07MOSCOW5899, RUSSIA-CHINA RELATIONS

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Reference ID	Created	Released	Classification	Origin
07MOSCOW5899	2007-12-20 15:24	2011-08-30 01:44	CONFIDENTIAL	Embassy Moscow

VZCZCXYZ0001
OO RUEHWEB

DE RUEHMO #5899/01 3541524
ZNY CCCCC ZZH
O 201524Z DEC 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5963
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L MOSCOW 005899 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 12/20/2017 
TAGS: PREL PGOV ECON ENRG CH RS
SUBJECT: RUSSIA-CHINA RELATIONS 
 
Classified By: Political M/C Alice Wells.  Reasons 1.4 (B/D). 
 
¶1.  (C) Summary.  The pragmatic pursuit of economic growth 
and political stability, and a determined effort to avoid 
"interfering" with each other's domestic political 
developments have brought an improvement in ties between 
Russia and China.  The conclusion of two "national years" 
created a stronger foundation for mutual understanding and 
precedes reciprocal years of the Russian and Chinese 
languages.  Economic cooperation, however, has not kept pace 
with the political declarations of "strategic partnership." 
Moscow experts predict that the bilateral trade relationship 
will grow for at least another decade, but that economic 
growth will be offset by Russian ambivalence about the role 
of China in its economic and political life.  Augmenting that 
ambivalence will be the continuing competition for political 
dominance and economic advantage in resource-rich Central 
Asia.  End summary. 
 
Successful National Years 
------------------------- 
 
¶2.  (SBU) At the conclusion of the 2006 Year of Russia in 
China and the 2007 Year of China in Russia, the two 
governments agreed to launch a follow-on Year of Russian 
language in China in 2009 and a Year of Chinese Language in 
Russia in 2010.  In a November interview, MFA Director of the 
First Asia Department Konstantin Vnukov expressed 
satisfaction that the national years had "expanded the social 
basis for bilateral relations."  Vnukov particularly lauded 
the many cultural events conducted during the Year of China. 
 
¶3.  (SBU) Vnukov stressed the regularity of high-level 
meetings in 2007 between the two countries:  President Hu's 
March visit to Moscow, Vice Premier Wu Yi's leading role in 
the 11th St. Petersburg International Economic Forum, Putin 
and Hu in Bishkek in August, FM Lavrov with the Chinese and 
Indian FMs in Harbin in October, and Premier Wen's visit to 
Moscow in November.  In addition, First Deputy Prime Minister 
Medvedev and Vice Premier Wu Yi, who jointly headed the 
Years, actively engaged with each other throughout the year. 
During the official opening of the Year of China in March, 
Putin and Hu signed 21 agreements worth over USD 4 billion, 
USD 500 million of which was to be Russian exports of Russian 
machinery and technical products. 
 
More to Come 
------------ 
 
¶4.  (SBU) The bilateral trade volume in 2007 has reached USD 
40 billion, making China Russia's second largest trade 
partner after the EU.  The GOR expects that the amount will 
increase to USD 60 billion by 2010.  Chinese investment in 
Russia centers on construction, including the multifunctional 
"Baltic Pearl" complex in St. Petersburg and celluoid-paper 
mills in the Chita and Khabarovsk regions. Vnukov expected 
that Chinese companies would be awarded contracts for 
infrastructure projects for the 2012 Vladivostok APEC Summit 
and the 2014 Sochi Olympics. 
 
Growing Ties 
------------ 
 
¶5.  (U) China is part of the fabric of life in Russia. 
Besides the ever-present Chinese consumer goods, China is 
frequently on Russia's cultural center stage.  The Institute 
of Far Eastern Studies of the Russian Academy of Sciences is 
publishing a multi-volume encyclopedia entitled "China: 
Spiritual Culture."  The first volume was published in 2006 
and several more are expected in 2007.  It is easier to catch 
movies in Moscow by well-known Chinese directors such as 
Zhang Yimu or Ang Lee than Japanese or Korean films.  With 
more exposure to Chinese culture has come a growing interest 
in the Chinese language.  One of President Putin's daughters 
is majoring in Chinese at a St. Petersburg university.  In 
2006, 2.35 million Russians visited China, among whom 1.3 
million were tourists, while 765,000 Chinese, 157,000 of them 
tourists, returned the favor. 
 
Despite Progress, Problems Abound 
--------------------------------- 
 
¶6.  (C) Most experts view the "blossoming" of Russia-China 
relations as something necessary and beneficial to Russia.  A 
group lead by the Director of the Institute of Far Eastern 
Studies Mikhail Titarenko is strenuously recommending the 
Chinese model:  economic development above all; while 
pro-Western scholars at the Moscow Carnegie Center argue that 
Russia should not follow the "predatory" modernization model 
of China.  All agree that Russia's China policy lacks 
direction and clearly thought-out objectives, and that its 
terms are generally set by the Chinese. 
 
--Russian Platitude, Chinese Focus: 
 
¶7.  (C) IMEMO's Gennadiy Chufrin summarized the bilateral 
relationship as one with a proper political climate but 
limited prospects for full development.  According to 
Chufrin, "The problem lies with the Russians, not the 
Chinese; the Chinese know exactly what they want but we don't 
know what our nation's interests are in dealing with them." 
Not having formulated clearly what the policy and goals 
sh
ould be, the GOR repeats stock phrases about strategic 
partnership and a peaceful neighborhood.  Among Russian 
official and analysts, there is a firm understanding that 
there will never be a formal alliance between the two.  The 
issue of Taiwan is a case in point. Russia supports the 
one-China policy and does not consider Tibet a serious 
problem for China but should there be open conflict, the GOR 
will never opt for direct involvement on the side of China. 
 
--Economic Discomfort: 
 
¶8.  (C) While the GOR has good reasons to be satisfied with 
the increasing bilateral trade volume, most experts pointed 
out that the structure of that trade is dictated by the 
Chinese, with Russia exporting raw materials, while Chinese 
manufactured goods saturate the Russian market.  Chufrin 
criticized the GOR for missing many economic opportunities, 
and noted the PRC's single-minded pursuit of its own 
advantage.  Chufrin argued that with a better conceived 
policy, the GOR could maximize its advantage in many fields 
including the construction industry; the energy sector, 
including nuclear energy; and financial flows and 
investments. 
 
¶9.  (C) Much of Russia's confused economic policies toward 
China is the by-product of its basic ambivalence about its 
rapidly growing neighbor.  MGIMO'S Aleksey Bogaturov thought 
the GOR's had created confusion with its much-publicized East 
Siberian Pacific Ocean Pipelines (ESPO).  With the change in 
Transneft's leadership (the state owned oil pipeline company 
in charge of the construction), the promised 2008 completion 
of the Taishet - Skvorodino leg (which connects to China's 
Daquing) was unlikely.  Moreover, the GOR is vacillating 
between China and Japan, while experts contend that there is 
not enough oil to supply both countries.  Chufrin alleged 
that GOR officials were not truthful about certain matters: 
despite the GOR's announcement that unprocessed timber was no 
longer exported to China, Chufrin himself had witnessed loads 
of raw timber, possibly illegal, ready for shipment to China 
from the Khabarovsk region. 
 
¶10.  (C) Although China is the largest buyer of Russia's 
weapons, the Russians are keenly aware that China will buy 
from the EU when/if the EU's embargo ends; leaving Russia 
only small-arms sales.  Chufrin predicted that China will 
follow the Indian model; combining Russian hardware with 
European technology as India has done with its aircraft 
industry. 
 
--Many Reasons to Worry: 
 
¶11.  (C) IMEMO's Nadezhda Arbatova maintained that China with 
its growing economic power and unclear military aspirations 
are throwing a long shadow over Russia and is making many 
Russians nervous.  Russia could not "copy" China, because the 
two societies are fundamentally different and a direct import 
of the Chinese model simply would not work in Russia.  Fedor 
Lukyanov, Chief Editor of Russia in Global Affairs, termed 
the Chinese "too smart" for the Russians to compete with. 
There is a sense among the Russians that they are being 
"outwitted" by the Chinese, he said.  As soon as Russia 
garnered a contract in early November to build more nuclear 
power stations -- a comfortable scenario as the new reactors 
would be similar to the two Russian-built models already 
operating in China, China awarded a large contract for four 
stations to France during Sarkozy's November visit.  Russia 
is experiencing role reversal -- from Soviet "big brother" to 
junior partner-- which is difficult to accept.  With a tinge 
of the prejudice that is often evident in conversations on 
China here, Lukyanov said that Russia would never play second 
fiddle in the region. 
 
-- How Much China Acceptable?: 
 
 ¶12.  (C) Lukyanov said that Russia would be content with the 
status quo: mutual good feeling and continued Russian 
economic parity.  He knew that such a situation would not 
last long, however, and the GOR would soon have to define how 
much China it could accept, especially in Central Asia and 
the former Soviet space.  With Russia's sluggishness in 
Central Asia, Kazakhstan has been aggressively courted by 
China, said Bogaturov.  Friction within the Shanghai 
Cooperation Organization (SCO) is part of the GOR's 
"stupidity," and GOR officials will soon have to ask 
themselves if Russia would be willing to relinquish its 
dominant role in the organization to China.  Many experts 
urged that Russia, the EU, and the US identify areas where 
their interests intersect rather than trying to portray 
Russia - China relations as an attempt to counter the West. 
 
Comment 
------- 
 
¶13.  (C) We expect little change in Russia-China relations in 
the near future; certainly not until well beyond the Russia's 
presidential elections. 
BURNS

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