Strategic partners? : understanding Sino-Russian cooperation in the energy sector

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‘Strategic Partners’?:

Understanding Sino-Russian

Cooperation in the Energy Sector

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_________________________________________________________________________________________________________________________(source: Christyn 2014)____________

Neal Parker

10862994 Master Thesis

The Political Economy of Energy Supervisor: Dr. M.P-Amineh Second reader: Dr. H. W. Houweling

Department of Political Science- International Relations Amsterdam, June 2015 

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List of Abbreviations………ix Chapter 1-Introduction………1 -1.1: Research Question……….2 -1.2: Delineation of Research………2 -1.3: Literature Review………..3 -1.4: Theoretical Framework………..……….…..6 -1.4.1: Offensive Realism………..7 -1.4.2: Critical Geopolitics……….……..………10

-1.5: Brief Argument and Hypotheses………..………14

-1.6: Data and Concepts………..…….………18

-1.7: Dissertation Outline…….………19

Chapter 2- The Foundations of Post Cold War Sino-Russian Political Cooperation…..21

-2.1: Brief History of Sino-Soviet/Russian Diplomatic Relations since World War II………22

-2.2: 1991-2001: Sino-Russian Rapprochement………..……23

-2.3: Geopolitical Shift: a Rising China and Declining Russia…………..………..26

-2.4: 2001-2008: Sino-Russian Friendship Treaty and the Rise of Putin……….………27

-2.5: Impediments to Political Cooperation between 2001 and 2008………….….…………30

-2.6: 2009-Present: Sino-Russian Political Relations after the Global Recession..…..….…..30

-2.7: Conclusions………..………34

Chapter 3- Post Cold War Sino-Russian Economic Relations………..……….36

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-3.2: 2000-2008: Trade Expansion………..….………40

-3.3: 2009-2014: China-Russia Trade in the Aftermath of the Global Recession…..…….….42

-3.4: Post Cold War Sino-Russian Oil Trade……….………..……….44

-3.5: Sino-Russian Natural Gas Trade……….……….50

-3.6: Chinese Foreign Direct Investment in Russia………..52

-3.7: Mechanisms for Financing Sino-Russian Trade and Investment………..….…………57

-3.8: Conclusions………..59

Chapter 4- Geopolitical Implications of the Sino-Russian partnership in Central Eurasia …….………..61

-4.1: Offensive Realism, Critical Geopolitics and the Sino-Russian Partnership in Central Eurasia………..…62

-4.2: China’s Interests in Central Eurasia……….…………64

-4.3: Russia’s Interests in Central Eurasia……….……….………..68

-4.4: American Foreign Policy Interests in Central Eurasia………….………72

-4.5: Conclusions……….….75

Chapter 5- Conclusion……….…………..………..…………..78

-5.1: Theoretical Framework Revisited………..………..………….………..79

-5.2: Findings and Evaluation of Hypotheses………..………..………..…80

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Abstract

This dissertation examines how the political and economic structure of the Sino-Russian ‘strategic partnership’ has affected energy trade between the two countries since the fall of the Soviet Union, while also assessing its effect on post Cold War geopolitics in Central Eurasia. It analyzes Sino-Russian relations in three parts, chapters 2,3 and 4, looking at the impetuses for their bilateral ties, as well as the various tensions present in their

relationship that in some cases also act as impediments to further cooperation. Chapter 2 examines the foundations of post-Cold War Sino-Russian cooperation as well as their bilateral political ties since the fall of the Soviet Union. Chapter 3 analyzes economic ties since the Soviet collapse in 1991, with a special focus on trade and investment in the energy sector. Chapter 4, meanwhile examines Chinese and Russian activities and foreign policy objectives in Central Eurasia, and compares them with US regional foreign policy objectives. This dissertation argues that the increasingly unequal nature of their relationship, with

Russia, the junior partner becoming much more dependent both politically and economically on China than vice versa, can also be viewed in their energy relations. Russia is more

dependent on China, than China is on Russia, especially given Russia’s mounting geopolitical tensions with the West. However, Sino-Russian cooperation is also vital for maintaining regional stability and countering the spread of terrorism through Central Eurasia, which is also an important American foreign policy objective. Thus, this dissertation also finds that their cooperation is beneficial to American interests.

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Acknowledgements

This dissertation is the result of six months of research and revision, for which I owe many a thank you to those who have aided me along the way. I would first like to express my sincere gratitude to Dr. Mehdi Parvizi-Amineh for his strong guidance and support

throughout the process. I would also like to thank the other students in Professor Amineh’s ‘Political Economy of Energy seminar for their input in the drafting of this project. A big thank you also to Dr. Henk Houweling for agreeing to take the time to be this dissertation’s second reader and to the University of Amsterdam for allowing me to present this thesis. And finally, thanks to my friends and family for their support and encouragement.

Neal Parker

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MAP OF CHINA

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MAP OF RUSSIA

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MAP OF CENTRAL EURASIA

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List of Tables and Figures

Table 3.1: China-Russia Bilateral Trade ($USD billions) 1991-1999 (p.38) Table 3.2: China-Russia Bilateral Trade ($USD billions) 2000-2008 (p.40) Table 3.3: China-Russia Bilateral Trade ($USD billions) 2009-2014 (p.42) Figure 3.1: China-Russia Bilateral Trade ($USD billions) 1991-2014 (p.44)

Table 3.4: Russian Exports to China (p.45)

Table 3.5: China-Russia Oil Trade 1991-2014 (bbl/d) (p.46) Figure 3.2: China-Russia Oil Trade 1991-2014 (bbl/d) (p.46) Table 3.6: China’s Oil Imports from Russia (p.47) Table 3.7: Russian Oil Exports to China (p.49) Table 3.8: Total Natural Gas Flows from Russia to China 2009-2014 (bcm) (p.51) Figure 3.3: Total Natural Gas Flows from Russia to China 2009-2014 (bcm) (p.51) Table 3.9: Total Chinese Outward FDI in Russia ($USD billions) 2006-2014 (p.53) Figure 3.4: China’s Outward FDI in Russia ($USD billions) 2006-2014 (p.53) Figure 3.5: Chinese FDI in Russia by Sector (%) (p.54) Figure 3.6: Chinese FDI in Russian Energy Sector (%) (p.55)

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List of Abbreviations

9/11 September 11, 2001 Terrorist attacks on New York City and Washington AIIB Asia Infrastructure Investment Bank

APEC Asia-Pacific Economic Cooperation ASEAN Association of Southeast Asian Nations bbl/d barrels of Petroleum crude oil per day bcm billion cubic metres

BRICS Brazil, Russia, India, China and South Africa (cooperative grouping) CCP Chinese Communist Party

CDB China Development Bank CIC China Investment Corporation

CIS Commonwealth of Independent States CNPC China National Petroleum Corporation CSTO Collective Security Treaty Organization EEU Eurasian Economic Union

EIA (United States) Energy Information Administration ESPO Eastern Siberia-Pacific Ocean oil pipeline

EU(-28) European Union (and its constituent economies) Exim Bank The Export-Import Bank of China

FDI Foreign Direct Investment GDP Gross Domestic Product

G7 (or G8) Group of 7 (formerly Group of 8) IMF International Monetary Fund LNG Liquified Natural Gas

NBS National Bureau of Statistics of China NATO North Atlantic Treaty Organization NOC National Oil Company

Norinco China North Industries Corporation OJSC Open Joint Stock Company

PPP Purchasing Power Parity PRC People’s Republic of China RDIF Russia Direct Investment Fund RFE Russian Far East region

SCO Shanghai Cooperation Organization SFSR Soviet Federative Socialist Republic

Sinomach China National Machinery Industry Corporation Sinopec China Petroleum & Chemical Corporation SIPRI Stockholm International Peace Research Institute SLOC(s) Sea Lane(s) of Communication

SPSS (IBM) Statistical Package for the Social Sciences UN United Nations 

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UN Comtrade United Nations Commercial Trade Statistics US(A) United States (of America)

USD United States Dollar

USSR Union of Soviet Socialist Republics WTO World Trade Organization

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1

Introduction

“Optimists learn Russian, pessimists learn Chinese…”

-American academic IR community proverb from the Cold War

Maintaining a steady and reliable supply of energy at the lowest possible price from a variety of sources is vital for sustainable economic growth in the current global economy. Russia, with its geographic location spanning across two continents is one of the world’s main oil and natural gas producers, with the largest natural gas reserves and eighth largest crude oil reserves (EIA 2013). As such, over the course of the past fifty years it has established and maintained its position as a dominant player in European energy markets accounting for 33.7% of the EU-28’s total oil imports and 32.0% of the EU-28’s total natural gas imports in 2012 (Eurostat 2014). Meanwhile, since the late 1970s, China has experienced a meteoric rise, from economic backwater to its current position as the world’s second largest nominal economy, and largest when measured by PPP, having overtaken the United States in this measure in late 2014 (World Bank 2015).

To meet its domestic energy consumption demand and maintain sustained levels of economic growth, China has been a net oil importer since 1993 and a net natural gas importer since 2006 (Ibid). With pollution from coal emissions causing environmental and health problems in China’s cities, imports of ‘cleaner’ forms of energy, such as crude oil and natural gas look set to rise even further in the coming years. Thus, since the end of the Cold War in 1991, China has sought to develop closer political, economic and security relations with Russia, with the two countries establishing a ‘strategic partnership’ in 1996 (Bellacqua 2010). China views Russia’s vast energy reserves as an important part of its broader strategy to secure a reliable, diverse and affordable energy supply (Ibid). In recent years Russia has also ‘pivoted’ a large portion of its political and economic focus towards East Asia, particularly China, as it looks to reduce its reliance on trade with European countries and diversify its export markets. Much of this ‘pivot’ has been centred around bilateral trade and investment in the energy sector.

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This dissertation will thus analyze the nature of the Sino-Russian ‘strategic

partnership’, focusing especially on bilateral cooperation in the energy sector in the post Cold War era. In short, I will illustrate how the political and economic structure of Sino-Russian relations affects energy trade between the two countries, while also providing an assessment of their affect on geopolitics in Central Eurasia. My research question is thus as follows:

1.1 Research Question

How has the political and economic structure of the Sino-Russian partnership affected energy trade between the two countries since the fall of the Soviet Union and what are the

geopolitical implications of this relationship for Central Eurasia?

This question can be further divided into the following subquestions that will also be investigated and guide the research carried out in this dissertation:

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What are the foreign policy objectives of China and Russia towards one another? How have they changed over the last 25 years?

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How have diplomatic, economic and security relations between the two countries evolved since the fall of the Soviet Union?

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How has American foreign policy responded to developments in China-Russia relations?

1.2 Delineation of Research

To answer these questions, my research will focus on the following timeframe:

i. I will first give a brief historical overview of Sino-Russian relations going back to the end of WWII to provide relevant context for the current state of their relationship.

ii. The main focus of the paper will be on Sino-Russian relations since their resumption of diplomatic ties in 1991, looking at diplomatic, economic, with a special focus on energy relations, and security ties.

iii. A final analysis will also include an examination of the shifts in regional geopolitics since 1991 and include United States foreign policy responses to developments in Central Eurasia during this time period.

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1.3 Literature Review

In reading the literature on Sino-Russian relations, it becomes evident that a variety of complex factors motivate each country’s foreign policy objectives towards one another. China’s policy towards Russia has evolved since the end of the Sino-Soviet Split and resumption of diplomatic ties in 1991. After decades of frigid relations, both countries resumed relations, based on economic and political cooperation in 1991 (Rozman 2014 and 2010, Burles 1999 and Bellacqua 2010). Chinese policy towards Russia, as well as the other Central Eurasian former Soviet Republics during this period was strongly motivated by an interest in maintaining regional stability (Falkenheim 2000 and Eder 2013). The Chinese government was worried about any potential unrest from the newly formed states on its western borders spilling over into China, particularly Xinjiang province where tensions already existed between Chinese authorities and local the Uyghur Muslim population (Koch-Weser and Murray 2014 and Rozman 2010). Stability in Russia was seen as key for this goal and thus Chinese policy during this time period sought to build political and economic ties with Russia in an attempt to mitigate the destabilizing effects of Russian economic stagnation and unemployment after the fall of the Soviet Union (Marketos 2009a and Downs 2010). In the interests of regional stability, Russia and China were also keen to settle their long standing disagreement over the precise demarcation of their shared borders, and thus a large portion of their foreign policy agenda throughout the 1990s focused on resolving this issue (Rozman 2010 and Downs 2010).

During this time, the two states also began cooperating through the newly created Shanghai Cooperation Organization (SCO), a Chinese initiative which included 4 other Central Asian countries and had the goal of strengthening ties between member countries 1

and maintaining regional stability (Jacobson et al 2011 and Eder 2013). Their cooperation in this forum has been mainly based on security collaboration in the form of defence agreements and joint military exercises, with the implicit goal of challenging American interests by limiting their influence in the region (Bolt 2013 and Paik et al 2013). In the aftermath of the 1989 American and European led arms trade embargo on China in response to the Tiananmen Square massacre, bilateral arms trade was also a key aspect of their renewed cooperation (Rozman 2014, Bolt 2013, Swanstrom 2011 and Downs 2010). As such much of their early

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post Cold War relations from the 1990s up until the mid 2000s were based on weapons trade and security matters.

Cooperation in the energy sector currently forms what is widely viewed as the most important pillar of their relationship. When China became a net oil importer in 1993, it began to view Russia, with its vast oil and gas reserves as a key partner for securing the necessary energy to meet its rapidly growing demand (Swanstrom 2014, Jacobson et al 2011 and Eder 2013). This need became even more pressing in the mid 2000s, as China sought to reduce its reliance on coal in an attempt to address pollution problems in its cities as well as reduce its energy dependence on the Middle East (Bolt 2013). Chinese foreign policy towards Russia from the early/mid 2000s onward therefore included a significant focus on securing bilateral energy trade deals, developing pipeline network infrastructure, and encouraging its state companies to invest in the Chinese energy sector (Swanstrom 2014 and Paik 2013). These aims remain part of China’s geopolitical strategy, with new pipelines between the two countries, both direct and via Central Eurasian transit countries, such as Kazakhstan being completed in the early 2010s and more projects currently in the planning and construction phases (Skalamera 2014 and Paik 2013). One of the most notable of these planned projects is the Power of Siberia gas pipeline, linked to the loan-for-gas deal, that was signed in May 2014 and will be discussed in greater detail in chapter 3 (Skalamera 2014).

China’s bilateral cooperation with Russia in Central Eurasia and the Pacific has also formed part of their foreign policy strategy, aimed at challenging American global political dominance and pushing for a world political order characterized by multipolarity (Bolt 2013, Rozman 2010 and 2014 and Spechler et al). This challenging of US global political

dominance is also a key aspect of Russia’s foreign policy strategyy with regards to China and has become even more apparent in the aftermath of the Ukraine crisis (Skalamera 2014). In Putin’s view, China’s economic influence and presence in Central Eurasia is preferable to that of the USA (Rozman 2014, Dannreuther 2011 and Chen 2011). Russia also sees China and other Asian countries as valuable export markets for its energy resources, as it looks to reduce its reliance on Europe as a consumer of its energy resources, particularly in light of recent sanctions (Skalamera 2014, Koch-Weser and Murray 2014 and Paik 2013). China is also now Russia’s single largest trading partner, although overall trade between the two countries is still dwarfed by bilateral trade between Russia and the EU-28 (Skalamera 2014).

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However, as authors such as Niklas Swanstrom and Mark Burles point out, despite increased cooperation and the appearance of a variety of common interests, Russia is also weary of China’s growing influence and does not wish to be considered China’s junior partner (Swanstrom 2014 and Burles 1999). Furthermore, in recent years there have been tensions between the two countries regarding the structure of their trade relationship. Russia has complained about China merely using them for their raw resource materials, citing a lack of Chinese interest in importing finished Russian goods, whereas as China asserts that this is due to their lack of quality (Swanstrom 2014, Paik et al 2013 and Eder 2013). In any case, Russian foreign policy makers are keen not to become a mere energy appendage of China (Jacobson et al 2011). In the past, intellectual property rights issues in the weapons trade have also been a source of tension, and is evident from the decline in weapons trade between the two countries since the mid 2000s (Koch-Weser and Murray 2014 and Bellacqua 2010). It is thus evident that Sino-Russian relations are dictated by a complex set of convergent and divergent interests.

The literature on Sino-Russian relations can be broadly classified into two streams, those scholars influenced strongly by realist theories and those who take an approach based in IPE. In keeping with realism’s focus on states as the primary actors in international relations, authors such as Gilbert Rozman, Erica Downs and Paul Bolt focus on government to government political relations as the main focus of their analysis (Rozman 2014 and 2010 Downs 2010 and Bolt 2013). In doing so, when examining the Sino-Russian relations, they focus primarily on diplomatic exchanges between China and Russia, which is implicitly defined as a threat to American interests (Ibid). The portrayal of the China-Russia

relationship in this manner creates an alarmist undertone in their writing, particularly in the case of Rozman (2014). However, in focusing primarily on inter-governmental interactions between the two countries they do not adequately account for the role of external market forces when examining the topic. Furthermore, diplomatic ties are the most well developed facet of the overall relationship, with most authors, including Rozman noting that bilateral relations between the countries are warmest at the government to government level (Rozman 2014). Thus, in focusing on the strongest foundation of Sino-Russian relations, potential weaknesses in their partnership are overlooked and the idea of a Sino-Russian threat is perhaps overstated.

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Those influenced more by IPE theories, such as Swanstrom, Eder, Paik et al and Jacobson et al, take the external market forces into account. They thus recognize the

underlying sources of tension and weakness in the economic relationship, such as its unequal nature and Russia concerns over becoming an energy appendage to China and account for the broader global political landscape in which their relationship takes place (Swanstrom 2011 and 2014, Eder 2013, Paik et al 2013 and Jacobson et al 2011). In their work they paint a fuller picture of the relationship and it is their work that this dissertation seeks to build upon, while also acknowledging the usefulness of certain realist concepts for understanding the global political order in which Sino-Russian relations occur. However, the vast majority of the research from these authors was written prior to the ongoing civil conflict in the Ukraine which started in early 2014 and eventually resulted in US and EU led sanctions against Russia. In the relatively short time span since then, the situation has changed considerably, as China’s importance to Russia as an economic and political partner has grown in light of these events and will continue to evolve in the coming years. Thus, recent developments have altered the nature of their partnership, requiring an update to the research.

1.4 Theoretical Framework

Theories help to understand the nature of the research topic in question. Thus in analyzing the various components this dissertation’s research it is necessary to develop a theoretical framework that best illustrates the nature of the different actors and forces at work. As discussed in the literature review, Sino-Russian bilateral cooperation in the aftermath of the Cold War has evolved from a security coalition, with the maintenance of cross border and regional stability as the primary shared aim into a multi-faceted relationship dictated by a variety of converging and diverging interests. Due to this complex nature, it is impossible to account for all the different economic and political components of their bilateral relationship, under a single theoretical framework. As such I will analyze the political and economic structure of energy trade between China and Russia and its

geopolitical implications for Central Asia using a variety of concepts borrowed from different theories. These will include some of the key concepts from Mearsheimer’s ‘offensive realism’ as well as ‘critical geopolitics’ and its radical school, which itself incorporates IPE

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1.4.1 Offensive Realism

As outlined in the research question, the analysis carried out in this dissertation deals with political and economic state to state relations between two influential global actors, China and Russia and its effects on geopolitics in Central Eurasia. With its focus on states as the primary actors in IR in the context of ‘Great Power Politics’, concepts from John

Mearsheimer’s offensive realism are helpful in analyzing the impact of international political order on Sino-Russian cooperation.

Like classical realist theories, Mearsheimer’s brand of offensive realism is state-centric. For him, analysis of international relations begins and ends with states, which are viewed as the unitary actors in the global system (Mearsheimer 2001). This system is

characterized by anarchy and a struggle for power, as states look to gain superiority over their rivals (Ibid). There is no effective and legitimate global police force, which means that states must take it upon themselves to ensure their own security and survival (Ibid). Continued survival and the maintenance of power is ultimately the state’s main goal and thus to survive the anarchic nature of IR and secure their interests, states will therefore strategize to expand militarily, geographically and economically (Mearsheimer 2001). States will pursue these strategies for their survival and maintenance of power in a manner that maximizes benefits and minimizes risks (Ibid). As such, the structure of the international system is characterized by nation states competing with one another for superiority, with the larger, more dominant powers effectively coming out on top, establishing themselves as ‘great powers’, achieving hegemony in their geographic sphere of influence and dictating the structure of the global political order (Ibid). These great powers seek to create a global environment that helps them maintain their status and most effectively suits their interests (Mearsheimer 2014). As such, they will look to develop and foster a system of alliances with lesser powers in their sphere of influence and engage in political and military posturing to limit the influence of other great powers or potential contenders to their position.

Under offensive realism, as with classical realism, a state’s military capability is the main point of analysis for determining its power, the stronger a state’s military capabilities, the greater its power (Morgenthau 1948 and Mearsheimer 2001). Thus, great powers are states with significant military power projection capabilities, also capable of projection beyond their geographic sphere of influence (Ibid). However to build up military strength

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and assert their dominance in international relations, states also need money, technology and personnel. As such, included in ‘offensive realism’ is the concept of latent power, which accounts for the socio-economic ingredients that contribute to the building of a state’s military power, in Mearsheimer words “the raw potential it can draw on when competing with rival states” (2001). This latent power is thus determined by a state’s wealth and the size of its population (Ibid). Contrary to the views of classical realists, under Mearsheimer’s brand of realism, a state does not need war to establish itself as a power, but can also do so by increasing the components that contribute to their latent power (Ibid).

These core concepts from offensive realism are useful for understanding the nature of the international order in which China and Russia operate, as well as aspects of their bilateral political cooperation. Prior to its collapse, the Soviet Union, along with the United States occupied a position as one of the two ‘great powers’ in global politics. Both states competed with one another for influence and each established a set of strategic alliances in the form of NATO (USA) and the Warsaw Pact (USSR) as a means of establishing a geographic sphere of influence (Mearsheimer 2001 and Luthi 2008). Meanwhile they sought to challenge each other’s global power and influence through military and political intervention in developing countries and regions deemed strategically important, such as Southeast Asia, East Asia, Africa and Latin America (Ibid). Through these actions, they sought to increase the size of their geographical sphere of influence and thus expand the base from which they could project power. After the USSR’s disintegration at the end of 1991, Russia immediately declined from its position as a great power and saw the US-led NATO alliance system move into its former geographic sphere of influence in Eastern Europe (Mearsheimer 2014). Whereas previously the global political system was characterized as bipolar, with two great poles of influence in the US and USSR, the Soviet collapse left the US as the lone great power in a now unipolar world order (Ibid). Moreover, it created a power void in Central Eurasia, which had formerly been part of the Soviet sphere of influence.

China on the other hand from 1978 onwards was experiencing its meteoric rise, effectively putting itself on the trajectory towards great power status. Its expanding wealth and massive population gave it significant latent power, as it became the primary challenger to the USA’s position as the sole great power, seeking to move into the void left by the Soviet collapse, and become co-great powers with the United States (Mearsheimer 2014 and

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Swanstrom 2011). The United States meanwhile has sought to contain China’s through geopolitical posturing, alliance systems and displays of military power projection. Through these actions it seeks to limit the geographic expansion of China’s sphere of influence, in what the Chinese government have referred to as ‘encirclement’ (Dannreuther 2011). China has thus viewed cooperation with Russia and the formerly Soviet republics in Central

Eurasia, both individually and through the Shanghai Cooperation Organization (SCO), which was constructed as an alternative to NATO, as a means to counter this containment policy and project its power. Russia, weary of the Atlantic order’s expansion into Eastern Europe and seeking to halt its relative decline in global politics and remain relevant as an international actor, shares this desire to challenge American hegemony. Although it is also apprehensive about Chinese expansion into Central Eurasia, which it still considers its sphere. Thus, challenging the status quo of American unipolarity in global politics has formed a

foundational pillar of Sino-Russian bilateral political cooperation, though the two states are not engaged in any sort of formal fully-fledged political and/or military alliance. Key concepts from offensive realism therefore help paint a picture of the post Cold War global political order in which Sino-Russian relations occur, while also helping illustrate part of the foundation for their mutual interest in bilateral political cooperation.

However, due to its state centric focus, offensive realism is problematic for analyzing the economic structure of their relationship as outlined in the research question as well as for examining the full nature of Russian and Chinese activities in Central Eurasia. Since

Mearsheimer’s offensive realism views states as the only actors in IR, and thus the only point of analysis, its does not account for the roles played by economic forces as entities separate from the state in the current era of globalization. The increasing integration of the global economy has meant that these forces play a key role in determining state actions in the international arena. This is particularly true for Sino-Russian cooperation, in which economic relations have become the key aspect of their bilateral cooperation, thus requiring concepts that adequately explain this dimension of their bilateral relations.

This failure to fully account for the economic nature of Sino-Russian relations also means that offensive realist concepts cannot properly explain the domestic forces that lead to each country pursuing economic relations with the other and how the composition of each respective state’s civil society has influenced this. Despite Mearsheimer’s concept of latent

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power accounting for factors such as a state’s wealth and population contributing to its overall power projection capabilities, it does so in the context of how they contribute to the strength of the state’s military. It does not account for them as autonomous forces in the context of globalization, that can potentially influence state policy. Therefore, for the purpose of this research, concepts that help critically evaluate the economic structure of their

relationship are required and the full nature of their relationship cannot be explained using a theoretical framework based purely in offensive realism.

1.4.2 Critical Geopolitics

By providing a framework that properly accounts for the role of economic factors in Sino-Russian cooperation, concepts from critical geopolitics are useful in the areas where offensive realism falls short. Critical geopolitics, emerged as a response to realist-inspired classical geopolitics and is born out of critical theory, which critiques theoretical approaches such as realism as prescriptive ‘problem solving’ theories (Cox 1981). It is broad in scope and thus hard to define in general terms, but incorporates IPE approaches and can be described as critical, political and economic as well as concerned with investigating the underlying causes of policy and political events without neglecting the way in which they unfold (Mercille 2008). This dissertation will use the strand of critical geopolitics presented by M.P. Amineh and H. Houweling (2010) and M.P. Amine and Yang Guang (2014), while also using certain concepts from its radical school as elaborated on by J. Mercille (2008). Whereas offensive realism tends to focus mostly on the international arena, these applications of critical geopolitics also conceptualize how domestic political, economic and social forces and the structure of a state’s civil society influence interstate relations.

The composition and organization of each state’s civil society, also known as the ‘state/society complex’ plays an important role in influencing developments in Sino-Russian relations (Amineh and Yang 2014). Scholars in critical geopolitics outline two types of state/ society complexes: ‘liberal’ state types and ‘authoritarian’ state types (Amineh and

Houweling 2010). Liberal states are characterized by a well developed civil society which plays a relatively active role in state governance and by a more distinct separation between the state’s governing class and the economic class (Ibid and Zürn 2013). In liberal states, the governing class and economic class are two clearly separated entities, with the economic

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class being subject to regulation from the governing class but also ultimately an autonomous force that is free to pursue its own interests both domestically and internationally (Amineh and Yang 2014). In authoritarian state types, the civil society is underdeveloped and the distinction between the governing and economic classes is much less clear, with the

governing class exerting great control over the composition and actions of a weak economic class (Amineh and Houweling 2010). Thus, in authoritarian states, the governing class has effectively incorporated the economic class to form a single ‘ruling elite’, which controls the state’s foreign and domestic policy.

Both Russia and China can be classified as authoritarian state types. Although a democracy in name, Russia’s ruling elite takes the form of a cult, being based around the leadership and personality of President Vladimir Putin, who effectively controls key political and economic appointments (Rozman 2014). Notably, he influences the composition of the boards of Russian state run energy companies, such as Gazprom, Rosneft and Transneft, effectively structuring their hierarchy, with the activities of these companies also being in line with Russian state interests (Jacobson et al 2011). In the case of China, the ruling elite is more systematized, being based around the Chinese Communist Party (CCP), specifically the Standing Committee of the Politburo, the point of concentration for political power in China (Amineh and Yang 2014). The Standing Committee is currently composed of seven members, headed by Chinese President Xi Jingping, who effectively determine Chinese policy on all issues, as well as the composition of its ministries and exert influence over Chinese state companies, by ensuring the appointment of CCP members to their boards (Ibid). Thus, as is the case with Russia, the policies and activities of these companies are also in line with the interests of the national government. As such, when examining the impacts of the political and economic structure of the China-Russia relationship on energy trade between the two countries, it must be emphasized that as authoritarian states, both the Russian and Chinese governments have a greater degree of control over all facets of the relationship than would be the case for bilateral relations between liberal states types.

Understanding China and Russia’s respective state/society complexes also helps in understanding the developments on the domestic level that have led to their cooperation. While concepts from offensive realism provide a picture of the global political order in which the two countries pursue bilateral relations as well as illustrate some of its political

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foundation, they do not account for how domestic pressures have influenced Sino-Russian cooperation. Critical geopolitics provides conceptualizations for these domestic economic and social forces. In the case of China, this component begins with ‘sequential

industrialization’, the process of sustained strong economic growth that China has experienced since the late 1970s as a ‘late industrializer’ seeking to modernize, in a time period after Western ‘early industrializers’ have already done so (Amineh and Houweling 2010). The Chinese process of industrialization, also known as its ‘peaceful rise’ has been driven by the need of the Chinese ruling elite to maintain their prestige and raise national wealth so as to remain the country’s legitimate authority (Ibid).

As a ‘late industrializer’, China has needed fuel from of energy resources such as coal, crude oil and natural gas to drive economic growth. These resources are limited and concentrated in a few resource rich regions, such as the Middle East, to which Western early industrializing countries, such as the United States have gained preferential access (Amineh and Houweling 2010). Up until 1993, China was energy self-sufficient, with coal playing the dominant role in fuelling its economic rise (EIA 2015). Thereafter however, its continued economic expansion led to increased demand for energy to fuel further growth and created a ‘resource scarcity’ problem, whereby China could no longer meet its energy demand with only domestic resources (Amineh and Yang 2014). This ‘resource scarcity’ combined with other societal forces such as the accumulation of national capital and environmental and health issues, stemming from coal pollution that created the need for cleaner fuels, to form ‘lateral pressure’ (Amineh and Yang 2014).

‘Lateral pressure’ has pushed China to look abroad, as part of its ‘going out’ policy and connect its national economy with resources and markets in energy-rich regions and states such as the Middle East, Central Eurasia and as will be analyzed in this dissertation, Russia (Ibid). This strategy has been necessary for the Chinese government to maintain sustained levels of economic growth as part of its industrialization process, retain its

legitimacy and prestige on the national level and keep public order. Julien Mercille, from the radical school of critical geopolitics refers to these societal pressures that force emerging powers to expand their activities across physical borders as they grow and accumulate capital, such as in China’s ‘going out’ policy, as ‘geoeconomics’ (Mercille 2008).

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public opinion with the need to maintain legitimacy in the international arena (Ibid). Thus, when applying this aspect of the theoretical framework throughout the dissertation, the term ‘geoeconomics’ will also be referred to.

Russia's domestic situation meanwhile is different. In the aftermath of the post Cold War economic chaos the country experienced during 1990s, Putin has based a Russian geopolitical ‘reassertion' on a restructured economy, with its vast natural resources,

particularly energy ones forming the base of national economic wealth and power (Amineh and Yang 2014 and Gabuev 2014). More than half of government revenues come from energy production (WTO 2015b). Energy production and trade thus form foundational pillars of Putin's Russia's prestige as well as his domestic appeal, and therefore also influence the ruling elite’s authority as well as their ability to keep domestic order. As such, a strong energy sector and control over a transportation network to its key export markets is vital for Putin's regime. Energy exports naturally form an important part of this strategy, and thus closer economic ties with China, currently the world's largest energy consumer are a means of expanding the country's economic wealth and power (EIA 2015). Putin has thus pursued closer energy ties with China as part of Russia’s greater economic strategy, pivoting focus away from Europe, traditionally Russia’s largest export market. Although, this is also a move borne out of necessity, in light of recent geopolitical tensions with the West over the ongoing Ukraine conflict and resulting sanctions against Russia. Thus, understanding bilateral

economic cooperation from a Russian perspective is also best analyzed by using a critical approach, understanding the underlying domestic political and economic factors that have pushed Russia towards China, and situating them in the context of broader developments in IR.

To summarize, in establishing a theoretical framework from which to analyze the research question, using one single theory is problematic due to the complex nature of Sino-Russian relations. I have thus borrowed concepts from offensive realism and critical

geopolitics to illustrate the theoretical framework that will be used in this dissertation. Concepts from Mearsheimer’s offensive realism help demonstrate how a global political order with a single great power in the United States has influenced bilateral Sino-Russian political cooperation. While China’s rise towards great power status and Russia’s fall from it have led to some tension between the two states, it has pushed them towards bilateral

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cooperation and the creation of an alternative to the US-led Atlantic order, based around NATO. Both states are challengers to US hegemony. also being subject to an American containment policy, and thus seek to foster a multipolar world order. However,

Mearsheimer’s concepts do not adequately account for the economic nature of their

relationship. Furthermore, it does not adequately examine the domestic pressures that have lead to bilateral cooperation and how the composition of each country’s ‘state/society complex’ has impacted relations. Thus, for a full analysis concepts from critical geopolitics are needed.

Sino-Russian cooperation is an instance of cooperation between authoritarian regimes. China and Russia are both authoritarian state types, where the governing and economic classes have effectively been fused into a single ruling elite based around Putin in Russia and the Politburo and CCP in China. In China’s case ‘sequential industrialization’ has led to resource scarcity, which has combined with other societal forces to form lateral

pressure that has pushed China to connect itself with markets and resources in energy-rich regions as part of a broader ‘going out’ policy. Meanwhile, Russia, has based its post Cold War ‘reassertion’, as well as its national wealth and prestige on a strong energy sector with exports and the control of transportation networks playing key roles. These developments have provided the impetus that has pushed Russia towards closer economic cooperation with China. As such, a theoretical approach that borrows concepts from offensive realism and critical geopolitics will provide the framework for this dissertation.

1.5 Brief Argument and Hypotheses

To answer the main research question and subquestions outlined earlier, it is necessary to develop hypotheses that will be tested over the course of the dissertation and then

evaluated in the concluding chapter. These hypotheses are guided by the theoretical framework presented in the previous section and are as follows:

1. Sino-Russian relations are founded upon mutual economic, political and security

interests which encourage energy trade as a vital component of this ‘strategic partnership’.

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Sino-Russian relations have been shaped by the post Cold War geopolitical world order in which it takes place. Their shared economic, political and security interests can thus be understood with the help of the concepts from offensive realism and critical geopolitics outlined in the previous section. Both countries have sought to challenge American

hegemony and alter the unipolar nature of the global political order, in which the US is the sole great power, while also fostering regional security in Central Eurasia and preventing the spread of extremist movements across their borders. Included in their view of extremist movements are pro-liberal democratic movements which could threaten to cause disorder within the two authoritarian states. China and Russia therefore cooperate not as military or political allies but as ‘strategic partners’, forming a coalition to mitigate the spread of these movements while also seeking to create a potential alternative the US-led world political order.

Domestic pressures have also encouraged energy trade as a key aspect of this

cooperation. China’s process of sequential industrialization has created an ever rising demand for energy resources to fuel further economic growth, which has led to the depletion of these resources within China’s national boundaries, creating ‘resource scaricity’ problems.

‘Resource scarcity’ has combined with other societal pressures, such as capital accumulation and environmental and health problems stemming from coal pollution, which have created the need for cleaner fuels. Together these forces have formed ‘lateral pressure’ and have pushed the Chinese ruling elite to connect the national economy with resources such as oil and natural gas in outside markets, such as Russia as a part of a larger ‘going out’ policy. Energy trade with Russia has thus formed a part of China’s broader strategy. Russia meanwhile has based its ‘reassertion’ under Putin on a strong energy sector, with energy exports playing a vital role. Energy trade with China, the world’s largest energy consumer thus also forms a vital part of bilateral relations from a Russian perspective, especially in light of recent geopolitical tensions with the US and EU. This hypothesis will be tested by looking at two components:

i. bilateral political exchanges at the government level and in international forums such as the UN and SCO since 1991

ii. bilateral trade and Chinese investment in Russia since 1991, observing how developments in both have corresponded with energy trade during that time.

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2. While China and Russia have worked to build a closer relationship in recent years, they

are also competitive rivals, particularly in Central Eurasia.

As can be illustrated using the concepts outlined in the preceding section, the fall of the Soviet Union left the US as the world’s only great power and created a power void in Central Eurasia, which during the Cold War had belonged to the Soviet sphere of influence. As China continues to challenge the United States on its trajectory towards great power status, it has also moved into Central Eurasia to secure access to markets and resources. This forms part of its ‘going out’ policy, and is a result of the lateral pressure it faces, that stems from the process of sequential industrialization. Russia, meanwhile still views the region as belonging to its sphere of influence and thus desires control over energy transportation networks in the region so that it can re-export their energy resources for profit. As mentioned in the previous section, Russia’s ‘reassertion’ is based on a strong energy sector, and this interest in the regions’s energy resources conflicts with China’s own regional interests as illustrated above, thus making them competitive rivals in the region. This hypothesis will be tested in chapter 4 by comparing the foreign policy objectives and actions/activities of both countries in Central Eurasia since 1991.

3. The unequal nature of their partnership and mistrust from past disputes and disagreements

will prevent a deeper relationship and could negatively impact energy trade between the two countries.

As mentioned when discussing the concept of great powers in the preceding section, China’s ‘peaceful rise’ has put it on the path towards great power status. Meanwhile, the collapse of the Soviet Union has resulted in Russia’s fall as a great power as well as its decline in significance in global politics. While, this has provided some foundation for cooperation as outlined in the first hypothesis as the two states look to counter the expansion of American hegemony, it is a source of tension as posited by the second hypothesis. China is becoming more influential as evidenced by its expansion into Central Eurasia while Russia’s

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significance in world politics is decreasing. Thus Russia is increasingly the junior partner to China, a position it resents due to its past superiority, and when combined with historical tensions from the Sino-Soviet Split and past trade disagreements, could result in less energy trade between the two countries. This hypothesis will evaluated using the data from chapter 3, looking at the trends in energy trade since 1991, taking into account time periods where there were political and economic disputes while also looking at the overall overall trend.

4. The China-Russia ‘strategic partnership’, which promotes the creation of a multipolar

global political order has challenged American interests, but prosperous Sino-Russian relations are actually beneficial to the US.

As discussed major shared interest upon which Sino-Russian cooperation is based is the desire to challenge the United States’ position as the sole great power in global politics. Through bilateral relations and cooperation in Central Eurasia in international forums such as the SCO, both countries have sought to create an alternative order to the US-led Atlantic order, based around NATO. This has resulted in the US seeking to contain the rise of China as well as Russia’s ‘reassertion’ through a containment strategy, whereby it has engaged in political and military posturing to limit the expansion of both countries political and

economic activities. The US is particularly concerned with China’s potential to rise to great power status.

However, Sino-Russian relations are also based upon maintaining stability in Central Eurasia as mentioned in the first hypothesis, with bilateral cooperation between the two states also being key to stability in the region. China and Russia cooperate to prevent the spread of transnational extremist networks, which include terrorist groups from problem areas in Afghanistan, Pakistan and the Middle East. Preventing the spread of these groups is also vital to the interests of the United States, and thus in this sense, deeper Sino-Russian cooperation is beneficial to American interests. This hypothesis will be evaluated in chapter 4 by

comparing the foreign policy objectives of each China, Russia and the United States in Central Eurasia, and examining how or whether they overlap.

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1.6 Data and Concepts

To test these hypotheses, I must define certain units of analysis. As stated in my research question, I will be analyzing how the political and economic structure of the China-Russia partnership affects energy trade between the two countries, also looking at the

geopolitical implications of this relationship for Central Eurasia. To analyze the the political and economic structure that I refer to in the research question, I will examine a variety of key concepts, statistics, events and agreements. In assessing the political structure of the

relationship, I will be looking primarily at diplomatic ties, examining interactions between the Russian and Chinese governmental bodies and relevant policies. This includes political summits bilateral treaties, different forms of cultural cooperation, unofficial and official interaction and correspondence between their ruling elites and shared memberships and voting patterns in international organizations, such as the UN and SCO. Thus, the core political forces and actors that I will be analyzing are the governments of Russia and China and their respective policies as well as those of international organizations such as the SCO, EEU and CSTO. Furthermore, when analyzing the geopolitical impacts on the region I will also be analyzing the foreign policy objectives of the United States government as the other key actor in the Central Eurasia Region, along with the policies and actions of the Chinese and Russian governments.

To follow up on my analysis on the political structure of their relationship, I will examine the nature of their economic relations. In doing so I will look primarily at trade and investment between the two countries, with a focus on the energy sector. To examine bilateral trade, I will use statistics and data on total bilateral trade, with sections also focusing on oil and natural gas trade presenting it both in terms of gross volume and percentage form. Similarly, my units of analysis when assessing investment between the two countries will be statistics and data on the cross-border investment activities of Chinese companies in Russia, since there was no evidence of investment on the part of Russian companies in China. As such the core economic forces and actors that I will examine are Chinese and Russian companies, particularly Chinese National Oil Companies, such as CNPC and Sinopec and Russian National Oil Companies, such as Rosneft, Transneft and Gazprom along with

international oil and gas markets. Institutions that facilitate financial interactions between the two countries, such as the China Development Bank, will also be assessed in the analysis of

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their economic relations. Moreover, within the economic and political structure of the relationship there is also a security partnership, which contains both political and economic elements. To assess this aspect of the relationship, I will examine bilateral security treaties and agreements signed by both governments, joint military exercises and other forms of security such as participation in the SCO, as well as statistics on weapons trade between the two countries.

Due to its significant quantitative component, my dissertation requires a vast amount of data collection to illustrate the economic aspect of their bilateral relations. I have thus collected data from the EIA Intenational Energy Statistics website, UN Comtrade Statitics, ‘International Direction of Trade Statistics’ from the IMF website, the BP Statistical Reviews from 2009-2015 and corresponding workbooks, the EIA’s International Energy Statistics database, the Heritage Foundation’s China Global Investment Tracker database, China Customs General Information Administration, Russian Customs and the Chinese National Bureau of Statistics. Using SPSS and Apple Numbers, this data will be presented in the form of tables and graphs in Chapter 3. I will also supplement this quantitative analysis with some qualitative analysis based on information from journal articles, online and print newspapers as well as government publications, such as the Chinese State Council’s White Paper and the

US-China Economic and Security Review Commission’s report and articles from a variety of

news sources such as The Economist, Russia Today, Business Insider, Bloomberg, Japan

Times, The Diplomat and Forbes. I will also use these sources when analyzing the political

aspect of China-Russia relations.

1.7 Dissertation Outline

The dissertation will be structured as follows. The next chapter, Chapter 2, will focus on the foundation of China-Russia political relations since the end of the Cold War. Here I will provide a brief overview of Sino-Russian relations from the end of the Second World War up until the end of the Cold War (ie. 1945-1990), to provide some context for post Cold War Sino-Russian relations. I will then outline major developments in the Sino-Russian political relationship since 1991. Chapter 3 will focus on Sino-Russian economic relations. As mentioned, this chapter will contain a data analysis component. Here, I will outline their economic relationship since 1991, looking at bilateral trade and investment, with a focus on

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the energy sector. I will also present data on investment from Chinese companies in Russia, with a focus on the activities of Chinese companies in the Russian energy sector, also discussing the mechanisms in place that facilitate the financing of said trade and investment. My findings in this section will also be presented in the form of tables and graphs and I will also assess how developments in Sino-Russian relations, as well as wider global events since 1991 have affected energy trade and Chinese investment in the Russian energy sector.

Chapter 4 will deal with the implications of their relationship for Central Eurasian

geopolitics. Here I will assess each country’s foreign policy objectives and activities in the region while also analyzing the US foreign policy objectives and responses to developments in Central Eurasia. Chapter 5 will be the conclusion, consisting of an assessment of my hypotheses as well as a summary of the findings and implications of my research.

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2

The Foundations of Post Cold War

Sino-Russian Political Cooperation

“History is not everything, but it is a starting point. History is a clock that people use to tell their political and cultural time of day. It is a compass they use to find themselves on the map of human

geography. It tells them where they are but, more importantly, what they must be.”

- John Henrik Clarke (1915-1998), 1997, History Professor at Cornell

Since the resumption of diplomatic relations between China and Russia in 1991, the two countries have developed a close political partnership on many issues. This chapter will analyze the main impetuses for political cooperation between the two countries in the aftermath of the Cold War, examining how bilateral diplomatic ties have developed over the past 25 years. In keeping with the concepts introduced in the theoretical section of Chapter 1, it will illustrate how the post Cold War global political order has helped shape Sino-Russian relations with both countries seeking to challenge the US as the world’s sole ‘great power’. Thus, this chapter will seek to answer the following questions:

1. How have the foreign policy objectives of China and Russia towards one another, changed over the 25 years since the fall of the Soviet Union?

2. What have been the primary foundations for Sino-Russian diplomatic cooperation in the aftermath of the Cold War? And what are the main impediments to further cooperation?

Chapter 2 consists of 7 sections. Section 2.1 will provide a brief historical analysis of political relations between China and the Soviet Union from the end of the Second World War up until the end of the Cold War and resumption of diplomatic ties in 1991. This will be followed by section 2.2 which will assess the conditions that led to their renewed political cooperation from 1991-2001 and section 2.3 which analyzes the shift in global politics from with Russia’s relative decline and China’s rise in the aftermath of the Cold War. Section 2.4

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will provide an analysis of diplomatic relations from 2001-2008, while section 2.5 will discuss the impediments to closer political cooperation during this time period. The final two sections will consist of an analysis of political relations between the two countries since the Global Recession of 2008-2009 (2.6) as well as the chapter’s concluding remarks (2.7).

2.1 Brief History of Sino-Soviet Diplomatic Relations 1945-1991

To understand the foundations upon which current Sino-Russian political relations are based, one must first look to global political developments following the Second World War. At its conclusion, as one of the two great powers along with the United States, the Soviet Union gained control of the China Far East and South Manchuria Railways as well as ice free ports in Lushun and Dalian (Luthi 2008). Both sets of railways and ports had previously belonged to China and had been a source of dispute between the two states in the past (Ibid). The more than 3500 km of shared Sino-Russian border were also a point of contention between the two countries, with China feeling that their borders at the time, which had been settled between 1858-1860 were unfair and disproportionate (Bellacqua 2010). Nonetheless, upon Mao Zedong’s declaration of the founding of the People’s Republic of China (PRC) in October 1949, the Soviet Union became a newly communist China’s closest ally and was the main source for developmental economic aid and military support for China (Wishnick 2010). The following year, the two countries signed the 1950 Sino-Soviet Treaty of Friendship, Alliance and Mutual Assistance which outlined their cooperation, based on a common communist ideology (Luthi 2008). Under the treaty, the USSR gave back control over both sets of railways and ice free ports to China (Ibid). These concessions, reluctantly granted by Joseph Stalin, contributed to feelings of animosity between the two sides that already existed due to the unsettled status of their shared borders, which despite the 1950 Treaty had not been effectively settled (Ibid and Bellacqua 2010). However despite the tension, these earlier exchanges were also underscored by mutual understanding and admiration between Stalin and Mao, both of whom also supported Kim-Il-sung during the Korean War (Rozman 2010). As such, while their bilateral relations in the aftermath of WWII, based in a common communist ideology appeared strong on the surface, key points of contention between the two countries were also evident.

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With Stalin’s death in 1953 and Nikita Khrushchev’s rise to power, these tensions were exacerbated by the new leader’s reforms to Soviet style communism and public denouncement of Stalin in the years after his death (Rozman 2014). Mao viewed

Khrushchev's revisions as a fundamental betrayal of Marxist-Leninist ideology and came to resent the new Soviet regime (Ibid). Gradually, over the course of the following decade, the two communist states broke off relations with one another in what is referred to as the ‘Sino-Soviet Split’ (Luthi 2008). Their shared animosity toward one another combined with the border issue to boil over in 1969 with the ‘Sino-Soviet Border Conflict’ (Ibid). Although the situation was eventually resolved and a full-scale war was averted, the status of their border remained contested and this episode marked a low point in their bilateral relations,

highlighting issues that would have to be settled before further cooperation could take place. The poor state of relations was further strained by the opening of diplomatic relations between China and the United States, the USSR’s great rival in the mid-1970s and the ‘Sino-Vietnamese War’ in 1979, in which China invaded Soviet-backed Vietnam, in reaction to the Vietnamese invasion of Cambodia, a Chinese ally (Centre for Strategic and International Studies 2014). By the mid-1980s, relations between the two powers were non-existent. However a 1989 state visit from Mikhail Gorbachev set in motion the events that would lead to the end of the Sino-Soviet Split and re-establish bilateral relations between the two former allies (Wishnick 2010). After two years of preamble and more than 30 years of estrangement, China and Russia resumed diplomatic relations in 1991, on the basis of maintaining “good-neighbourly and mutually beneficial” ties (Bolt 2013). It was thus a change in Soviet leadership, and Gorbachev’s desire for warm relations with its neighbours and former adversaries that paved the way for their renewed cooperation.

2.2 1991-2001: Sino-Russian Rapprochement

As discussed in Chapter 1, in the decade leading up to the disintegration of the Soviet Union, China’s industrialization and the ongoing process globalization contributed the lateral pressure that ‘pushed China out’ (Amineh and Houweling 2010). Under Deng Xiaoping, beginning in 1978, the PRC was forced to abandon its purely centrally planned communist economy in favour of neoliberal reforms, opening up Chinese markets to capital flows from global markets (Falkenheim 2000). This facilitated rapid economic growth, transforming

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China from a political and economic backwater into an emerging power (Ibid). By the time of the collapse of the Soviet Union, two years after Gorbachev’s visit to Beijing, China’s

economy had risen to equal that of a declining Russia’s in size and was continuing its upward trend (Swanstrom 2010). Meanwhile Russia in the aftermath of the Soviet collapse

experienced economic chaos, with stagnation and high unemployment severely damaging the national psyche (Rozman 2014). Its global influence and power projection capabilities were greatly diminished, with the country immediately falling from its position as a great power (Ibid). Thus, China’s economic reforms had effectively enabled its ascendence to a position similar to that of a declining Russia in the global geopolitical order by the 1990s.

The disintegration of the Soviet Union at the end of 1991 turned global and regional geopolitics upside down and highlighted the pressing issue of maintaining stability in Central Eurasia, with 7 former Soviet republics in the region becoming independent essentially 2

overnight (Marketos 2009b). China shared more than 3000 km of borders with these newly autonomous states and worried that any potential unrest in the former Soviet republics might spill over into China’s Western territories, particularly Xinjiang province where tensions already existed with part of the local Uyghur population who sought independence from Beijing (Eder 2013). Russia, although reeling from the dissolution of the USSR, still wished to maintain regional stability as well as retain primacy in what it still considered its sphere of influence (Kuchins 2010). Moreover, the Soviet Union’s ten year failed occupation in

Afghanistan from 1979 to 1989 had accelerated the rise of Islamic extremism (Bolt 2013). Both states, which also possessed large Muslim minorities were worried about the spread of extremist movements into Central Eurasia, particularly the Central Asian Republics , which 3

were predominantly Muslim (Gabuev 2015a). They feared these movements would spill over into China and Russia, creating instability while the authority of their respective governments (Downs 2010). Regional and cross-border security were thus the key focus points of bilateral cooperation in the immediate aftermath of the Cold War.

To facilitate further cooperation, in 1994, after lengthy negotiations, the majority of their longstanding border dispute was resolved as both parties agreed on most of their current shared boundaries with Russia granting territorial concessions to China, notably Zhenbao,

Central Eurasia consists of Azerbaijan, Georgia, Kazakhstan, Turkmenistan, Kyrgyzstan, Tajikistan and

2

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Heixiazi and Yinlong Islands (Wietz 2011). The status of their shared borders would be fully settled by 2008 (Bellacqua 2010). This settlement paved the way for deeper political

cooperation between the two states. In April 1996, Russian president Boris Yeltsin and his Chinese counterpart Jiang Zemin signed a document upgrading the relationship between the two states from a ‘constructive partnership’ to its current status as a ‘strategic

partnership’ (Falkenheim 2000). Although this is not a formal alliance or full scale economic integration agreement, with a customs union or free trade zone, it saw them agreeing to deeper political, economic and especially security ties, introducing information sharing measures aimed at halting the spread of extremist networks (Bellacqua 2010). This upgrade also expanded the basis for Sino-Russian cooperation by adding energy cooperation, which will be discussed in greater detail in chapter 3 (Ibid). That same year, the structural

framework was laid out for the Shanghai Five, a Chinese initiative which would become the Shanghai Cooperation Organization (SCO) upon its inauguration in 2001 (Marketos 2009b). The organizations primary aim was to foster regional security cooperation between its member states, China, Russia, Kazakhstan, Tajikistan, Kyrgyzstan and later Uzbekistan (Ibid). These actions demonstrated each state’s goal to create a stable political environment in Central Eurasia, while also developing an alternative political order to the US-led, NATO based Atlantic one that was expanding into Eastern Europe.

Along with maintaining cross-border and regional security, weapons trade was the other component the security relationship that formed the primary foundation for their

rapprochement during the 1990s. The US and EU led arms embargo was imposed on China in response to the 1989 Tiananmen Square Massacre (Koch-Weser and Murray 2014). This created problems for China’s plan to modernize its military, particularly its navy, and assert itself as a major global actor in its territorial disputes with its neighbours in the South and East China Seas (Ibid). Thus, China had to look elsewhere to obtain the required 4

infrastructure. Meanwhile, Russia as the second largest arms exporter in the world, with significantly more modern and technologically advanced equipment than China, represented an ideal partner in this venture (Downs 2010). From 1992 to 2006 China was Russia’s largest customer for military weapons, accounting for 40% of all Russian military exports during this

China is involved in territorial disputes with Japan over the Senkaku Islands in the East China Sea as well as

4

Strategic partners? : understanding Sino-Russian cooperation in the energy sector