China possesses sizable financial resources. Russia possesses experience, technologies, industrial skills and historical relations with the region. That sounded like wishful thinking. When the Chinese president was in St. Petersburg, Rosneft, the Russian state oil company confounded expectations and failed to announce a contract to build an oil refinery in Tianjin, China. The next day, Kazakhstan announced that China will build a refinery in Kazakhstan. (Russia has not built a new refinery from the ground up in Russia since the Soviet era). China had bargaining power. On Sept. 7 Chinas state oil company CNPC bought a $5 billion stake in Kazakhstans new Kashagan oil field. Four days later, the first oil started flowing from the field, rated the largest in the world outside of the Middle East. China seems happy to delegate to Russia the task of policing Central Asia. Chinese President Xi is happy to let Russian President Vladimir Putin take the lead on police work in Central Asia. Russia is bolstering Tajikistans southern border in preparation of the pullout of NATO troops from Tajikistan: Photo: AP/Alexander Zemlianichenko With Russia providing security, China is free to concentrate on forging a massive east-west trade relationship, flowing through new, Chinese-financed pipelines and highways. Trade between China and Central Asia hit $46 billion last year. At the time of the Soviet collapse, in 1991, it was virtually zero.
Credit: Reuters/Sergei Karpukhin By Darya Korsunskaya and Timothy Heritage MOSCOW | Mon Sep 23, 2013 2:36pm EDT MOSCOW (Reuters) – Russia issued a new warning to Ukraine on Monday that Moscow could respond with protectionist barriers if its former Soviet ally joins a free trade pact with the European Union. Russia is worried it will be flooded by European goods if Ukraine removes import duties with the EU under agreements likely to be signed in November, but also fears Kiev is making a pivotal shift away from Moscow. “This is Ukraine’s choice and we have to respect it, but at the same time money has to be taken into account,” First Deputy Prime Minister Igor Shuvalov told the Reuters Russia Investment Summit. “If they have a stronger economy, it will be a plus, but only if it is not achieved by making us weaker.” He denied Moscow was putting pressure on Kiev or drawing up plans to retaliate. But he also said Russia would have to act “if there is evidence of dumping or the use of hidden forms (of protectionism) such as support for exports, support for agricultural producers”. Shuvalov’s remarks made clear Moscow had not been appeased by Ukrainian Prime Minister Mykola Azarov, who tried on Saturday to soothe Russian fears over planned agreements with the EU on political association and free trade. Azarov says Ukraine, whose economy is dominated by exports such as steel, chemicals and agricultural produce, would benefit almost immediately from lower duties on Ukrainian exports. Russian officials, led by President Vladimir Putin, say Ukraine has more to gain from joining a Customs Union grouping Russia, Kazakhstan and Belarus. Moscow is also holding out against Ukraine’s pleas for cheaper Russian gas to help its hard-pressed economy. Moscow’s efforts to persuade Kiev not to move closer to the EU form part of a broader drive by Russia to deter former Soviet allies from edging out of its orbit and moving their economy and future trade towards western Europe. But Ukraine, a vast country with a population of 45 million and psychologically tied closely to Russia by history and shared culture, is the sorest point of contention. Shuvalov has played an important role in this drive in his government role overseeing relations with the former Soviet republics in the Commonwealth of Independent States (CIS).