Sino-Russian energy relations: a history of complementarity & friction

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Sino-Russian energy relations: a history of

complementarity & friction

MSc Political Science (Political Economy)

Thesis Research Project: The Political Economy of Energy University of Amsterdam, Graduate School of Social Sciences

June 2020

Author: Supervisor:

Nemanja Popovic Dr. M. P. (Mehdi) Amineh

12731080 Second Reader: Dhr. dr. R.J. Pistorius S o u rc e: ht tp://w ww. kr em lin.r u/e ve nt s/p re si de n t/ne ws/60674/ ph o to s

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Abstract

This thesis sets out to analyze the evolution of the Sino-Russian oil and gas relationship since the collapse of the Soviet Union in 1991, within the context of their political relationship. To explore this phenomenon, this thesis employs concepts and ideas from the theories of defensive realism, neoclassical realism and critical geopolitics. It supplements this framework with a combination of qualitative methods and quantitative data. It will be shown that while China and Russia have persistently displayed a tendency towards political cooperation in the post-Cold War period, the consumer-producer divide has inhibited productive collaboration in oil and gas relations – in spite of an obvious economic and geographic complementarity.

Indeed, Russia is a primary supplier of both gas and oil to China. But this is largely due to external forces as opposed to compromise and productive dialogue. As will be demonstrated, a combination of economic crises and political confrontations with the transatlantic community forced Russia to not only make concessions in oil and gas negotiations, thereby accelerating the formalization of bilateral energy relations, but also to integrate China into its upstream – a longstanding barrier. Yet, it will be shown that while China has become an integral piece in Russia’s upstream oil and gas projects, Russian authorities limit Beijing’s influence due to political considerations arising from the intimate connection between the oil & gas sectors, the macroeconomy and Russia’s material power capabilities.

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Acknowledgements

First and foremost, I want to thank my professor Dr. Mehdi Parvizi-Amineh for his guidance along the way and, in particular, his sense of urgency. I also wish to thank my fellow classmates Sarah and Tiarna for the endless banter and support we showed one another during these stressful times, as well as my roommates Niraj and Phoenix for the tremendous feedback and laughs, respectively (but not always). Last, but not least, I wish to thank my family for not only providing me with the opportunity to pursue my passion, but also for the endless and unconditional support and love I received along the way. Volim vas najvise.

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Map of the Russian Federation

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Map of the People’s Republic of China

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List of Tables and Figures

Figure 3.1 Brent Crude Spot Price ($), 1997-2010 p.38

Figure 3.2 Russian Foreign Exchange Reserves ($bn), 2008 - 2010 p.40

Figure 3.3 Russian Crude Oil Imports as % of EU Gross Inland Consumption p.42

Figure 3.4 China’s Crude Oil Imports by Source, 2005 p.43

Figure 3.5 Russian Share in Chinese Fuel Imports & Bilateral

Import Product share of fuels (%) p.45

Table 3.1 Russian Export Share to China ($bn), 2010-2017 p.47

Figure 3.6 Russian Export Value to China ($bn), 2010-2017 p.47

Figure 3.7 China Oil Consumption vs EU Oil Consumption (Mt), 2000-2017 p.50

Figure 3.8 Russian Natural Gas Imports as % of Total EU Natural Gas

Imports (mcm), 2008-2017 p.51

Figure 4.1 Oil and Natural Gas Production in Russia, 2013 p.56

Figure 4.2 Chinese FDI in Russia by sector, 2010-2019 p.58

Figure 4.3 Chinese FDI in Russia by Energy Sub-Sector, 2010-2019 p.59

Figure 4.4 Average Share Sizes for Chinese FDI by Energy

Sub-Sector, 2010-2019 p.60

Figure 4.5 Russian Natural Gas Exports to China by volume (bcm),

2009-2017 p.61

Figure 4.6 Chinese Natural Gas Imports by Source (bcm), 2017 p.62

Figure 4.7 The Water Area of the Northern Sea Route p.64

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List of Abbreviations

9/11 September 11, 2001 Terrorist Attacks on New York and Washington

ABM Treaty Anti-Ballistic Missile Treaty

AIIB Asia Infrastructure Investment Bank

AZRF Arctic Zone of the Russian Federation

Bcm Billion Cubic Metres

B/d Barrels per Day

Bn Billion

BP British Petroleum

BRI Belt and Road Initiative

BRICS Brazil, Russia, India, China and South Africa

CA Central Asia

CDB China Development Bank

CNOOC China National Offshore Oil Corporation

CNPC China National Petroleum Corporation

EAEU Eurasian Economic Union

ESPO Eastern Siberia-Pacific Ocean oil pipeline

EU European Union

China Exim Bank Export-Import Bank of China FDI Foreign Direct Investment Forex Foreign Exchange

GDP Gross Domestic Product

GNI PPP Gross National Income per capita at purchasing power parity

GNP Gross National Product

IEA International Energy Agency IR International Relations LNG Liquefied Natural Gas Mt Million Tonnes

NATO North Atlantic Treaty Organization NOC National Oil Company

SCO Shanghai Cooperation Organization

SCS South China Sea

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SRF Silk Road Fund US United States

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Chapter One

Introduction

ver the past few years, the nature of the Sino-Russian relationship has been called into question, largely due to their declining relations with the United States. The Russia-US relationship needs little introduction. Their divisions regularly manifest in the international arena. The Crimean crisis of 2014, the alleged Russian meddling in the US political process and the recent Nord Stream II sanctions are but a few examples. Meanwhile, the strains in the US-China relationship are a relatively recent phenomenon. The recent trade war embodies America’s growing concerns surrounding China’s evolutionary path, as it has grown into a powerful economic, and by extension, political entity.

But these collisions, despite being more direct in character, are simply continuations of an already existing trend. China and Russia have been at odds with the United States since the end of the Cold War, albeit to different extents and in distinct forms. Both sides deeply oppose the notions of liberal interventionism – which justifies intervention on the basis of liberal objectives - and universalism. These are the flagships of American foreign policy and soft power. This has been a constant in the China-Russia partnership and forms the buttress of their bilateral relationship. This mutuality has been supplemented in recent years by an increasing convergence of economic interests. Russia is an energy exporter. In 2017, it accounted for almost 13 percent of global crude oil exports, only second to Saudi Arabia, and for just over 29 percent of global natural gas exports (BP, 2018). China, meanwhile, is an energy-user. It became a net importer of oil, natural gas and coal in 1993, 2007 and 2009, respectively (Kong, 2011, p. 52). For China, energy is a prerequisite to its economic ambitions. Thus, an energy link satisfies the interests of both parties.

But despite an obvious economic and geographic complementarity, Sino-Russian energy relations took a while to crystallize. In some respects, it is a counterintuitive outcome. But a deeper investigation, which is conducted in Chapters 2 & 3, suggests that there were

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significant roadblocks standing in the way of a formal energy relationship that pertain to this day. Indeed, energy relations have warmed in recent times. Russia’s share in China’s oil and gas mixes has increased. The export-product share of fuels has also risen. But their economic relationship, which is mainly centred on the energy trade, has displayed a lower tendency for cooperation when compared to the state of political relations. This is particularly true of Sino-Russian oil and gas cooperation in Russia’s upstream, a subject that will be tackled in Chapter 4.

Against this backdrop, this thesis aims to examine the evolution of Sino-Russian oil and gas relations since the collapse of the Soviet Union in 1991 within the context of their political relationship. In order to do so, this thesis will first present an overview of Sino-Russian political and economic relations in the post-Cold War period. It will examine the political logic behind their tendency to cooperate, while also investigating the evolution of economic relations – namely the energy trade – and why collaboration has been less pronounced in this sphere. This thesis will then focus on the impact of economic crises in the post-2008 period on Russia’s energy policy, namely their role in accelerating the formalization of Sino-Russian energy relations. Finally, this thesis will examine Russia’s energy policy in the wake of the Crimean crisis, and analyze Sino-Russian cooperation in Russia’s upstream oil and gas sectors.

1.1 Research Question and Sub-Questions

How has the Sino-Russian oil and gas relationship evolved vis-à-vis political relations since the breakup of the Soviet Union in 1991, and what is China’s role in the Russian oil and gas

sectors?

The sub-questions for this thesis are as follows:

I. What was the political logic behind the Sino-Russian tendency for cooperation in the post-Cold War period and how did energy and, more broadly, economic relations develop?

II. How did economic crises and Russia’s deteriorating relations with the West contribute to its energy reorientation towards China?

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III. What explains China’s presence in Russia’s upstream oil and gas projects and what are the limiting factors for upstream cooperation?

1.2 Delineation of Research

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

 An investigation of their contemporary oil and gas relations cannot be isolated from their broader political and economic relationship. Thus, the second chapter will provide a very brief historical overview of Sino-Russian relations since the end of the Second World War, which will then be followed up by an examination of their political and economic relationship since the collapse of the Soviet Union.

 The main focus of this thesis will be on their energy relationship in the post-2008 period

 As for the energy resources, the focus will be on both oil and natural gas. Oil has been, and still is, Russia’s main energy link to China. It's also arguably the most central resource to modern economies, given its wide-ranging applications. Natural gas has also been chosen because demand for it has increased, particularly in China. Coal has been left out, given its decreasing share in both bilateral exchanges and China’s energy mix.

1.3 Literature Review

Indeed, while relations have generally warmed since the de facto diplomatic re-set in 1991; a broad perspective ignores the nuances of their bilateral relationship. The inherent complexity of Sino-Russian relations becomes clear in reading the existing literature. With that in mind, the following literature review will be organized thematically. It will first present the debate concerning the Sino-Russian political relationship. Then, the review will discuss the debate on their economic relationship, focusing largely on the energy aspect.

Lo suggests that China and Russia share neither a long-term vision of the world nor a common understanding of their respective places within the global order (Lo, 2009, p. 3). He argues that this has to do with the fact that the West continues to be the principal external point of reference, for both parties (Lo, 2009, p. 4). Other authors mirror this view, arguing

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that neither Moscow nor Beijing want to jeopardize their productive relationships with the United States for deeper bilateral integration (Menon, 2009, p. 125; Jakobson et al., 2011, p. 41; Bolt, 2014, p. 65). China, in particular, is not interested in pursuing an anti-US agenda, largely due to its domestic needs and commitment to the globalization process (Kuhrt, 2007, p. 138). Even institutions such as the Shanghai Cooperation Organization (SCO), argues Menon, which tend to be perceived as balancing institutions, were created under no illusions - that is, China and Russia were aware they cannot create an effective counterweight to the United States (Menon, 2009, p. 125). Other authors tend to focus on their bilateral differences as the point of collision. De haas argues that the Sino-Russian strategic relationship may very well deteriorate in the long-term, largely due to augmenting conflicting interests in economic, political and security fields (De haas, 2013). Baev goes one step further, suggesting that the Sino-Russian partnership is instead a pseudo-presidential alliance that is characterized by a mutually irritating duress, in which Beijing and Moscow restrict one another (Baev, 2019, p. 13). His take is particularly interesting, given that it is the temporal anomaly.

On the other hand, authors such as Micheal Cox argue that despite having considerable differences, what increasingly binds China and Russia together is more important than what separates them (Cox, 2016, p. 319). He suggests that their mutual strategic and political interests far outweigh other considerations (Cox, 2016, p. 329). Gabuev reinforces this conception, suggesting that their interests may outweigh their differences, particularly in Central Asia (Gabuev, 2016, p. 27). Rolland shares a similar viewpoint. He claims that China and Russia are looking in the same direction, both regionally and globally (Rolland, 2019, p. 8). “Both powers perceive the Western presence on opposite sides of the Eurasian landmass – US alliances and presence in East Asia for China; NATO and the European Union’s normative power for Russia – as threatening to contain and ultimately undermine them” (Ibid). In the mid-term perspective, rapprochement between China and Russia will likely be stable, particularly if systemic pressures from the US continue to build (Korolev & Portyakov, 2019, p. 60). Moreover, both have an interest in preserving the political stability in Eurasia, despite suggestions that they are purely competitors in the area (Ibid). Kashin and Lukin reinforce this conception, suggesting that economic competition between China and Russia in Central Asia should not be confused with bitter state rivalry (Kashin & Lukin, 2018, p. 630). Indeed, China and Russia have demonstrated that coordinating policy in Central Asia has prevailed, despite sceptical views interpreting it as inevitably confrontational (Korolev, 2016, p. 397). After all, both China and Russia benefit

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from a politically stable and economically healthy Central Asia (Kashin & Lukin, 2018, p. 630).

Yet, with regards to the progress made in bilateral relations, some authors suggest that despite a mutual determination to move forward, it will not be easy (Malle, 2017, p. 148; Portyakov, 2013, p. 242). They are still competitors. Kocamaz emphasizes this view in his analysis of the SCO. He suggests that although the it has enjoyed remarkable achievements, such as making progress in advancing multilateral approaches to security threats, it is operating sub optimally, given the differences in values, lack of solidarity and problems related to the enlargement process (Kocamaz, 2019, p. 141).

With that in mind, the main takeaway from the existing debate concerning their political relationship is the temporal division, which shouldn’t be surprising. Earlier works generally suggest that China’s and Russia’s interests are misaligned, largely due to their desire to forge productive ties with the United States. Meanwhile, more recent studies generally tend to discuss the Sino-Russian relationship as complementary and, in some respects, a necessary axis. They also suggest that increasing systemic pressure coming from the United States will likely initiate closer alignment.

Their economic relationship also hosts an interesting debate, though it isn’t as fierce a battleground. Indeed, the authors agree on the interests that motivated both sides to establish an economic relationship: energy. China’s interests in engaging with Russian energy have to do with its interest in enlarging its energy supplies and mitigating naval transportation risks (Amineh & Guang, 2018, p. 16; Chen, 2012, p. 34; Lanteigne, 2008, p. 151; Shaofeng, 2011, p. 618; Wrobel, 2014, p. 36). The bulk of China’s oil imports pass through the straits of Malacca while the majority of its natural gas imports come from a relatively select amount of sources. Russia, meanwhile, has sought to diversify its energy exports and reduce its dependence on the European Union, its traditional export market (Roseth, 2017, p. 49; Yilmaz & Daksueva, 2017, p. 71). However, the authors emphasize different processes that contributed to the current state of Sino-Russian oil and gas relations.

Some authors stress broader developments, such as the center of economic life gradually shifting towards the Asia-Pacific region as a result of the growth of the Asian economies (İşeri & Özdemir, 2017, p. 57; Kashin & Lukin, 2018, p. 617). As a result, in adopting the strategy of the eastward shift, Russian oil and gas companies, as well as the State, acted in a business frame (Aalto, 2012, p. 179). Henderson and Mitrova underpin this conception, suggesting that Europe’s limited growth prospects, along with the deterioration

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of Russo-European relations, provided a commercial impetus for a pivot to the East (Henderson & Mitrova, 2016, p. 5).

Others emphasize more specific events, such as the 2008 financial crisis, and how Russia’s interests fundamentally shifted after China had demonstrated its economic robustness (Blakkisrud & Rowe, 2017, p. 78; Malle, 2017, p. 137; Roseth, 2017, p. 36). Some stress the impact of the Ukraine crisis in 2014 and its acceleratory role in Russia’s economic reorientation to China (Alexeeva & Lasserre, 2018b, p. 70). Skalamera doesn’t explicitly emphasize the role of the Ukrainian crisis in Russia’s economic pivot to China, as her study focuses solely on it. But she does illustrate its significance in the breakthrough of stagnant gas relations, arguing that domestic preferences had changed (Skalamera, 2018, p. 104). Specifically, Russia wanted to pivot its identity away from the West towards a stronger Eurasian one, while China wanted to rebrand itself as an environmentally aware power (Ibid). Some authors synthesize these developments, and argue that a combination of China’s increasing economic weight, the sanctions and counter-sanctions between the West and Russia as well as the US-China trade war helped reorient Russia’s economic relationship with China (Herrero & Xu, 2019, p. 386).

But even so, some authors suggest there are limits to the degree of energy integration. Moscow certainly welcomes Chinese investments and technology, although there is a limit (Blakkisrud & Rowe, 2017, p. 112; Sorensen & Klimenko, 2017, p. 41). This is most obvious in the Arctic, where Russia has integrated other actors into the region, so as to lessen the risks of locking itself to China solely (Sorensen & Klimenko, 2017, p. 42). Upstream cooperation remains troublesome, partly due to a reluctance on the Russian side to share assets (Henderson & Mitrova, 2016, p. 38). Indeed, while Russia has loosened restrictions on Chinese upstream investments, coordination will remain hard (Bolt & Cross, 2018, p. 95).

All in all, the existing body of literature on Sino-Russian relations focuses on their political relationship, and integrates economic developments, namely the energy trade, within this framework. More recent studies tend to portray the Sino-Russian relationship as a complementary axis. Their mutual economic and regional interests and their common distaste of American influence outweigh other considerations. Earlier studies generally remained sceptical of increasing cooperation between China and Russia, largely due to the US factor. China’s and Russia’s declining relations with the United States explain this temporal shift. The state of their energy relationship is particularly interesting. While most authors generally agree that the changing geography of energy demand played a crucial role in Russia’s energy

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reorientation, they also stress the importance of particular developments in facilitating this shift.

1.4 Theoretical Framework

Theories are crucial elements in the understanding of complex social phenomena. Sino-Russian relations are no different. Traditional theories of International Relations, such as Neorealism/structural realism, are well suited in explaining recurring patterns in the international sphere. This is particularly true of Sino-Russian relations, whose mutual distaste for US hegemony prompted a strategic balancing effort. However, neorealist theorists focus primarily on systemic forces and ignore internal factors, such as individual and social roles and their effects on foreign policy behaviour (Firozabad & Ashkenazi, 2016, p. 96). For example, neorealist theories, in the context of Sino-Russian relations, explain the general logic of balancing against US hegemony in the post-Cold war period. But they fail to explain why they have deepened political cooperation, in spite of China’s growing power. Moreover, neorealist theories do not explain the lack of unconditional support between China and Russia, despite agreements suggesting the inverse. As such, this thesis employs a more dynamic approach, incorporating concepts from the neoclassical realist bloc alongside defensive neorealist theory. In short, while defensive realism attempts to explain recurring patterns in international relations, neoclassical realism explains particular state responses to systemic imperatives (Lobell et al. 2009, p. 19-21).

At the same time, while the duo of defensive realism and neoclassical realism offers a more complete analytical approach, shortfalls remain. Specifically in relation to the Sino-Russian relationship, they fail to interpret the underlying historical processes that explain the emergence of an economic relationship. As the global economy has grown more integrated, the importance and significance of the geoeconomic space has increased. And since Sino-Russian relations encompass a strong economic facet, it is important to discern a theory that tackles this phenomenon. Thus, in order to account for a dynamic approach to both their political and economic relationship, this thesis incorporates concepts from two theoretical camps: “Defensive Realist & Neoclassical Realism” and “Critical Geopolitics.”

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1.4.1 Defensive Realism & Neoclassical Realism

Defensive realism forms one of the two blocks within structural/neorealist theory, alongside offensive realism. Like its other half, it shares several assumptions about the international system. Both treat states as principal actors, agree that the behaviour of states is driven by the external environment and that states can never be certain of the others’ intentions (Mearsheimer, 2001, p. 99). However, defensive realism parts ways with offensive realism over the question of how much power states want. While offensive realists believe that the international system creates powerful incentives for expansion (Mearsheimer, 2001, p. 100), defensive realists believe that states want to maintain their positions in the system (Waltz, 1979, p. 126). Power is a means, not an end. Moreover, defensive realists believe in a balance of power and that it is in the interest of both strong and weak states to preserve it (Waltz, 1979, p. 132). Hunting for power necessarily leads to balancing by other parties. And if states are falling behind, they will either work harder to increase their own strength or combine with others (Waltz, 1979, p. 126).

Meanwhile, neoclassical realism synthesizes assumptions from realist and neoclassical blocs. It is realist because it argues that “the scope and ambition of a country's foreign policy is driven first and fore most by its place in the international system and specifically by its relative material power capabilities” (Rose, 1998, p. 146). It is neoclassical because it argues that “the impact of such power capabilities on foreign policy is indirect and complex, because systemic pressures must be translated through intervening variables at the unit level” (Ibid). Although neoclassical realists acknowledge the importance of relative material power, they argue that, at the end of the day, foreign policy decisions are taken by actual political leaders who have an imperfect conception of relative power (Rose, 1998, p. 147). As such, the perception of power is equally as important. They also acknowledge that utilizing a nation’s domestic resources is constrained by the structure of the society (Ibid). Depending on the structure, states can either operate more freely or less freely. And, finally, while the theory recognizes the importance of systemic forces, it argues that although they broadly shape foreign policy, it doesn’t explain specific episodes of state-behaviour (Rose, 1998, p. 147). To explain specific episodes, neoclassical realism believes that intervening variables at the unit-level must be examined in tandem with systemic forces. This is particularly important in the context of Sino-Russian relations.

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Indeed, the systemic pressure of US primacy has been a crucial factor in the post-Cold War convergence of China and Russia, as defensive realist theory would suggest. The collapse of a longstanding bipolar order established an American hegemony, thereby creating an environment conducive to a Sino-Russian rapprochement. Russia, being the successor state of the Soviet Union, was particularly interested in retaining its geopolitical clout. Aligning with China was one means of doing so. The 2001 Sino-Russian Friendship Treaty, the cornerstone of the Sino-Russian political relationship in the current millennium, in some respects formalized this approach. Article 12 reads that “The contracting parties shall work together for the maintenance of global strategic balance and stability” (Ministry of Foreign Affairs of the People's Republic of China, 2001).

Alongside the need to rebalance for strategic reasons, the specific behaviour of the United States has contributed to the increase in systemic pressures (Korolev & Portyakov, 2019, p. 49). The enlargement of NATO into Eastern Europe and the increasing naval presence of the United States in the Asia-Pacific region have significantly elevated systemic pressures on China and Russia (Korolev & Portyakov, 2019, p. 50). As a response, China and Russia have stepped up their cooperation.

This is particularly true of their shared neighbourhood, Central Asia – a battleground of influence. The basic argument is that local great powers will tighten the screws on its neighbours to prevent them from teaming up with extra regional powers, who are trying to build their influence in the neighbourhood (Götz, 2019, p. 100). Both China and Russia have looked to limit American influence in Central Asia. One example is the Shanghai Cooperation Organization (SCO). Another is their desire to strengthen economic ties with the Central Asian states. Important to note however, the SCO isn’t a “coercive” institution, nor is its sole goal to limit US influence. Indeed, one of objectives of the SCO is to limit American influence in the region, albeit indirectly. Moscow and Beijing oppose “colour revolutions” endorsed by the West and have conflicting interests regarding pipeline alignment (Guang, 2015, p. 359). However, as was mentioned, the US is not the sole factor for cooperation in the SCO. China and Russia have a mutual interest in curbing separatist, terrorist and extremist movements. But, more broadly, China and Russia have used the SCO as a platform towards developing a regional agenda based not only on enhancing the security environment, but also elevating economic and humanitarian cooperation (Gabuev, 2017).

However, two inconsistencies eventually emerge in the balance of power logic. First, China’s growing power, particularly in the context of its proximity and longstanding disputes with Russia, should have triggered a balancing effort from Moscow (Yoder, 2020, p. 11). A

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dynamic theory would have expected increased Russo-American cooperation and a decline in Sino-Russian relations (Owen, 2020, p. 3). This is particularly true when we consider that China and Russia are natural competitors in the Central Asian region.

Granted, there is no one universal conception of a dynamic balance of power theory. For example, Kydd suggests that states will first side with the rising power in order to prevent the hegemon from waging a preventive war, then switching to the declining power to deter predation from the rising state (Kydd, 2020). This conception fits the trend so far. But one would expect that as the rising state, China in this case, gains more and more power at the expense of the hegemon, the United States, the third party, Russia, would gradually reduce its cooperation with the rising state. But this hasn’t happened. On the contrary, Sino-Russian relations have, according to their respective leaders, reached their highest level yet (Putin & Jinping, 2017; Putin & Jinping, 2019).

Secondly, China and Russia have not always expressed support for one another, despite systemic pressures urging them to do so. A neoclassical realist approach plugs this void. It integrates intervening variables, usually at the regional and domestic levels, in order to explain the specific foreign policy behaviours of Russia and China. In this case, why Russia has deepened cooperation with Beijing, despite China’s obvious rising power status. And why they haven’t supported one another at all times.

One major factor that explains the absence of a Russian balancing effort against China is their mutual distaste for liberal hegemony and universal principles (Owen, 2020, p. 4). Both sides’ political structures are characterized by the centralization of power. As such, soft power influences, such as liberal democracy, have the potential to compromise regime power and undermine state-determined national goals. But, perhaps more importantly, liberal hegemony and liberal democratic principles threaten to destabilize their shared region – Central Asia. As such, they have a common goal of limiting such influences. This ideological overlap explains their tendency to cooperate at the global level, which is further reinforced by the fact that they are the only “superpowers” who abide by such principles. In other words, they are each other’s only friends ideologically, which has outweighed other considerations. Moreover, the consistency in their political regimes may have contributed to increasing cooperation. Aside from the 1990’s, Russia’s political system has been dominated by one person: Vladimir Putin. In China’s case, leaders have changed but they are all products of the communist ideology, which pushes a relatively uniform agenda. This ideological consistency from both parties may have contributed to the erosion of unpredictability, albeit partially. While liberal democracies experience constant shifts in political power and alignment,

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authoritarian regimes are characterized by more consistent and, by association, relatively fixed set of policy objectives, thereby setting a more conducive environment for cooperation. Neoclassical realism also emphasizes the role of state leaders (Cesnakas, 2010, p. 46). In that light, a closer look into the policies of specific statesmen may provide a richer understanding of Russia’s warm policy stance towards China. Vladimir Putin has dominated Russian politics for the past 20 years. And his stance towards China has barely shifted. The bedrock of Putin’s China policy is the 2001 Sino-Russian Treaty of Friendship which aimed to “enhance relations between the two countries to a completely new level, determined to develop the friendship between the people of the two countries from generation to generation” (Ministry of Foreign Affairs of the People's Republic of China, 2001). Policies ranged from enhancing military trust and strengthening cooperation in the United Nations to stabilizing the neighbouring regions and increasing economic and scientific cooperation (Ibid). Almost 20 years later, Putin’s China policy has stayed identical. In his article published in 2012, he stressed the importance of the Sino-Russian friendship, and that in spite of China’s material power gains; it is not considered threatening (Putin, 2012). In June of 2019, he emphasizes that “Russo-Chinese relations have reached an unprecedentedly high level” (Putin, 2019). Thus, as is stressed by the neoclassical realist lens, Russia’s bilateral relationship with China is greatly influenced by Vladimir Putin, whose perception of power and the international system has guided Russian foreign policy throughout the past two decades. Indeed, while China’s GNP and annual defence spending have shot up, Russia’s policy stance has remained unchanged. Moreover, China’s careful cultivation of its expansion has also played a significant role. This is particularly true of Central Asia, where Russia and China are natural competitors. Beijing continuously stresses cooperation and win-win models. Putin personally acknowledged China’s steady and reliable behaviour, suggesting that it hasn’t displayed a tendency to dominate (Putin, 2012).

The neoclassical realist approach is also perfectly suited at explaining the lack of unconditional support in the face of similar systemic experiences. After all, China and Russia have not always supported one another, despite experiencing the same systemic pressure. A neoclassical realist approach suggests that unit-level factors at the regional and domestic levels, have pulled in an alternative direction, thereby stifling the systemic push to support one another at all times (Korolev & Portyakov, 2018, p. 425). A look into recent crises illustrates this point. Throughout the 2008 crisis in the Caucasus and the 2014 Crimean crisis, China didn’t support Russia. Similarly, Russia has never declared public support for China’s endeavours in the South China Sea. China’s strategic ambivalence is explained by several

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factors: its structural dependence on Western consumer markets and, perhaps more importantly, its interests in the post-Soviet space and its own sensitives regarding territorial disputes (Korolev & Portyakov, 2018, p. 417). Meanwhile, Russia’s reluctance is largely explained by its desire to develop its economic relations with many Asian countries as part of its diversification strategy (Korolev & Portyakov, 2018, p. 428). As such, antagonizing these countries by explicitly siding with China ultimately ensures the inverse. But neither side called out the other, which illustrates an interesting dynamic. While they do have conflicting interests at particular points in time, their foreign policy behaviour suggests that they reserve important roles for one another, despite popular sentiment in the West highlighting Russia’s economic insignificance to China. Beijing’s muted reaction to Russia’s endeavours in Georgia and Crimea is particularly noteworthy, as it stayed silent despite having territorial and separatist issues of its own.

In any case, the combination of defensive realism alongside neoclassical realist theory creates for a more complete analysis of the nuances in the Sino-Russian relationship in the post-Cold war period. While the defensive neorealist does a good job in explaining the Sino-Russian convergence in the post-Cold war period, it fails to acknowledge certain developments and the complexity in others. It doesn’t explain why Russia has not balanced against China, nor does it explain why China and Russia have, at times, not projected their support for one another.

To fill these voids, this thesis applies the neoclassical realist theory. Intervening variables, namely domestic elite perceptions, mutual interests and common ideologies/political systems, explain the Sino-Russian tendency towards cooperation. These variables have outweighed other considerations, such as China’s rising power status. The theory also explains why Russia and China have not always supported one another. Variables at the regional and domestic levels have stifled the systemic push for unconditional support. China’s more structural reliance on the West serves as one roadblock to closer political alignment with Moscow. As for Russia, its desire to expand its economic outreach to the Asia-Pacific region necessitates a neutral stance during China’s allegedly hostile endeavours in the area.

However, the theories do fall short in certain aspects. They do not allow for an analysis of their economic relationship, largely due to the fact that both theories are embedded in a political framework. Defensive realism in particular, is too state-centric. As such, the theories do not explain how certain structures came to be and the historical and

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social processes that underpinned the emergence of those very same structures. To fill this intellectual lacuna, this thesis applies the theory of ‘Critical Geopolitics.’

1.4.2 Critical Geopolitics

Critical geopolitics emerged as a response to traditional theories of international relations, which placed the state as the primary unit of analysis. This new approach wanted to provide proper attention to social forces and processes and their impact on the development of states and world orders, while at the same time acknowledging that state power is not to be underestimated (Cox, 1981, p. 128). It is a relatively dispersed theory but, in essence, it seeks to understand how current structures came about through an understanding of historical change (Cox, 1981, p. 129). In essence, state-centric theories, such as defensive realism, are helpful in explaining recurring state patterns. But they do not account for the economic forces and social processes that characterize those nations and, subsequently, how they affect inter-state relations. Critical geopolitics plugs this void. It describes how domestic social processes formed the geoeconomic interests of both China and Russia, which ultimately explains their bilateral economic dynamic - that is, why they engage with one another. For this thesis, I employ concepts from critical geopolitics as presented by Amineh & Guang (2017; 2018) and Amineh & Houweling (2010).

The unit of analysis within the selected strand of Critical Geopolitics is the state-market complex, which are state-made institutions that connect and regulate state-markets both at home and abroad (Amineh & Guang, 2018, p. 10). There are two ideal types: the ‘liberal state-society complex’ and the ‘authoritarian/centralized or contender state-complex’ (Amineh & Guang, 2017, p. 12). The former is characterized by well-developed social forces, particularly a strong capitalist class, and a clear separation between society and the state (Amineh & Guang, 2018, p. 11). Centralized state complexes are distinguished by their relatively underdeveloped or non-existent social forces and business classes, which necessitates a centralization of power (Ibid).

Both China and Russia can be categorized as the latter, broadly-speaking. They aren’t completely identical. In China’s case, the state directly or indirectly controls the business class, which is part and parcel of state power (Amineh & Guang, 2018, p. 11). Russia’s case is slightly more nuanced. Indeed, power is centralized and the state dominates crucial sectors of the economy, such as energy, through an oligarchic regime. But it wasn’t always so.

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Russia’s control over these assets greatly shifted at the turn of the millennium, coinciding with the rise of Vladimir Putin. Energy is one of the few strategic resources Russia had after the collapse of the Soviet Union (Hill & Fee, 2002, p. 464). This realization justified a more aggressive policy approach towards increasing government influence in the oil and gas sectors (Hill & Fee, 2002, p. 464; Gidadhubli, 2003, p. 2030). It consequently employed its hydrocarbon assets as foreign policy tools, (Djankov, 2015) most often in the post-Soviet world. Between 1991 and 2007, 55 incidents of coercive energy policy were employed against former Soviet states, of which 70 percent were supply cuts (Hedenskog & Larsson, 2007). Granted, the authors acknowledge that there is limited evidence tying it to Moscow (Ibid). The energy confrontations with Ukraine provide an obvious case. For example, the Orange revolution in Ukraine in 2004 raised anxieties in Moscow, who feared that a ‘democratic contagion’ may engulf other post-Soviet territories (Wolczuk, 2016, p. 122). As a response, Gazprom increased the price of energy and demanded that Ukraine’s accumulated debts be paid back immediately. Aside from failing to come to an agreement on the price, Ukraine couldn’t repay the debt back, which prompted Gazprom to halt gas supplies to Ukraine (Ibid). Eventually, a deal was signed in 2009. But just a few weeks later, then Ukrainian President Yushchenko dubbed it a bad deal, one not based on partnership (Pirani et al., 2009, p. 30). But Russia’s “energy diplomacy” extends beyond supply cuts. Over the past few years, Moscow has looked to minimize its costs by creating routes that bypass the need for transit countries (Grigas, 2012, p. 6). By reducing its dependence on transit countries, Moscow gains leverage. Nord Stream 2 is one example. It allows Russia to transport gas directly to Germany, which not only saves billions in transit fees but also reduces Ukraine’s influence.

But it has also used its hydrocarbon assets as balancing tools against external pressures. For example, in the same way that it has looked to balance US liberal hegemony by developing political and economic relations with China, it has looked to limit China’s growing stature by retaining control over the oil and gas sectors and limiting Chinese influence. It is one of the only tools, if not the only, that allows Russia to rebalance the macroeconomic asymmetry vis-à-vis China.

However, Russia’s state-energy complex is not completely unified. In other words, it is a more fragmented structure in relation to China, literally and figuratively. Take a look at Gazprom, Russia’s natural gas giant. In 2018, the Russian state held 50.3 percent of its shares. Companies such as Rosneft are not wholly state-owned either. For example, BP’s shares stand at just under 20 percent. There are also (quasi)private entities. Novatek’s

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majority shareholder is Leonid Mikhailson. However, he is considered to be one of the Russian “oligarchs,” which implies an intimate connection to the Kremlin. He has been targeted by American sanctions.

But despite an oligarchic structure, it is not in a state of harmony. Broadly-speaking, Russia’s elite may appear fully consolidated under Putin from a distance but, in reality, competing groups fight over influence, property and ideology (Stanovaya, 2020). A notable split is between the state oligarchs, such as Gazprom’s Alexei Miller and Rosneft’s Igor Sechin, who tend to have a more international outlook, given their business interests, and the conservatives, who are worried about normalizing relations with the West (Ibid). Moreover, companies such as Rosneft do have some leeway in terms of pursuing their own agenda. The states influence has been gradually decreasing on Rosneft’s board, while its transparency has also increased (Henderson, 2012, p. 54). But even so, the state still plays the crucial role. By contrast, China’s energy giants, such as CNPC and CNOOC, are fully state-owned enterprises. Indeed, they have tried to develop commercial strategies, but have to do so within the confines of a state that controls the purse strings and personnel appointments (Meidan, 2016a, p. 55). The Chinese regime is also fully consolidated around the ideology of the communist party, which nullifies any competing interests. There is only one goal: to better China.

But even though the lines between Russia’s political and economic infrastructure are more blurred, they are only so vis-a-vis China. Both Moscow and Beijing exert significant control over their energy sectors and orient their companies, who act as state-proxies, towards primarily satisfying national economic interests. For Russia in particular, energy exports comprise the bulk of Federal revenues - accounting for 39.3 percent in 2019 (Ministry of Finance of the Russian Federation, 2019). And, as was mentioned, Russia can employ its hydrocarbon assets towards extracting political concessions from dependent countries in the ex-Soviet space.

Nevertheless, the theory is also useful in explaining the domestic processes that contributed to their current geoeconomic interest. Unlike Russia, China is considered a late-industrializing economy. It is a developmental state, which has projected a revolutionary ideology to mobilize domestic human and material forces to defend against foreign intrusion (Amineh & Guang, 2017, p. 13). It has had to play catch up to the developed and, largely, Western world. This catch-up process is defined as the process of sequential industrialization, which refers to an autonomous top-down development process that seeks to avoid marginalisation in the global economy (Amineh & Houweling, 2010, p. 220). Given

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the successes and failures of modernisation and industrialization, the current era of sequential industrialization is characterized by more frequent changes in the hierarchy of states (Amineh & Houweling, 2010, p. 223). China has succeeded in its industrialization process, skilfully exploiting the process of globalization and tailoring it towards its own specificities.

However, China’s growth has come at a cost, something Amineh and Houweling call ‘lateral pressure.’ It essentially refers to the pressures arising from growing population, higher incomes and the gradual exhaustion of domestic resources, which necessitates an expansion into foreign markets to satisfy demand (Amineh & Houweling, 2010, p. 246). One of those resources has been energy, and China has been unable to match growing domestic demand with local energy resources. It became a net energy importer in 2009. Hence, it has looked abroad, namely to Russia, in order to quell growing lateral pressure. Thus, China’s economic relationship with Russia has to be understood within the context of its development path.

Meanwhile, Russia’s economic relationship with China has to be understood in the context of its own domestic social processes. The collapse of Soviet Union and the ensuing failure of privatization in the 1990’s set the foundations for the centralization of authority in the 21st century, particularly in the energy sector. Perhaps the most prominent example is the so-called Yukos affair in which, essentially, the private interests of then-owner Mikhail Khodorkovsky, clashed with state interests. It represented the growing role of the state in economic affairs, and a new form of leadership centred on control over the pivotal energy sector (Ivanenko, 2008, p. 264). It was part of Russia’s broader strategy of employing its oil and gas reserves as foreign policy tools (Newnham, 2011, p. 134).

Since then, Russia has established a strong foothold in European energy markets. According to Eurostat, it accounted for around 27 percent of EU crude oil consumption and 31 percent of EU natural gas consumption in 2017. But recent geopolitical developments, namely the Crimean crisis, have driven a wedge between Russia and the transatlantic community. Other processes, such as the growing salience of climate change, have necessitated a shift away from carbon-intensive fuels towards greener alternatives. But even so, the aforementioned pattern of sequential industrialization has complemented Russia’s own socio-economic objectives, as it hopes to reassert its geopolitical status by exploiting China’s increasing lateral pressure. This is evident in the increasing export product share of fuels to China, which stood at 72 percent in 2018 compared to 41 percent in 2005 (World Integrated Trade Solution, 2020c).

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The ‘capitalist logic of power’ is also relevant when discussing the Sino-Russian economic relationship. It essentially refers to the tendency of capital to circulate globally in case of domestic oversaturation. For example, China has used its capital surpluses as a means of satisfying growing energy demand. During the 2008 financial crisis, it opened credit lines with indebted countries like Russia, in exchange for energy. This will be developed in Chapter 3. But, in essence, the capitalist logic of power is also a crucial concept in terms of understanding the Sino-Russian energy relationship.

In sum, an analysis of the Sino-Russian relationship requires more than just one theoretical approach. The theory of defensive realism is useful in explaining the Sino-Russian political convergence in the immediate post-Cold war era, while the neoclassical realist theory explains their tendency towards cooperation despite China’s increasing power. However, the theory of defensive realism, in particular, does not adequately explain the underlying causes that helped shape Sino-Russian economic relations. China’s spectacular growth rates have depleted domestic energy resources. Thus, it has looked to foreign markets for relief, which allows it to maintain its economic momentum. One of those markets has been Russia, who happens to be one of the main energy producers. Moreover, the concept of the state-market complex also helps understand the link between Russian state power and its oil and gas sectors. This will be particularly important in the discussion concerning Sino-Russian upstream cooperation in Chapter 4.

1.5 Argumentation & Hypotheses

The research question will be approached through a number of questions. The first sub-question examines the political logic behind the Sino-Russian convergence in the post-Cold War period, while also investigating the evolution of their economic relationship. After all, energy relations cannot be discussed in isolation. It therefore reads: “What was the political logic behind the Sino-Russian tendency for cooperation in the post-Cold War period and how did energy and, more broadly, economic relations develop?” It will be shown that while the Sino-Russian political relationship has displayed a tremendous tendency for cooperation, their economic relationship has been more conflictual – namely their energy relations. It will be argued that their tendency to cooperate, in spite of China’s growing power, had to do with factors at the unit-level, as is emphasized the neoclassical realist theory. China and Russia have mutual regional security interest, which include pacifying the area and limiting

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American influence. Their similar political structures, their common worldview and their distaste for US liberal hegemony have also contributed to their political rapprochement. But China and Russia were not able to fully translate their motivation to collaborate to economic considerations. This thesis argues that the frictions in economic relations had to do with structural and political forces. Aside from the absence of a US factor, which usually provides the impetus for cooperation, China and Russia occupy opposite sides of the market. This explains their long and unproductive negotiations. Perhaps most importantly, the absence of a strong commercial logic, particularly in light of Russia’s well-established position in European markets, nullified a more determined Russian approach to establishing energy relations, at least in the immediate post-Cold War years.

With that in mind, the next sub-question explores the impact of economic crises on the gridlock that became synonymous with Sino-Russian energy relations. It reads: “How did economic crises and Russia’s deteriorating relations with the West contribute to its energy reorientation towards China?” It will be shown that the 2008 financial crisis necessitated an expansion of the customer-base, namely to China. The economic impact of the crisis undermined Russia’s bargaining position in energy relations with China, who had managed to stay relatively robust, thereby forcing it to make concessions to cover more pressing considerations, such as high company indebtedness. It will then be shown that the 2014 Crimean crisis not only led to a breakthrough in gas relations, but also forced Russia to incorporate China into its oil and gas infrastructure. This section will argue that the two crises greatly accelerated Russia’s energy pivot to China, a policy shift that was borne out of necessity as opposed to goodwill.

The final part of the argumentation analyses China’s role in the Russian oil and gas sectors. It reads: “What explains China’s presence in Russia’s upstream oil and gas projects and what are factors limit upstream cooperation?” It will be shown that China’s presence in the upstream is a by-product of Russia’s collision with the West over Crimea. To operationalize China’s presence, this section will analyze the volume, shareholding ratios and energy sub-sector preference of Chinese FDI since 2010. It will be argued that the limiting factor to upstream cooperation is the deeply intimate connection between the oil and gas sectors and the macroeconomy, elite power and the material power capabilities of the Russian state. This link is explained using the state-market complex concept, as identified in the theoretical framework.

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H1: In spite of China’s rising power status, Russia has continued cooperating with China because of intervening variables at the unit-level, namely Putin’s personal conception of Chinese material power capabilities as well as their identical state structures and worldview. H2: China’s role in the Russian oil and gas sectors is and will be limited due to the intimate connection between the Russian oil and gas sectors, the macroeconomy and the material power capabilities of the Russian state.

1.6 Data and Concepts

In terms of the data and concepts, this thesis employs both quantitative and qualitative elements. The quantitative data is collected from British Petroleum (BP), the Central Bank of the Russian Federation, the China Statistical Yearbook, Eurostat, Gazprom, Rosneft, Gazprom and Novatek press releases and documents, the Heritage Foundation Global Investment Tracker, the (IEA) International Energy Agency, the Ministry of Finance of the Russian Federation, the Observatory of Economic Complexity (OEC), UN Comtrade, the World Bank and the World Integrated Trade Solution. This data will be illustrated through the use of primarily figures and, occasionally, tables in Chapters 2, 3 and 4, which I have generated using google sheets. In essence, the quantitative figures set the context for and supplement the qualitative analysis. Bilateral trade and investment figures, with a particular focus on the energy sector, will be examined. The trade figures will be investigated by looking at Russian’s export shares that go to China, as well as their value. Similarly, the bilateral energy trade will also be analysed by examining China’s natural gas imports from Russia by volume as well as their imports of Russian crude oil as a share of their total oil imports. The import-product share of Russian fuel is also examined. As for the financial element, this thesis will look at the loans facilitated by Chinese financial institutions to Russian energy companies, namely the loan-for-energy deals in the post-2008 crisis years.

In terms of the qualitative aspect, this thesis employs information from journal articles, books, online sources and government publications, such as China’s White Paper on its Arctic Policy and Russia’s Energy Strategy for the Period up to 2030 as well as its most recent Energy Security Doctrine, whose key points I personally translated. To account for the political dimension of the relationship, this thesis relies on individual & joint declarations as well as speeches, charters and treaties. These sources have been extracted from both governmental bodies, such as the Ministry of Foreign Affairs of the People’s Republic of

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China or the Kremlin’s official website, and intergovernmental bodies, like the Shanghai Cooperation Organization and BRICS. These sources form the bedrock of the Sino-Russian political and security relationship. I also employ the press releases and annual reports of Russian energy companies Gazprom, Novatek and Rosneft and popular outlets such as the Financial Times. To analyze Putin’s conception of China, which is one of the intervening variables this thesis will use in its assessment of the factors that explain the persistency of Sino-Russian political cooperation, I employ transcripts published by the Kremlin as well as his own personal writings.

1.7 Organization of the thesis

The thesis is structured as follows. Chapter 2 will investigate the Sino-Russian political and economic relationship in the post-Cold War period, focusing largely on the progress of their energy relations. It intends to illustrate that while they demonstrated a tremendous capacity for political cooperation, their economic (energy) relationship is inherently competitive. These factors are discerned through a unit-level approach emphasized by the neoclassical realist theory. Chapter 3 will then analyze the impact of economic crises on Russia’s energy policy towards China. Specifically, it will examine the role of the 2008 financial crisis and the 2014 Crimean crisis in bringing about a break in Russia’s bargaining position vis-à-vis China in energy relations. It seeks to explain that Russia’s energy pivot to China in the post-2008 period was a policy response borne out of necessity. Chapter 4 will then investigate the impact of the Western sanctions on Russia’s contemporary energy policy and, specifically, its effect on Sino-Russian oil and gas negotiations. It will be shown that China’s presence in Russia’s upstream has increased, given the need to plug the financial and technological void left by the sanctions. China’s presence will be measured by looking at the volume of Chinese investments into the energy sector, the energy sub-sector preference and the shareholding ratios they are allocated in projects. Ultimately, it seeks to identify China’s role and discern the factors that have limited, and continue to limit upstream cooperation.

Chapter 5 concludes my research, and consists of an assessment of the aforementioned

hypotheses, the summary of the findings and the implications of my research for future studies.

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Chapter Two

Sino-Russian Relations in the Post-Cold War

Period

ince the collapse of the Soviet Union, relations between China and Russia have transitioned through several phases. This chapter will analyze these different stages, by examining how their diplomatic and economic ties have developed over the past three decades. After all, Sino-Russian energy relations cannot be discussed in isolation. It must be integrated within an understanding of their broader political and economic relationship. Thus, this chapter will illustrate how the post-Cold War order was conducive to a political rapprochement, but less so for energy relations. Thus, this chapter will seek to answer the following question:

I. What was the political logic behind the Sino-Russian tendency for cooperation in the post-Cold War period and how did energy and, more broadly, economic relations develop?

Chapter 2 consists of several sub-sections. Section 2.1 will provide a brief historical overview of Sino-Soviet relations up until 1991. This will be followed by section 2.2, which will assess the progress of Sino-Russian political and economic relations in the 1990’s, which includes an exploration of their clashing points – such as the power vacuum in Central Asia. Section

2.3 will then investigate the nature of Sino-Russian relations during the initial Putin years, so

from the year 2000 till the financial crisis of 2008, while also discerning the roadblocks in their energy relationship. Section 2.4 will consist of an analysis of Sino-Russian political and economic relations in the aftermath of the 2008 Financial Crash while section 2.5 will present a conclusion.

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2.1 Sino-Soviet relations 1945-1991

At the conclusion of the Second World War, the Soviet Union emerged as one of the two global powers, alongside the United States. Its immediate goals in Asia were to secure Mongolia’s independence, thereby creating a buffer zone on its southern flank, and to restore its influence in Northeast China (Shen, 2019, p. 110). China, on the other hand, was hosting a civil war that pitted the communist party against the ruling nationalists. Stalin exploited the situation by pressing forth on the aforementioned Soviet policies, extracting favourable conditions from the nationalists. But with the Chinese Communist Party’s victory in 1949, these plans were revised, leading the Soviet Union to redirect its support to its ideological offspring. China received material and financial aid in return for political alignment. Thus, a co-dependent, albeit asymmetric, relationship emerged. But even so, significant differences remained. Mao complained of unequal treatment. And he was very well aware of Soviet intentions prior to his rise in 1949. Nevertheless, the coming Korean War appeared to, at least temporarily, heal these wounds.

However, relations grinded to a halt in 1959, the year of the Sino-Soviet split. In Mao’s view, Soviet revisionism was no longer fit to guide the Communist movement (Li & Xia, 2018, p. 31). Specifically, Shen suggests that it was Khruschev’s desire to ease tensions with the United States that was the real cause behind the schism (2019, p. 224). Mao responded by reorienting China’s foreign policy, citing Soviet revisionism alongside US imperialism as its main threats (Li & Xia, 2018, p. 119). Tensions reached their apex during the Sino-Soviet border conflict in 1969.

Relations remained strained for a while. But by the early 1980’s, changing domestic circumstances prompted an attempt at normalization. China, now under the guidance of Deng Xiaoping, wanted its foreign policy to complement its new national development strategy, which prioritized economic growth (Shen, 2019, p. 347). It stressed the need for greater production in consumer goods, a strong and healthy agricultural foundation and an emphasis on transportation, energy supply and education (Chang, 1991, p. 89). Moreover, the failure to facilitate a proper rapprochement with the United States also forced China to revaluate its Soviet policy. Raegan’s paradoxical China policy, which wanted to develop Sino-US relations while at the same time continuing to supply Taiwan with arms, caused a serious jolt in state relations (Shen, 2019, p. 350). Ultimately, China’s new development strategy, which emphasized economic growth, required a stable external environment. Thus, by easing

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relations with the Soviet Union, it could partially redirect its effort and resources away from managing unpredictable security concerns towards more productive considerations, such as stimulating national development.

As for Moscow, changing internal conditions necessitated a reevaluation of its China policy. The catalyst was the war in Afghanistan. Not only did it demonstrate Russia’s military vulnerability, but it also accentuated the cleavages between non-Russian republics and the Soviet state (Reuveny & Prakash, 1999). Thus, the desire of both parties to focus on primarily domestic needs facilitated a renewal of relations.

In 1989, they achieved consensus on all aspects of their bilateral relationship, marking a comprehensive normalization of state relations (Shen, 2019, p. 384). After issuing a joint communique in the same year, both sides committed to coexisting peacefully and building mutual trust (Shen, 2019, p. 385). This would set the foundations for relations in the post-Soviet period.

2.2 Sino-Russian relations 1991-1999

The 1990’s laid the groundworks for the contemporary Sino-Russian political economic relationship. China’s desire to focus on developing its own economy and Russia’s desire to consolidate its position in the wake of the collapse of the Soviet Union necessitated a stable external environment. Thus, in spite of having different national objectives, they had a similar interest in calming their shared region.

For example, military cooperation took off in the 1990’s, going hand in hand with security concerns, as both sides prioritized regional stability. They specifically signalled their intention to curb ethnic separatism and religious extremism (Kuhrt, 2007, p. 20). With that in mind, regional and cross-border security gradually became a cornerstone of Sino-Russian cooperation. In both 1994 and 1997, border demarcations were established, targeting the western and eastern sectors of the Sino-Russian border (Amirov et al., 1999). On April 25th 1996, Yeltsin and Zemin elevated their relations to a ‘strategic partnership,’ which deepened political ties through the creation of multilateral security arrangements (Amirov et al., 1999). Then, in 1997, along with the Presidents of Kazakhstan, Kyrgizia and Tajikistan, Russia and China signed the Treaty on Mutual Reductions of Military Forces in border areas (Ibid). Its purpose was to de-escalate any existing regional tensions and initiate closer cross-border cooperation in the hopes of enhancing the overall security environment.

Sino-Russian energy relations: a history of complementarity &amp; friction