Sino- Russian trade to benefit from increased US sanctions

A plan by the US Congress to intensify sanctions against Russia would create opportunities for increased Sino- Russian trade, especially on infrastructure development, Chinese experts said, but adjustments in the economic structure of both countries would determine the speed and stability of bilateral trade.

US lawmakers reached a bipartisan agreement on a bill that allows new sanctions against Russia, Iran and North Korea, Reuters quoted leading congressional Democrats as saying on Saturday.

With the bill, US lawmakers hope to punish Russia for its 2014 annexation of Crimea from Ukraine and for meddling in the 2016 US presidential election. Russian President Vladimir Putin denied any interference in the US democratic process last year. The House

is expected to vote on the bill on Tuesday.

“The US and EU believe in imposing sanctions on Russia, but the costs and benefits of such a move are different, especially since Russia remains the main energy exporter. The sanctions would further hamper economic exchanges between Russia and the EU, which may convince Russia to look to the East,” Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, told the Global Times on Monday.

In Brussels, the EU sounded the alarm on US moves to step up sanctions against Russia, urging Washington to coordinate with its G7 partners. And Germany fears it could lead to fines against European companies involved in Nord Stream 2, a project to build a pipeline carrying Russian gas under the Baltic Sea, Reuters reported.

“We are concerned the measures discussed in the US Congress could have unintended consequences … The impact could be potentially wide and indiscriminate, especially when it comes to diversifying energy resources,” the European Commission said in a statement on Saturday.

“The growth in Russia- EU trade has slowed down in recent years due to lower bulk commodity prices and political factors. And the situation will not improve since the EU is implementing the energy revolution and seeking to diversify energy resources,” Feng Yujun, director of the Institute of Russian Studies at the China Institutes of Contemporary International Relations, told the Global Times.

Feng said that China’s investment in Russia will further rise and cooperation on infrastructure development will accelerate under the Belt and Road initiative.

“The Russian and Chinese economies complement each other – the main Russian exports to China are energy, including gas, and China exports textiles and other light industrial goods to Russia. As partners in BRICS and under the Belt and Road initiative, the two enjoy broader prospects for future cooperation aside from close political relations,” Bai said.

Data from the General Administration of Customs shows that Sino- Russian trade increased by 34 percent in January from the same period the previous year. China has been Russia’s top trading partner for six years.

Structural changes

Despite optimism in the future of bilateral trade, experts reached by the Global Times on Monday said trade structure problems make it difficult for China to fill the void left by the EU.

“Most of China’s exports of mechanical and electrical products to Russia are processed products with low added value and are less competitive. And it is not easy for Russia to shift its exports focus, mainly energy, to the East because of the high cost of exporting energy to countries in the East, not to mention the technological and infrastructure challenges,” Jiang Yi, deputy director of Russian studies at the Chinese Academy of Social Sciences, told the Global Times.

Jiang said the international energy market is changing, and countries like China are trying to diversify their energy resources. “China will focus on completing work on two main gas pipelines and maximize their use instead of building more,” Jiang said.

Other factors that also have an effect on Sino-Russian trade include gray customs clearance, logistics, the instability of Russia’s currency, the ruble, and Russia’s ability to pay, Bai said, but that logistics have improved under the Belt and Road initiative.