By Sergei Blagov

Russia has repeatedly pledged to expand its trade with China, as the Kremlin appeared to view these commercial ties as an important indicator of what was officially described as a bilateral strategic partnership.

Although bilateral trade was adversely affected by the global economic downturn, Moscow also achieved a sizable surplus in its trade with China in 2009. Last year, bilateral trade between Russia and China declined 32% to US$38.8 billion, according to Russian and Chinese statistics.

Chinese exports to Russia fell 47% in the year to $17.5 billion, according to Russia’s trade representative in Beijing, Sergei

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Tsyplakov. Russian exports to China declined only 11%, to $21.3 billion, giving Russia a $3.8 billion surplus in its trade with China.
Tsyplakov said Russian exports to China began increasing from September 2009. Notably, in the fourth quarter of 2009 Russian exports were 21.1% up year-on-year and the figure was 53.6% up year-on-year last December, he said. Increased Russian exports to China, including crude oil, metals and metal ore, came to indicate signs of recovery in bilateral trade, Tsyplakov argued.

High growth rates in Sino-Russian commerce have been seen by Moscow as an important indicator of the state of the bilateral partnership. In 2006, bilateral trade amounted to $33.4 billion, about 15% up on the previous year. Russia’s trade turnover with China exceeded $29 billion in 2005, up by 37.1% year-on-year.

In January 2006, the then Russian president Vladimir Putin announced plans to raise bilateral trade to between $60 billion and $80 billion annually by 2010. Initially, both countries appeared to progress rapidly towards achieving that goal. In 2007, Russia’s trade with China reached $48.16 billion, or 44.3% up year-on-year.
In 2008, the level of bilateral trade reached $56.8 billion, 18% up year-on-year, as China emerged as Russia’s third-largest foreign trade partner and Russia became China’s eighth-largest trade partner. However, in the second half of 2008 trade between the two countries apparently began to slow against the background of the global economic downturn. Not surprisingly, last year bilateral commerce fell below $40 billion, or well below the level of 2007.

Russian officials conceded that bilateral trade is unlikely to recover this year. In 2010, Russia’s trade with China is not expected to exceed $46 billion, and the pre-crisis trade turnover of $56 billion may be reached in 2011 or 2012, Tsyplakov said. Russia achieved a sizable surplus in its trade with China mainly caused by falling machinery exports from the country due to weak demand in Russia. In contrast, Russian energy exports to China were rising.

From January to October 2009, oil deliveries to China totaled 13 million tonnes, according to Tsyplakov. Consequently, Russia became China’s fourth-largest oil supplier. In 2009, Russian oil supplies amounted to 7.8% of China’s total oil imports, up from 6.5% in 2008. In March 2009, Russia resumed its electricity exports to China following a prolonged hiatus. This occurred in the context of the long-standing saga of Russian power supplies to China.

Moscow and Beijing have long discussed electricity trade. In the mid-1990s, they discussed a joint project to build a 2,600-kilometer power transmission line from the Irkutsk region in Siberia to China at a cost of $1.5 billion. However, no pricing agreement was reached and the project was later abandoned. In November 2006, Moscow and Beijing reached a deal to raise annual exports of electricity from Russia to China to 3.6-4.3 billion kilowatt hours (kwh) per year in 2008 to 2010, and 18 billion kwh in 2010 to 2015, and eventually up to 60 billion kwh. However, Moscow’s plan to boost its electricity exports was dealt a major blow three years ago. From February 1, 2007, China refused to import Russian electricity, thus leaving Russian hydropower plants without a market to sell their surplus electricity.

The differences were eventually resolved, and in 2009 Russian suppliers exported about 900 million kwh to China. Russian energy companies now reportedly aim to export 60 billion kwh by 2020.

Russian and Chinese trade statistics typically do not include armament sales figures. However, Russian arms supplies to China were apparently also in decline. The Russian state-run arms export company, Rosoboronexport, conceded that its arms exports to China were falling. On January 28, the Rosoboronexport head, Anatoly Isaikin, said China’s share in Russian arms exports fell by 18%.

China has been cutting its arms imports and instead focusing on military technology transfers and the development of domestic arms production, he said. In the early 2000s, Russia earned up to 40% of its arms exports revenue from sales to China. Therefore, trade in industrial commodities between Russia and China apparently declined due to the adverse effects of the global economic downturn. Meanwhile, Russia has continued to increase its energy supplies to China.

Prior to working as Moscow-based independent researcher and journalist, Dr Sergei Blagov was a newswire reporter. He spent nearly seven years reporting from Hanoi, Vietnam, between 1983 and 1997.

(This article first appeared in The Jamestown Foundation. Used with permission.)

(Copyright 2010 The Jamestown Foundation.)