goals in Asia-Pacific. The dialogue with China evades cooperation on such issues vital for Russia's Asian policy as its role on the Korean peninsula and general approaches to settle Korean problems, arms control and confidence building measures in Asia-Pacific (except directly bilateral issue of border arrangements), Russia's integration into regional structures etc. It is oriented not so much for mutual practical assistance in international or regional issues, but rather for a kind of parallel global response to the United States and their allies' attempts to impose their views on Moscow and Beijing through mutual support on issues where their interests do not overlap. The Sino-Russian relations seems to be a trump card in Russia's relations with the West. Hence the Chinese stake does not settle Russian problems in Asia-Pacific and preserve the need for further search for accommodation with other regional powers. Virtually, the revival of Russian-Japanese dialogue in 1996-97 reflects the last trend.

China has recognised new Russia as soon as in December 1991, and in early 1992 Chinese leadership adopted a decision to stimulate broader and deeper contacts with Russian business circles. To revive bilateral cooperation China used established channels in Russia, military-industrial cooperation first of all, with trade and economic relations laying a new ground for bilateral ties.

During 1992 Moscow and Beijing have managed to overcome ideologically determined mutual distrust and alienation. Prospects of practical gains from cooperation, primarily in military industrial sphere, on the basis of agreements reached in late Gorbachev period finally prevailed. Various contacts on different levels were held. By the time of President Yeltsin's visit to Beijing in December 1992 the ground for intensive development of economic cooperation was thoroughly prepared. Besides the Joint Declaration on Basic Relations between the Russian Federation and the PRC was signed by two leaders with mutual obligations not to join alliances against each other and stipulating that neither side will allow a third party to use their respective territory to endanger security of the other.

The evaluation saying that a desire to secure Russian-Chinese border to enable concentration of efforts on economic transformation⁴ is common but not quite correct. It goes without saying that in 1980s both nations have set their top priorities on economic development and gradually evaded the dominance of ideological stereotypes. Yet, even in the era of most hostile perceptions none of them considered a large armed conflict of strategic scale as realistic though both spent large finance for border military build up (Russian sources evaluate military expenditures related to "Chinese threat" as US$ 100 billions in twenty years). Therefore low ideological confrontation and following improvement of bilateral ties has easily opened the way for radical and rapid decrease of military confrontation in the Far East.

For at least three decades relations between Moscow and Beijing were based on triangular interdependent logic of balance of powers between the USSR, United States and China. Functions of the big triangle were largely determined by the level of confrontation between its participants and their power potential. It assumes that two weaker and/or more passive sides cooperate to meet the challenge of the one stronger and/or active. While Moscow used to be most offensive in 1970, then in late 1980s the United States gradually acquired more and more active posture. Under these conditions and within the logic of triangular relations China put the accent on enhancement of relations with the "weaker" side, i.e. with the USSR. With the USSR's collapse the "triangular" seemed to vanish too.

However, the tensions between Russia and the West, the confusion over relations among the CIS countries and Russia's weak position in the Asian Pacific Region - aggravated by the unsettled dispute with Japan - have led to the Russian leadership's return to a triangular logic in its foreign policy course.

Thus, by mid 1990s the "triangular" political motivation again grew as prevailing in Russian-Chinese relations. During his visit to Beijing in January 1994 Russian foreign minister Andrei Kozyrev proposed to raise bilateral cooperation up to the level of strategic partnership, the idea accepted by China after a period of hesitation⁵. The Joint Declaration signed during the visit to Moscow by Secretary General of the Chinese Communist party Jiang Zemin in September 1994 characterises Russian-Chinese ties as "new relations of cooperative partnership".

Moscow's rapprochement with China was largely smoothed by the fact that both nations may easily and with minimal efforts support each other in two vital issues for them, the expansion of NATO and the problem of Taiwan. The Joint Declaration signed at president Yeltsin's visit to Beijing made a new step, formulating "partnership relations of equality and confidence oriented on strategic interaction in the XXI century". China has stated that it understands the Russian position against NATO eastward expansion and supports Russian actions to preserve the federation, assessing the Chechen issue as a domestic one. Russia in its turn reiterated that the PRC government is the only legal administration to represent all China, and Taiwan is an integral part of Chinese territory. Therefore Russia will not establish official relations or have official contacts with Taiwan. Russia also recognised that Tibet is an integral part of China.

In general in 1991-96 Russian-Chinese relations expanded from debating recognition as a major issue to the level of "partnership relations of equality and confidence oriented on strategic interaction in the XXI century". Besides, 1996 was marked by Chinese prime-minister Li Peng's visit to Moscow with agreement to intensify top level contacts (not less than once a year) and starting the business cooperation structure similar to Gore-Chernomyrdin commission in US-Russian relations with not less than two annual sessions. In June 1997 the two governments signed a ten year agreement on establishing a "mechanism of regular meetings between the heads of Russian and Chinese governments"⁶. The "mechanism" is aimed to developing the bilateral cooperation in the following fields: trade and economic ties, military exchange, scientific cooperation, energy and nuclear energy production, transportation. In the framework of it relevant commissions were established.

The April 1997 summit was featured by the desire to demonstrate to international community, the United States first of all, correlation of geopolitical posture of two nations, as represented in the Joint Declaration on Multipolar World and Emerging New International Order. The document is unique for post-Soviet Russia as nothing of the kind was ever agreed with any other nation. As it was noted, the Russian-Chinese rapprochement is basically a reaction to changing balance of power in world politics. So two nations act in parallel rather than as allies. Efforts to elaborate "strategic partnership" aim at countering American line to preserve unipolar international system and seek for the establishment of multipolarity with both nations playing maximal independent roles. Hence the final objective of joint actions by Moscow and Beijing is in concurrent self-determination, gain of independent influence and separate bargaining positions instead of close military and political alliance. It is very symbolic that a search for terms defining stages of their bilateral cooperation is mostly a search for labels to attract attention of third parties (the United States, Japan) rather than to come into conflict with them. Simultaneously the absence of allied relationship between Russia and China is constantly stressed.

Russia and China successfully used the triangular relationship among Moscow, Beijing and Washington for their own interests. The verbal support Russia received from China on the question of the NATO enlargement made it easier for Russia to bargain with the West and receive compensation in the form of participating in the Group of Seven leading industrial nations and entering the Paris and London clubs⁷. The Krasnoyarsk meeting between Yeltsin and Japanese Prime Minister Ryutaro Hashimoto was the result of Russian efforts to obtain an alternative partner in Asia and avoid being oriented exclusively toward China. As it is well-known, one of Tokyo's main concern was to balance stable relations with Russia against China's growing power.

In its turn, China got the opportunity for constructive dialogue with the United States. However, China seems to know better than Russia what to do with the possibilities that are open to it.

Beijing's current assessment of the structure of international relations is based on the premise that international forces are dispersing. Now the U.S. are the only super power in the world, but the Chinese believe that the U.S. ability to influence international affairs will gradually diminish in the nearest future. Thus, the world is going to multipolar structure, in which various powers are balanced and large-scale military conflicts are unlikely.

In the new international situation China is to continue its policy of "maintaining independence and keeping initiative in hands". That means China intends to independently determine its position on the world arena, refuses to participate in any alliance and arms race, on the basis of "five principles of peaceful coexistance" develops cooperation with all nations of the world⁸. Virtually, Beijing tries to be pragmatic and does not want any ideological community or dispute determine its international relations. It has mostly removed ideological constraints for its foreign policy to avoid ideological and geopolitical factors prevailing over the economic expediency.

On the whole, the emergence of military and political Russian-Chinese alliance seems inconceivable as their geopolitical and strategic national interests do not coincide. China would rather evade the prospect to become a part to the conflict situation in remote Europe in case of strain in NATO-Russian relations. Russia also would not endanger her relations with the United Nations, Japan and other Asian Pacific nations in case of a conflict in the Taiwan strait or grave confrontation around territorial claims on islands in South China and East China seas. At the same time both nations are ready to develop military-technical cooperation, one of major driving forces for their current ties.

Meanwhile confidence building measures (CBMs) along the border acquire important symbolic value in bilateral relations. With signing two agreements on border delimitation in 1991-95 Russia and China have settled their territorial dispute to ease cooperation on CBMs. In 1992 they have signed a memorandum providing for radical cuts of arms and weapons along the border. In 1994 they adopted the declaration on mutual non-targeting of strategic nuclear missiles to each other and reinforced the obligations not to use nuclear weapons against each other as a first strike. In 1996 China and four CIS nations (Russia, Kazakhstan, Kirghizia and Tajikistan) have signed the agreement on border CBMs, appended in 1997 by the agreement on mutual reduction of armed forces along the border. With all their importance, these agreements ensure nothing more than stabilisation of the current balance of forces along Russian-Chinese border and have basically symbolic meaning to support broader political declarations.

It is more significant that in late 1997 two nations completed six years of work between government bodies on the demarcation of the Sino-Russian border. The final demarcation agreement undoubtedly has a deep influence on relations between the two countries. It curbs the strong irritant for both sides and eliminates possible territorial claims, above all Chinese claims to the Primorye region⁹.

The economic interaction in civil areas are not yet important enough to determine the flow of political cooperation. The Sino-Russian economic relations develop very slowly and chaotically in distinction to the political ties that constantly go up. Meanwhile leadership of both nations understands the importance of stable economic basis for effective bilateral political relationship and stimulates activation of economic ties. In other words political motivation in Russian-Chinese relations heavily overweight economic reasons unlike the Chinese cooperation with the United States and Japan where economic interests help to soften political contradictions.

Today Russia has to acknowledge that it cannot cultivate the Chinese market on the basis of "special relations" with the Chinese government proceeded from the "strategic partnership". But such illusions persist. For example, Russian energy machine-builders expected that they would be given favourable terms in China. Last year they got a cold shower when they did not win the tender on equipment deliveries to the "Three Gorges Dam" ("San Xia") project¹⁰. It also came as an unpleasant surprise when Washington removed its ban on U.S. companies to supply nuclear reactors to China. Now the Russian nuclear energy export company "Atomenergoexport" expects to encounter stiff competition in a market that the Russian company practically considered to be its inherited estate¹¹.

These events show that Russian enterprises have an inaccurate idea about the Chinese market. They see it as some kind of alternative to competitive struggles on the world market.

Several years ago the Chinese had experienced something similar. There was a sharp rise in Russian-Chinese trade between 1991 and 1993, during which time it seemed to the Chinese that they could buy from the Russians products for excessively low prices and that the Russian market would absorb consumer goods of any quality. Today the Russian market is saturated with consumer goods and Chinese sales have fallen sharply.

That was the period when bilateral economic ties were highly dependent on small businesses, including individuals (so-called "chelnoki" - shuttles). They distinguished themselves with short-term orientations and intentions to use the Russian economic crisis for their own benefit. The decrease of small companies' activities was the main reason for the dramatic fall of trade turnover in 1994 after 1993 record of US$ 7.6. Only in 1996 turnover came to the level of US$ 7 bln.

Now in Russia there have appeared industrial lobbies trying to push the government into creating favourable conditions for economic collaboration. Russian suppliers of energy equipment, energy resources and arms have placed great stakes on China. For them, mastering the Chinese market is not only a chance to earn profits but a form of survival. Actually, these industries still have a high level of government regulation. On the other hand, the above mentioned groups need Russia's government support to ensure large-scale exports of their products. Thus, the recent increase of government bodies' activities in the field of Sino-Russian economic cooperation is not just a campaign initiated from the top in order to strengthen the basis of political partnership, but it also mirror the real interest of Russia's large business groups to develop cooperation with China.

However, the current trade turnover is far from the target of US$ 20 bln. set by the two governments last year. In 1996 China took the fifth place among Russia's foreign trade partners - behind the Ukraine, Germany, the United States and Byelorussia. The Chinese share was only 4,5% of the total Russian foreign trade turnover. For China Russia appeared to be the eighth partner in the world. The bilateral trade turnover grew to US$ 6.84 bln. which meant 25% growth in comparison to 1995¹². Nevertheless, in 1997 there was another fall by 15%. Unlike steadily developing political relationship, bilateral economic ties have got chaotic development.

The Russian exports to China is very vulnerable to market changes, as its structure is very primitive. For example, in 1993 exports of ferrous metals gave 40% of Russia's total revenue received from sales to China, in 1994 the figure increased to 50%¹³. That caused protests by the Chinese steel producers that low prices offered by CIS - first of all Russia's - companies put them at a disadvantage, albeit they were able to produce nearly all the range of steel products. Following these protests, in 1995 China reduced its purchases by 40%. Subsequently, in late 1996 the Chinese Ministry of Metallurgy offered anti-dumping measures against CIS producers. Inevitably, all that affected the bilateral trade turnover.

Russia's major exports to China (US$ 5.15 bln. in 1996) include planes, cars and trucks, agricultural machines, mining and oil-processing equipment, textile equipment, chemical products, construction materials, steel, timber, cement, etc. Fertilisers and ferrous metals continue to be leading export goods that have more than 50% of the total deliveries¹⁴. In 1996 Russia exported to China machines and equipment with a total value of US$ 930 mln. China supply Russia with consumer goods (US$ 893 mln. in 1996), food products (US$ 427 mln. in 1996).

Today Russian arms sales seem to be the only stable sector of Sino-Russian trade. Thus, there is a reason for concern that Russian-Chinese economic ties will be reduced only to arms trading. Stephen J. Blank argues that Russia's government has lost control over its arms sales program but dares not react negatively, despite the military implications of such transfers for its own security¹⁵. However, the problem is that though the government is still capable of controlling its arms export¹⁶ it not only gives free hand to arms producers but helps to promote their sales.

Russian arms suppliers are expanding sales to China despite objections from certain military circles. Former defence minister Igor Rodionov, for example, has called China a potential opponent¹⁷. The giant military production complex created in Soviet times has lost orders from the government, as Russia is not able and does not need to support such enormous amounts of military production. China's attempts to increase its regional role by modernising its army is manna from heaven for the Russian ailing military industry, which simply can not turn its back on the potential Chinese market.

It is true that one of the main reasons for Russia's governmental support of expanding arms sales to China is a privatization of state policy (and the whole of state apparatus) taken place under Yeltsin¹⁸. Thus, the government represents and protects interests of certain industrial lobbies, arms producers among them. Logically, given China is a "strategic" partner, arms sales to it has appeared to be a good substitute to vanished governmental subsidies to the industry.

Chinese interests in expanded contacts with Soviet military leadership and party nomenklatura is to be explained not only by ideological, political or strategic considerations (to prevent further expansion of "bourgeois ideology" and "peaceful evolution" of socialist nations to capitalism, to weaken Western pressure, to overcome international isolation after Tian'anmen incident), but also by plans for rapid modernisation of the People's Liberation Army, a strategy advocated by Chinese military and party conservative radicals evaluating international politics in terms of military power.

As Michael D.Swaine put it, today China is the most critical and the least understandable variable for the future Asian security structure, as current trends lead to China emerging as a prevailing military and economic power in Asia, capable of projecting its air, ground and naval forces far beyond its boundaries¹⁹. Precisely that determines most of suspicions about the Sino-Russian military cooperation.

Russian modern arms deliveries provided China with a unique opportunity to close the technical gap with military superpowers. Russia has supplied and plans to supply the most advanced weapons. That are "SU-27" fighters, "C-300PMU-1" air defence missile complexes, "Kilo"-class submarines, "Smerch" (Tornado) multiple rocket launchers, "Metis" and "Konkurs" anti-tank rocket systems, "AK-630"-class high-speed ship guns,"Kashtan" air defence marine complexes, "Sovremennyi"-class destroyers (the ship has eight the most modern "Mosquito" anti-ship ultra-sonic rocket launchers and two "Shtill" air defence guided missile launchers), T-80U and T-90C tanks, BMP-3 and BTR-80 armoured vehicle, "Mi-28N" and "Ka-50" multipurpose helicopters, "Tor-M1" air defence missile complex, "Msta-S" and "Vena" self-propelled artillery, "Tunguska" air defence gun-missile complexes²⁰. Russian "Il-76" planes may become the base for installing "Falcon" early warning system, the delivery of which China successfully negotiated with Israel in July 1996²¹.

Besides - or even in the first turn - China intends to buy Russian arms technologies. In 1996 China bought from "Sukhoi" firm a license for producing 200 "Su-27" fighters in the city of Shenyang. On the whole, the proportion of Russian weapon deliveries and arms technology sales is 7 to 3. China wants to reverse it²².

Russian arms supplies are especially important for China. That is not only because of the Western embargo, but also because of the fact that several decades ago China obtained the technological base through Soviet technology transfers and with the help of Soviet experts. Russian modern arms sales help to increase the level of Chinese professionals and educate military personnel (including Russian military colleges) to use modern warfare. Thus, China's own military R&D can be quickly promoted and the procedure of its implementation becomes easier.

Recently, a bilateral cooperation in the sphere of energy resources supply emerged as a very promising direction of economic cooperation between Russia and China. In June 1997 during the double visit of former Premier Viktor Chernomyrdin and former vice-premier Boris Nemtsov the Russian Ministry of Fuel and Energy and China's National Oil and Gas Corporation signed an agreement on cooperation in crude oil and natural gas production. According to the agreement two parties will cooperate in exploring so-called Irkutsk project which should run 3360-km gas supply main from Kovykta gas deposit (Irkutsk District of Russia) through Mongolia to a Chinese port (probably, the port of Rizhao on the Yellow Sea) ²³. Later in 1997 the Russian joint-stock company "Gasprom" and China's National Oil and Gas Corporation signed another agreement on cooperation in the natural gas industry.

Two parties are also studying the feasibility of a so-called Western project to run a gas main from Russia through the Western border of China to China's South-East. At the same time the Russian Ministry of Fuel and Energy and China's National Oil and Gas Corporation will cooperate in crude oil transportation from East Siberia to China, and they will study projects of crude oil transportation from Kazakhstan and Sakhalin to China. "Gasprom" and China's National Oil and Gas Corporation intend to cooperate in tapping gas and oil fields in China.

The export of Russian energy resources seems to be the only field where Russia now expects no competition from other countries expanding their exports to China. According to Boris Nemtsov, the Russian government would grant an implicit support to Russian energy exporters trying to develop the Chinese market²⁴. A successful cooperation in this sphere might have twofold implications. Inwardly, that would help Russia in further developing its rare competitive industries and in raising funds to support East Siberia and the Russian Far East had been most hardly hit by the economic crisis. Outwardly, that would offer the basis for the Russian integration to the Northeast Asian regional economy, which Russia especially needs after its entry to the APEC. The Chinese energy shortages are well-known. That is a "bottleneck" in its development. Thus, the Russian expectations may become true.

At the same time, the cooperation energy resources supply may have deep consequences. It will change the actors and the entire structure of the bilateral ties, as large companies enjoying governmental support will dominate in bilateral ties. The character of the cooperation on the provincial level will also change. However, the growing economic interdependence between the two economies may appear to be controversial and may turn into a "zero sum game". That in case of failure in developing cooperation ties may bring political strains.

It should be noted that Russia does not have a consolidated vision of prospects for the relationship with China. It is obvious that reforms promote the status of China from regional power to global superpower. Currently both nations use each other to counterbalance American or Japanese regional dominance. Yet emergence of China as a global superpower may conflict with Russian strategic interests, particularly in case it succeeds in becoming active and important partner of Asian Pacific nations, which is her ultimate regional goal²⁵. Simultaneously China would compete with the United States and Japan for the leading role in the Pacific rim.

On the other hand, different evaluations of favourable and unfavourable factors in Chinese social development, diverting assessments of problems confronting China and abilities of its leadership to cope with them provoke controversial forecasts. There exists a pessimistic vision of Chinese prospects stressing probability of isolationism, regionalization with only formal feeling of national identity and unity, fluctuations and hesitations in political options, as well as forecasts of complete integration of China into world economy without posing military or political threats to neighbouring nations. Judging by pure economic factors the catastrophic scenario seems improbable for coming two decades. Meanwhile social and economic transformation of China brings objective ground for a deep crisis of society institutions, i.e. contradictions between central government and provinces as well as between provinces, growing social tensions, increasing discrepancy between archaic political system and boosting economy, deepening ethnic problems. Hence any prognosis of the future of post Deng Xiaoping regime is rather hard to evaluate.

Taking these hypothetical scenarios pessimists assess China as a potential threat to Russia either as an authoritarian state with growing military might, or as a nation doomed to repeat the fate of the USSR with consequences hard to foresee. Therefore they advise to avoid measures strengthening China, weapons and arms technology deliveries first of all. Optimists believe that Chinese leadership is able to manage the nation, a scenario responding to Russian interests. This vision assesses Chinese military build up as a modernisation of the backward army without possible threats to the region, maybe except Taiwan, but the last one is viewed as China's domestic affair. The optimistic vision now prevails among Russian leadership.

The future of Russian-Chinese relations largely depends on American foreign policy, i.e. results of the engagement policy towards China and level of trust in Russian-American cooperation. Obviously ideological considerations complicate the improvement of US-Chinese relations. The American allergy to any kind of totalitarianism and periodical emotional campaigns on human rights in China preserve mutual distrust. Unless the United States play down these tendencies in their approach to China Beijing will always have a strong motivation for closer ties with Moscow. On the other hand increasing Russian feeling of being duped, isolated and neglected by the West puts her to find the best partner in China.

In conclusion, following features are characteristic of the current nature of Russian-Chinese "strategic partnership":

External motivation of rapprochement within the logic of triangular relations when major value of their cooperation is determined by common demand to meet real or perceived challenges from the West;

Opportunities to overcome possible isolation in international affairs and improve their abilities to assert specific national interests vis-a-vis non-cooperative Western nations;

Lack of overlapping or conflicting national priorities enabling mutual verbal support without essential expenditures or sacrifices;

Vague nature of slogans declared and insufficient practical understanding of the essence of proclaimed partnership referring to bilateral cooperation;

Low level of political coordination in regional Asia-Pacific issues;

High value of military industrial and technical cooperation helping China to modernise the People's Liberation Army and opening the market for Russian military industrial complex;

Persistent perceptions of possible mutual threats of geopolitical nature and rather cautious evaluations of scenarios for the future;

Lack of economic base for political cooperation, but Russia's energy resources supply may close the gap.

In that sense the Russian-Chinese "strategic partnership" looks as lacking enough internal motivation and highly determined by international environment. Narrow isolationism and increasing tension with the West does not meet optimal preferences of both, and both would prefer differentiation of their international connections. A kind of quasi-alliance is nothing but inevitable tactics for the worst case scenario imposed from outside.

Endnotes:

Russian sinologists - most of them advocate government interference and slow pace of economic reforms - provided a theoretical explanation for that. For example, see: A.V.Ostrovsky. Otsenka vozmozhnostei ispolzovania opyta kitaiskikh reform v Rossii (Assessment of Possibilities to Use China's Reform Experience in Russia). /In: Opyt Rynochnykh Preobrasovaniy v Kitae (China's Experience of Market Reforms), Moscow, Institute for Far Eastern Studies, RAS, 1996, pp.163-172

² The Moscow Times. May 14, 1997

³ Right before Yeltsin's 1992 visit to China, the Japanese Kyodo news agency revealed secret instructions of the Chinese Communist Party Central Committee to develop military collaboration with Russia with the aim of obtaining an end to the embargo of the West on the export of military technology to China.

⁴ For example, Gennady Chufrin recently wrote that one of the key factors of Sino-Russian rapprochement is the Russian aspiration to ensure stability along a very long Sino-Russian border (Gennady Chufrin. China and Russia: Just Ties, No Alliance. The Strait Times, Singapore, October 10, 1997)

⁵ Izvestia. Moscow, January 29, 1994

⁶ Far Eastern Affairs, Moscow, 1997, No.4, pp.95-96

⁷ The Moscow Times. November 18, 1997

⁸ In his report to the XV congress of the Chinese Communist Party, Jiang Zemin again stressed the five basic principles of the PRC's foreign policy: "do not yield to any external pressure, do not form alliances with any superpower or nation, do not create military blocks of any kind, do not participate in military drills, do not conduct military expansion" (Renmin Ribao. September 22, 1997)

⁹ Observers note that in the first half of 1990s the Chinese local TV channels had a lot of programs discussing the Sino-Russian treaties of tsarist period and projecting scenes of mass massacres of Chinese conducted by Cossacks.

¹⁰ In August 1997 China signed contracts on the delivery of power equipment with a total output of 14700 MW for the first machinery section of "San Xia". The consortium consisted of Anglo-French group "GEC Alsthom" and "ABB" got a contract on the delivery of 8 power units for US$ 420 mln. The consortium formed by German companies "Siemens" and "Voith" and Canadian "General Electric" won another contract on the delivery of 6 power units for US$ 320 mln. The Chinese counterparts in the contracts are "Harbin Power Equipment" and "Dongfang Electrical Machinery".(Bulleten Inostrannoi Kommercheckoi Informatsii (Bulletin of International Commercial Information). Moscow, December 16, 1997. p.13)

¹¹ According to the Agreement between the Government of Russian Federation and the Government of People's Republic of China on the Construction of Nuclear Power Plant on the PRC's Territory and the Russian Governmental Loan to the PRC, Russia should construct a nuclear power plant in the Chinese province of Liaoning. China decided to move the construction site to the province of Jiangsu and asked to increase the plant's capacity to 4 blocks each of 1000 MWatt. (Bisness i Politika (Business & Policy). Moscow, 1997, No.12. pp.12-13)

¹² Finansovye Izvestia. No.46. June 26, 1997

¹³ Biznes I Politika (Business and Politics). Moscow, 1997, No.12, p.18

¹⁴ Finansovye Izvestia. No.46. June 26, 1997

¹⁵ Stephen J.Blank. The Dynamics of Russian Weapon Sales to China. March 4, 1997 (Internet Edition), p.2

¹⁶ A special commission with the participation of high ranking Russian diplomats and military has been established to check and license every export delivery of arms.

¹⁷ Nezavisimaya Gazeta. Moscow, December 26, 1996

¹⁸ Stephen J.Blank. p.2

¹⁹ Strategic Appraisal 1996. Ed. by Zalmay Khalizad. - Santa Monica: RAND,1996. - p. 186-187

²⁰ Profile. Moscow, No.17, May 1997, p.14.; Izvestia. Moscow, April 25, 1997

²¹ Finansovye Izvestia. Moscow, No.37, May 22,1997

²² Izvestia. April 25, 1997

²³ Far Eastern Affairs, Moscow, 1997, No.4, pp.97-99

²⁴ Izvestia. November 25, 1997

²⁵ See: V.S.Myasnikov. Shestaya model otnosheniy Rossii s Kitaem (The Sixth Model of Sino-Russian Relations). In: Biznes i Politika (Business and Politics). Moscow, 1997, No.12, p.6

RUSSIA: CRISIS? WHAT CRISIS?

Dr Vladimir Tikhomirov

Contradicting his own statements made just a few days earlier, on 29 June President Yeltsin said that it was wrong to call the current financial situation in Russia a "crisis". He referred to the Russian government's attempts to raise additional funding in order to continue its current fiscal policy as a "stabilisation programme".

Ever since the Russian reform began in early 1992, the Russian government was depending on the flow of outside funding to cover huge deficits of the state budget. In the first two years of the reform a significant part of that funding came in the form of foreign government and international assistance. By 1994 this source had significantly dried up. During the last three years, loans from international financial organisations and foreign banks became the main source of external funding for the Russian government.

Another important source of funding in the recent years was domestic state borrowing through issues of government securities (GKO-OFZ). These issues were started in 1993 and between 1994 and 1997 the total volume of their annual issues increased from US$ 5.7 bn to US$75.5 bn, or by more than 13 times. During that time the Russian bond market became one of the most profitable markets in the world². However, by the end of 1997 the net budgetary revenue from issues of government securities was becoming constantly negative.

The current Russian financial crisis was sparked off by internal factors. The failure of the Russian government to start a real reform of the economy had led to a rapid shrinking of its revenue base. As a result, in order to fulfill its social obligations the government was forced to borrow more and more money, both externally and domestically. The spread of the Asian financial crisis in the second half of last year had resulted in the rise of interest rates on credit resources available on international markets. The Asian crisis also sent a clear warning to many foreign investors on the Russian market of the possible things to come. Since October-November 1997 foreign capital was leaving the Russian bond market en masse.

In tactical terms, future developments on the Russian financial market are dependent on the result of negotiations between Russian Deputy Prime Minister, Anatoly Chubais, and international financial institutions (IMF, World Bank) and private banks. Currently there are indications that in the next 1-2 months Russia might be able to secure additional US$10-12 bn credit from these sources³. However, in strategic terms this will hardly stop the downward tendency in Russia's economy and its financial markets. The Russian government needs to radically reassess its reform policy. The anti-crisis programme made public by the new cabinet of Sergei Kirienko on 23 June is the first step in that direction. However, it remains to be seen whether Kirienko's government will prove capable of breaking with the Soviet legacy of keeping a large distance between the promised future and the reality.

Endnotes:

RFE/RL Newsline, Vol.2, No.123, 29 June 1998.

² See "Russia: the Stock Market Boom", Russian & Euro-Asian Bulletin, Vol.6, No.1, January 1997, pp.10-14.

³ See Monitor, Vol.4, No.117, 18 June 1998; Kommersant-Daily, 19 June 1998; Izvestia, 29 June 1998; Monitor, Vol.4, No.124, 29 June 1998.