With the war against Ukraine, Russia is jeopardizing its position as a world power.
Especially in Central Asia, Russia’s power and influence is dwindling at the expense of China.
According to important international experts, China is the big winner of the conflict.
Russia’s invasion of Ukraine arose out of world power thinking Vladimir Putin’s. But with the attack, Putin has decisively weakened Russia’s status as a world power. This is the result of an analysis of Geopolitical Intelligence Services (GIS). Putin also sees the war against Ukraine as Russia’s confrontation with the West. The big winner of this game is China.
Shortly before Putin started the war against Ukraine in February 2022, he had met with China’s president on the sidelines of the Beijing Olympics Xi Jinping met at eye level. The two autocrats spoke of a “boundless friendship” between their countries.
Since then, according to GIS expert and economist Stefan Hedlund, relations have developed completely to Russia’s disadvantage. Since the beginning of the war, China has been using Russia’s raw materials more and more and has to give little in return.
China’s position is so strong that Beijing no longer even has to fulfill old promises to Moscow. In the major investment program of the New Silk Road (“New Belt and Road Initiative”), China invested less in Russia than Moscow had promised. China has also not fulfilled its promise to participate in the construction of a high-speed railway line between Moscow and Kazan.
And China is also letting Russia feel the changed balance. Beijing is hosting the China-Central Asia summit on May 18 – without Russia.
China outstrips Russia in Central Asia
Especially in the Central Asian region, Russia is losing power and influence to China. “The implosion of Russia as a great power has far-reaching implications for Central Asia,” says Hedlund. “For a long time we assumed that there was something like a quietly agreed division of roles between Moscow and Beijing: Russia ensures security, China for investments and economic development. If that agreement ever existed, it is no longer valid now,” says Hedlund.
Russia’s armed intervention in Kazakhstan in 2022 may have been Moscow’s “last try” in Central Asia, he adds. Joint military exercises with other countries in the region have been canceled.
Russia’s importance in the region is declining not only militarily and strategically, but also economically. Russia’s economy is under such pressure that the future role of the government in Moscow in regional trade in the future is completely open.
“The main concern for the Beijing government is to what extent China can capitalize on Russia’s descent,” Hedlund said.
China is putting pressure on anyway. The country has already increased its investments in Central Asia to around 40 billion dollars by the end of 2020. Chinese trade with the region shot up 40 percent in 2022 to $70 billion.
The second winner in Central Asia could be Turkey, while Russia’s role will continue to shrink, Hedlund expects. “As Russia withdraws from Central Asia, Turkey and China will be the most active players there. In such a competition, the brute strength of the Chinese economy will give Beijing an advantage that Ankara’s economy cannot match.”
Putin’s war is slowing down Russia’s economy
Russia will be a total of the Western sanctions and the extensive isolation prevented for a long time from making real economic progress, wrote Alexandra Prokopenko, from the research institution Carnegie Russia Eurasia Center.
Russia’s attempts to become less dependent on exports from the energy sector through technology and diversification have been halted for the time being. “Now Moscow is enacting capital controls, classifying countries as friendly or hostile, becoming dependent on China’s currency, the yuan, and militarizing its budgetary spending. Russia’s extremely high spending on militarization will hold back modernization of the economy, she said.
Prokopenko also sees Russia becoming dependent on China since the beginning of the Ukraine war. Russia’s cheap energy exports to China and India are hurting Kremlin government revenues.
Whether high-tech or consumer goods, Russia is increasingly dependent on China almost everywhere. And payments would mostly be made in yuan instead of rubles, Prokopenko said.
Moscow’s much-heralded detachment of the Russian economy from the US dollar “is becoming, quite simply, its yuanization,” she says.
In the long term, Western sanctions would permanently make Russia’s economy less efficient. Russia will remain vulnerable to oil and gas market disruptions, Prokopenko added.
Russia has already become China’s second largest oil supplier and fourth largest LNG supplier. Prokopenko also sees an unequal relationship in this.
China: When in doubt, for business with the West
The sanctions have also restricted Russia’s access to turbines and technologies for building modern tankers, locomotives, cars, next-generation communications networks and other high-tech products, and locked Russia out of the global trend toward artificial intelligence and quantum computing,” Prokopenko writes.
Global Chinese companies that also do business in the West, like Huawei, are less inclined to do business in Russia for fear of further sanctions. Just had the EU with a previous taboo broken and sanctions against companies from third countries announced to support Russia.
“The constant focus on commodity prices and the increase in military spending to about a third of the budget means that Russia’s economic development will be frozen for a long time,” Prokopenko said. “Even after the active phase of the war is over, military spending is unlikely to decrease as long as some form of Putinism persists.”