07MOSCOW1292, RUSSIA-CHINA RELATIONS — PART 2

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Reference ID Created Released Classification Origin
07MOSCOW1292 2007-03-26 02:57 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO4923
OO RUEHCHI RUEHDBU RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHMO #1292/01 0850257
ZNY CCCCC ZZH
O 260257Z MAR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8572
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 001292 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/23/2017 
TAGS: PREL PGOV ECON ETRD ENRG CH RS
SUBJECT: RUSSIA-CHINA RELATIONS -- PART 2 
 
Classified By: Deputy Chief of Mission Daniel A. Russell.  Reasons: 1.4 
 (B/D). 
 
------- 
Summary 
------- 
 
1.  (C) Despite the positive official rhetoric from Moscow 
and Beijing, Russian fears of a rising China will shape the 
future of their relationship.  Continuing areas of concern to 
the Russians include the lopsided trade relationship 
(Russia's raw materials for China's finished products), real 
and imagined "demographic pressure" on the Russian Far East, 
China's cross-border environmental pollution, Beijing's 
regional and global political ambitions, and popular 
xenophobia.  Arms sales, a constant in Russian-Chinese 
relations for decades, have plateaued.  While many of these 
concerns affect the Russian Far East most directly, Moscow's 
policy makers seem to pay little heed to the region's biggest 
issues vis-a-vis its neighbor.  End Summary. 
 
---------------- 
Trade and Energy 
---------------- 
 
2.  (C) In 2006, Russia's trade with China was USD 34 
billion, making Russia China's ninth largest trading partner. 
 Fifty-four percent of Russian exports last year were oil and 
oil products, while timber and arms sales comprised the 
remainder.  Russia and China are indeed natural partners on 
energy.  During Putin's visit to Beijing last year, the two 
countries agreed that the China National Petroleum 
Corporation (CNPC) would provide a loan of up to USD 400 
million to build an oil pipeline from Skovorodino to Daqing, 
an extension of the Tayshet-Skovorodino pipeline, with oil 
expected to flow by the end of 2008.  CNPC and Rosneft have 
agreed to build a refinery in China and to undertake joint 
exploration for new oil in Russia.  In August 2006, Rosneft 
and a subsidiary of Sinopec began drilling an exploratory 
well on the Sakhalin-3 project, under an agreement signed 
during President Hu's July 2005 visit to Moscow. 
 
3.  (C) However, despite significant progress on the energy 
front, experts here believe that Russia should not simply 
serve as a raw materials source for Chinese manufacturers. 
Aleksey Voskressenskiy of the Moscow State Institute of 
International Relations (MGIMO) found it worrisome that there 
was no trade framework that undeniably served Russia's 
interests, leaving China free to shape the trade relationship 
as it pleased, even in the sphere of oil and gas, where China 
constantly pushed for below-market prices. 
 
4.  (C) Even Mikhail Titarenko, one of Moscow's most 
pro-Beijing analysts, felt that Russia had little chance to 
penetrate the Chinese market, while the Russian market was 
being flooded with cheap Chinese goods.  Andrey Karneyev, 
Moscow State University's Vice Director of the Institute of 
Asian and African Studies, opined that Russian oil would fuel 
Chinese industrial growth, which in turn would increase the 
flow of Chinese exports to Russia.  All China hands here 
spoke of the necessity of "diversifying" Russia's trade with 
China, but no one had a vision of how that could be 
accomplished.  Vasiliy Mikheyev of the Institute of World 
Economy and International Relations (IMEMO) argued that it 
took more than expanding trade to build a good relationship, 
pointing to the need for mutual investment.  During a recent 
visit to China, he learned that more than half of China's 700 
existing research centers were funded by U.S. companies. 
 
---------- 
Arms Sales 
---------- 
 
5.  (C) With the resolution of the longstanding border 
dispute and the overall improved relationship, Russia does 
not consider China a military threat for the immediate 
future.  Ivan Safranchuk, Director of the Moscow office of 
the Center for Defense Information, told us that Russia was 
experiencing a "renaissance of relations" with China and that 
most defense experts spoke of opportunities rather than 
risks.  Although some defense analysts referred to the 
possibility in the long-term of disputes over natural 
resources with China, Safranchuk predicted that Russia did 
not expect relations with China to deteriorate for at least 
20 years.  Russia believed, he said, that China was focused 
on Taiwan and U.S. challenges to its growing strength. 
 
6.  (C) Despite the fact that China remains Russia's number 
one arms customer to the tune of roughly USD 2 billion a 
year, arms deals have plateaued, and Russia has begun to seek 
other markets.  Though Russia was reluctant to sell 
 
MOSCOW 00001292  002 OF 003 
 
 
long-range aviation assets to China, Safranchuk said Moscow 
would sell whatever else China was ready to buy, especially 
fighters and medium-range bombers, advanced air defense 
systems, and submarines.  Safranchuk added that China needed 
effective command and control systems to integrate air and 
naval air forces to prepare for any potential conflict in the 
Taiwanese S
traits.  Safranchuk also noted the Chinese often 
complained about receiving stripped-down versions of Russian 
advanced weaponry such as fighters.  Russia was concerned, he 
said, that China might be inclined to buy more advanced 
European weapons systems if the EU arms embargo were ever 
lifted. 
 
7.  (C) China's increasingly sophisticated technical 
capacities were another Russian worry, most recently on 
display when China tested an anti-satellite missile on 
January 11.  Moscow was careful not to criticize Beijing too 
harshly in public, but several contacts told us that Russia 
was dismayed that the test undermined the two countries' 
previously shared position supporting an international treaty 
to ban weapons in space. 
 
----------------------- 
China's Hidden Ambitions 
------------------------ 
 
8.  (C) China's successful efforts to engage the Russians 
have not allayed growing Russian fears that someday China 
would use its economic and political power to become an 
overbearing neighbor.  The two countries' difficult past 
reinforced that fear.  MGIMO's Aleksey Bogaturov warned that 
Russia should temper its current pro-China zeal; relations 
with the U.S. should remain the centerpiece of Russian 
diplomacy.  Gennadiy Chufrin of IMEMO guessed that Russia 
could count on an accommodating China for, at most, two 
decades, unless continued NATO enlargement pushed Russia and 
China even closer together. 
 
9.  (C) Bogaturov thought the Chinese economic presence was 
being felt in every major city of Russia, and beyond.  Russia 
was nervously eyeing Chinese economic penetration in Central 
Asia.  Chufrin pointed out that besides the new pipeline 
connecting Kazakhstan to China, China had signed an 
inter-state treaty with Turkmenistan, something the PRC 
rarely did.  To some, Chinese commercial expansion fueled a 
traditional Russian fear of encirclement. 
 
--------------------------------------------- ----- 
When It Rains In China, It Rains Yellow in Siberia 
--------------------------------------------- ----- 
 
10.  (C) Russians also worry about the spill-over effects of 
environmental damage caused by unrestrained Chinese 
development.  Moscow experts scoffed at promises made in 
early March by Prime Minister Wen Jiabao that China would 
improve its environmental standards.  They believed that 
China would never trade rapid economic growth for 
environmental protection.  Russian areas bordering China are 
most outspoken about China's "irresponsible" environmental 
record.  Many point to the environmental damage caused by 
frequent spills in the heavily-polluted Sungari river, which 
flows into the Amur.  Twenty million Chinese live on the 
banks of the Sungari river, while the population of the 
entire Khabarovsk territory bordering the Amur is barely 1.5 
million.  Chita Region's environmental NGO, Dauria, 
complained to us that the region's steppe and taiga have been 
ruined by Chinese firms overexploting resources.  An NGO rep 
pointed to the annual yellow sand storm that blankets a large 
part of North East Asia, including parts of Russia, as an 
unhappy reminder of the Chinese economic miracle. 
 
----------------------------------- 
Lonely to be Russian out in Siberia 
----------------------------------- 
 
11.  (C) There is a longstanding popular fear in Russia that 
the Chinese are in the process of taking over the Russian Far 
East (RFE).  These concerns are spurred by the ever-declining 
Russian population in Siberia and the RFE, the product of low 
birthrates, early deaths, and out-migration.  Not to worry, 
said Konstantin Vnukov, Director of the MFA's First Asia 
Department, who claimed that there were only 35,000 Chinese 
residents in Russia.  Even a generous estimate of 200,000 did 
not create "demographic pressure."  Per Vnukov, a recent poll 
in major Chinese cities showed that only 1.7 percent of 
respondents would be willing to consider Russia their future 
workplace.  Gui Congyu of the Chinese Embassy scoffed at 
Russian fears of waves of Chinese swamping the Russian 
population. "Who, among us Chinese, would want to live here?" 
he asked. 
 
 
MOSCOW 00001292  003 OF 003 
 
 
12.  (C) Popular impressions are little affected by such 
arguments.  Stories in the press speak of Chinese firms 
buying vast tracts in Siberia to exploit for natural 
resources and to establish Chinese settlements.  Among many 
examples, the January 11 edition of liberal newspaper Novaya 
Gazeta argued that "China's annexation of the Russian Far 
East has effectively started."  The newspaper compared 
Chinese inroads to the expansion of white Americans into the 
American West: "the Indians watched new towns being built, 
with alien laws and alien settlers, but they did not 
understand how extensive and irreversible the process was." 
 
13.  (C) Russian public opinion polls on attitudes toward 
China fluctuated widely, according to Dmitriy Polikanov, 
Director of Opinion and Market Research of the PBN Company. 
While many polls showed that the overall perception of China 
had improved in the last fifteen years, others indicated that 
an increasing number of Russians were dissatisfied with 
Beijing.  According to the latest data from the All-Russian 
Public Opinion Research Center (VTsIOM), forty percent of 
Russians viewed Moscow's relations with Beijing as normal, 
while another thirty-four percent regarded China as friendly. 
 Only fifteen percent described China negatively.  On the 
other hand, rising xenophobia and nationalism across Russia 
already affect the Chinese in Russia.  The Chinese Embassy 
here advises its students not to travel alone on Moscow 
public transport.  Ultimately, said Political Counselor Gui 
Congyu, Russians "cannot stand the sight of us."  Although 
one does not readily spot many Chinese faces in major Russian 
cities, fears that China are taking over surface easily.  The 
most telling revelation: very few experts thought that 
Putin's approach to China was sincere; it was driven by 
Russian calculations about what steps were necessary to 
accommodate a rising China. 
 
--------------------------------------------- - 
RFE:  Singapore Wannabe But No Chinese, Please 
--------------------------------------------- - 
 
14.  (C) The Russian Far East, the region most directly 
affected by China, often feels left out of the discussion 
about how to respond to Beijing's growing strength.  As 
Bogaturov observed, Vladivostok "wants to be another 
Singapore; but who is going to build it?"  His rhetorical 
question captures the lack of a serious RFE development plan 
or a sufficient labor force.  There is an abundance of labor 
just across the border, but Russia was reluctant to open the 
gates to eager Chinese workers.  Viktor Larin, Director of 
the Institute of History, Archeology and Ethnology of the 
Russian Academy of Sciences, criticized Moscow for not having &#x0
00A;formulated a viable economic development plan for the region. 
  In his book, "In the Shadow of the Awakened Dragon" he 
blamed Russian leaders from Gorbachev to Putin for failing to 
understand the region and for viewing the Russia-China 
relationship as something abstract.  Putin has confessed to a 
"lack of systematic, integrated strategic planning in 
territorial development" for the RFE.  Talk of the 
"socio-economic revival" of the RFE has been a welcome change 
for RFE residents, who had become used to being ignored 
completely.  Experts, however, agreed that talk had not 
brought concrete results.  Depopulation and relatively slow 
economic growth in the RFE had only strengthened the Chinese 
position, which in turn, fueled popular suspicion of China, 
especially among the region's residents.  Experts agreed that 
the problems were traceable more to GOR fecklessness than to 
Chinese designs. 
 
------- 
Comment 
------- 
 
15.  (C)  A strategic interest in maintaining a good 
relationship with a rising China as well as the possibility 
for substantial economic gains now power the bilateral 
relationship and mask the insecurity that China's growing 
strength provokes among the Russian leadership.  Fears about 
the effects of a powerful China on Russia's strategic 
position and worries about Moscow's inability to compete 
economically suggest that relations will become more 
complicated as China's rise continues. 
BURNS

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