World

China's Xi Jinping keeps West guessing ahead of meeting with Putin

Chinese leader Xi Jinping is keeping the West guessing about whether Beijing will co-operate with tougher sanctions on Russia as he meets President Vladimir Putin a year after declaring they had a "no limits" friendship ahead of the Kremlin's invasion of Ukraine.

Meeting Russian leader in Uzbekistan on 1st trip outside China since pandemic began

Russian President Vladimir Putin, left, and Chinese President Xi Jinping pose during a meeting in Beijing in February. The two leaders will meet again this week. (Alexei Druzhinin/Sputnik/AFP/Getty Images)

Chinese leader Xi Jinping is keeping the West guessing about whether Beijing will co-operate with tougher sanctions on Russia as he meets President Vladimir Putin a year after declaring they had a "no limits" friendship ahead of the Kremlin's invasion of Ukraine in February.

China has avoided violating sanctions, but its purchases of Russian oil and gas rose almost 60 per cent in August over a year ago to $11.2 billion US. That helps to top up Moscow's cash flow after the United States, Europe and Japan cut purchases and expelled Russia from the global banking system.

Xi and Putin are due to meet this week in Uzbekistan at a gathering of the Shanghai Co-operation Organization, an eight-nation Central Asian security group.

Washington and allies in the Group of Seven major economies want to squeeze Moscow by enforcing an upper limit on how much buyers are allowed to pay for its oil. That would require co-operation from China, India and other energy-hungry Asian economies that have avoided taking sides in the war and still buy from Russia.

China reluctant to hurt Russia

"India and China may decide to stay out of the fray and sign separate agreements with Russia," wrote Sergey Vakulenko, a former strategy director for Russian gas giant Gazprom, in a report for the Carnegie Endowment for International Peace.

China's potential role as a spoiler reflects its strength as the second-biggest global economy and its reluctance to hurt Russia.

Beijing-Moscow relations were chilly during the Soviet era, but the two sides have formed a political marriage of convenience since the 1990s, united by shared frustration with U.S. dominance of global affairs.

Russia is looking to China for support, said Alexander Gabuev, a leading Russian expert on ties with Beijing.

China is the largest trade and economic partner outside the sanctions coalition, he noted, contributing about 18 per cent to Russia's foreign trade. As Russia embraces using the Chinese yuan as its main foreign currency and looks to China to replace some technology it cannot buy from the West, it will rise further.

"China will be a much larger partner of Russia by the end of this year, and especially in the coming years, when the oil embargo will fully work and gas exports to the EU will drop, possibly to zero, except for what gets through the Turkish stream," Gabuev said.

Russian sales of oil and gas to China on the rise

Beijing bought 20 per cent of Moscow's crude exports last year, according to the International Energy Agency. Purchases have risen this year, helping to top up Russia's cash flow in the face of Western sanctions. China spent 60 per cent more on Russian oil and gas in August than a year earlier, according to customs data.

The ruling Chinese Communist Party's military wing, the People's Liberation Army, spent billions of dollars on Russian fighter planes and other weapons starting in the late 1990s, but those purchases have ended as China develops its own technology.

G7 governments announced on Sept. 2 that they would enforce price caps on Russian oil by prohibiting their shipping companies or insurers from dealing with any customer that pays more. They have yet to say when that might take effect.

In this image taken from video, Xi arrives by plane in Nur-Sultan, Kazakhstan, on Wednesday, part of his first foreign trip since the outbreak of the pandemic. (Kaz Media/The Associated Press)

Other sanctions imposed by Washington, Europe and Japan are enforced by the threat that any country that violates them, even if it has not agreed to them, might also be cut off from valuable Western markets and the global banking system.

China, the biggest global energy consumer, has one of the biggest tanker fleets and its own insurers, which would allow Beijing to operate outside G7 curbs.

If China, India or other Asian governments refuse to co-operate, the G7 has to decide whether to sanction their biggest trading partners and "risk waging an economic war on several fronts," Vakulenko wrote.

Meanwhile, Russia has threatened to stop selling to any country that complies.

Biden has warned Xi not to help Russia evade sanctions

Xi's government also sees Russian oil and gas as a way to diversify supplies and reduce strategic risks from potential disruptions.

China rejects sanctions already in place as improper because they weren't imposed through the United Nations, where Beijing and Moscow have veto power as permanent Security Council members. But Chinese banks and companies have complied for fear of losing access to valuable Western markets or the global financial system.

China or other countries aren't barred from buying Russian energy. But U.S. President Joe Biden has warned Xi of unspecified consequences if Beijing helps Moscow evade sanctions.

Some Chinese companies are pulling out of Russia, but Beijing appears to be looking for ways to profit from Moscow's isolation.

Gazprom agreed last week to let state-owned China National Petroleum Corp. pay in Russian rubles or Chinese yuan instead of dollars. That works in China's favour, because few other exporters accept yuan, which makes Russia more likely to buy Chinese goods.

Access to low-priced Russian oil and gas has helped China ward off the inflation that is roiling Western economies.

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