China Thwarts Russian Goal

Beijing's investment in Belarus marks move into Russia's "sphere of influence."

Belarus-Oil-305.jpg Belarus employees work at a gas transfer station near Nesvizh, some 130 kms (80 miles) west of Minsk, Jan. 9, 2009.

By Michael Lelyveld

BOSTON—China is making major investments that will strain ties with Russia as it exercises its new economic power, analysts say.

During a visit to Belarus on March 25, Chinese Vice President Xi Jinping approved support for projects worth up to U.S. $10 billion in the former Soviet republic on Russia's western border, a Belarusian government spokesman told reporters.

China's involvement appears to be substantial, with cooperation planned for 89 projects, including sugar refining, auto production, and the reconstruction of power plants, Reuters reported.

The investment comes on top of a U.S. $5.7-billion credit from China's Export-Import Bank in December, giving Belarus a financial lifeline after a series of trade and political disputes with Moscow.

Russia is likely to resent China's involvement with a close neighbor that it sees as part of its self-declared "sphere of influence," but analysts say Beijing has shown little regard for Moscow's sensitivities.

"I doubt they really worry much about that," Mikkal Herberg, research director for energy security at the Seattle-based National Bureau of Asian Research, said.

"This is building markets, and what can Russia really do about it?"

Financial backing 'curious'

While China has made big energy investments in Central Asia in recent years, its financing in the European portions of the former Soviet region seems to make less economic sense.

Countries such as Belarus have no oil or gas links to China, no direct land routes, and little obvious potential for a payoff in trade.

China's backing for Belarus is most curious because of the country's current conflicts with Russia, its Union State partner under a treaty signed over a decade ago.

Russia recently cut duty breaks for oil exports to Belarus, depriving it of billions of dollars in hidden subsidies to the government of authoritarian President Alexander Lukashenko.

The duty dispute followed months of pressure on Belarus to join Moscow in recognizing the independence of South Ossetia and Abkhazia, two breakaway territories of Georgia that it lost in an August 2008 war with Russia.

Belarus has not endorsed Russia's stand on the territories for fear of wrecking its chances for better relations with the European Union (EU), which could be a source of alternate financing.

China's funding comes just in time to ease the squeeze on Lukashenko as he tries to balance his interests between Moscow and the EU.

'No holds barred'

The apparent rescue for Belarus is all the more notable because Xi visited Moscow on his way to Minsk as part of a four-nation tour that also included stops in Finland and Sweden.

Xi is frequently tipped as a possible successor to President Hu Jintao in 2013.

Although China has steadily increased its influence and investment in Central Asia since the 1990s, such an intrusion into Russian and European relations would have been unthinkable a few years ago.

"It just shows that China sees Russia as a competitor, Russia sees China as a competitor, and so there's really no holds barred on where China goes," Herberg said.

"They're really not worried about what Russia is liable to do about it."

The Russian Web site noted that China's support "comes at a time of strained relations between Belarus and Russia."

It cited a Belarusian analyst, saying Lukashenko was "demonstrating his independence from Russia by taking money from China."

Competition or cooperation?

Alexandros Petersen, a nonresident senior fellow at the Atlantic Council in Washington, cited two theories about China's relations with Russia in the former Soviet states.

The first is that an ascendant China and a declining Russia will compete throughout Eurasia in years to come.

The second is that the two countries will cooperate to dominate the region, complementing China's economic strength with Russia's military power.

Petersen suggests a middle ground. He notes that China's support for Belarus has given it a chance to craft its own policies, although China's relations with Russia remain amicable.

"China in many ways is the perfect partner for the Lukashenko government, because they're a partner that is not concerned about governance, certainly, and they're a partner that can provide significant economic opportunities," he said.

Russia may still benefit from growth in the Belarusian economy that comes from Chinese investment, he said. And with its new financial power and presence, China will also be prepared bring more pressure on Russia if the competition becomes more open.

"It certainly sets up China in the future, were things to become more competitive, to have more cards available to it, not just in its backyard of Central Asia," Petersen said.

Edited for the Web by Richard Finney.

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