How Putin is driving Russia into dependence on China

This article by Andreas Herteux was first published in Analysenmagazin

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It is a reality again – the nightmare of a country expanding into Europe, long believed to have sunk, in which an ambitious head of state fantasizes about presumed ancient greatness and wants to achieve it by all means. In the end, however, there will be no great Eurasian empire, but most likely only the role of China’s junior partner.

The seeds for the future are usually sown early, and it may take years for them to sprout, but they do flourish. This is also how Russia’s domestic and foreign policy should be viewed, which has presumably now taken an irreversible direction. The central factor here is Vladimir Putin, who, encouraged by his own abundance of power, has created self-isolating structures for himself and no longer seems able to see beyond a monothematic view of politics.

In the best Soviet tradition, Putin is guided in his actions primarily by geopolitical thinking in spaces. Economic, sociopolitical, diplomatic or technological factors appear secondary or serve only to support his own striving for world power. Foreign policy is therefore, in propaganda terms, a central pillar of domestic policy.  Other criteria for great power status are neglected, despite numerous announcements and decrees. This is a way of thinking that cannot and will not work in the medium and long term in an interconnected world of dependencies.

But isn’t Putin to be measured by his overall record? This can be measured primarily by the social issue and his own economic strength. A closer look is sobering. Russia does not have a balanced economy. Only natural gas, crude oil and crude oil products account for almost 70 % of all exports.  They are followed by precious stones and metals, pig iron and steel, coal, copper, wood, grain and fertilizers. Although machinery is also among the 10 most important export items, it only accounts for about 2% of total exports and, at $7.1 billion (as of 2020), has a manageable volume. Accordingly, the economy is also not very innovative and is seen in 45th place in the common indices (Global Innovation Index, as of 2021). Realistically, despite the advantages of an autocratic system, Putin has not succeeded in transforming the Russian economy, and the country still lives primarily from its natural resources.

Socially, in addition to the authoritarian system, the high level of poverty stands out, which former Russian Finance Minister Alexei Kudrin called a “disgrace” as recently as 2019. Yes, poverty definitions can be changed and decrees easily signed, but still, even by today’s Russian criteria, where poverty criteria are just barely linked to physical survival, nearly 20 million people (13.5% of the population, as of 2019) live below this threshold. According to Western criteria, which generally set the threshold higher, the figure is between 33% and 40%, and according to surveys by the Russian opinion institute Levada, 71% of respondents consider their situation to be bad or very bad.

No matter which figures one wants to follow, the problem remains a fact. Putin has also acknowledged this several times in the past and has also described economic growth as the most important factor in the fight against poverty (e.g., at the 2019 Federal Assembly). High growth is an explicit state requirement and imperative. Hopes for this, however, are now likely to be dashed due to the aggressive foreign policy. The economy is likely to shrink rather than grow significantly in the future.

Economic sanctions would therefore affect the Russian population and the entire economy much more massively in the medium to long term than is officially communicated. In the short term, i.e. for a period of about 2-3 years, Putin believes that he can compensate for any export losses (about $330 billion in 2020) and sanctions with his foreign currency and gold reserves (estimated at about $630 billion). A daring calculation, but one that also shows that military escalation has been part of the calculation for years.

If, therefore, one-sided reference is made to the fact that the West is partly dependent on Russian raw materials, it should not be concealed that Russia, too, would be economically ruined in the medium to long term without its export customers.

Yes, the process of getting rid of Russian raw materials – at least partially – would be painful for the Western world. It would be incredibly expensive, but it could be accomplished within about 5 years. With good planning, it could be done in 3 years.

If the Western world were to agree on this point, Russia would tend to lose a large part of its economic power and, as a consequence, would also have to disarm militarily. Reserves will be depleted. The history of the Soviet Union would repeat itself in fast forward.  Moreover, it would be politically isolated from many of its main markets and would inevitably have to orient itself more closely to China, which will play a key role in Russia’s future one way or another.

The Middle Kingdom is watching the situation in Ukraine very closely in parallel. Tactically, it is holding back, observing the reaction of the Western powers very closely, especially with regard to its own geopolitical ambitions, but it will continue to adopt a neutral position. Ultimately, Chinese policy is far wiser and more far-sighted than Russian policy, because Beijing does not view the world in military-geopolitical terms, but comprehensively. Openly supporting Moscow would massively disrupt projects such as the “New Silk Road,” ambitions in Africa, or even its own reconstruction, and are just as undesirable as complications in the sometimes already strained relations with Western countries, which are practically forced to rearm and close ranks by Russia’s actions. All this does not fit into the long-term plans up to 2049. Why also take action too openly? Beijing has already been working for some time to turn the “borderless partnership” into a relationship of dependence. This can continue to happen in quiet harmony.  China will end up cooperating more deeply with Russia. The Ukraine conflict will probably only accelerate the whole thing, because as long as Moscow is ruled in an authoritarian manner, the orientation toward similar structures is only a natural reflex.

Does this not threaten a Sino-Russian bloc of equal partners? The answer to this question is relatively simple: Russia is simply too weak economically to be able to act at eye level. Russia has triggered a spiral of armament and cooperation that is difficult to stop. If Moscow were to permanently accept a role as a junior partner of the Middle Kingdom, emerging tensions could probably be circumvented. However, this seems unlikely at best. Such a demotion, which is all it would be, does not seem compatible with Russia’s self-image. In addition, both countries have interests in Central Asia. Therefore, a gradual alienation can be assumed at the latest as soon as China has pushed through parts of its own domestic and foreign policy goals and Russia is made aware of its own economic inferiority, which must inevitably manifest itself in economic dependence. Already today 15% of the total exports go to China and it can be assumed that the share will increase in the future. Conversely, Russia does not have this significance (2%; as of 2020). The danger that the junior partner may not be able to disengage at all is at least a possibility that cannot be ruled out, but it remains a scenario because there are fundamentally too many variables missing from the equation.

Ultimately, however, Putin’s actions have most likely deprived him in the long term of a Western option that goes beyond the surface, and made the Eastern option in its place without alternative. Is that perhaps also a bit of calculation? When one deliberately takes options, it is usually not a calculation, but incompetence, which at best can be sold as a plan if successful.

For the West, however, no matter how difficult it may be, it must emancipate itself economically and also rearm. The Russian aggression was an unintended wake-up call. But it remains to be seen whether it will really awaken all those concerned. Announcements and actions are two different levels.  In a dynamic world of changing times and collective individualism, however, it would be fatal to remain asleep.

Nevertheless, in the end it must be soberly noted that authoritarian states have achieved considerable successes and will continue to do so. It would be fatal to narrow the focus to Russia at this point. The liberal ideology is in retreat and is characterized primarily by self-induced weakness. No, the end of history has never been reached, and stumbling from crisis to crisis must give way to a run that not only shortens the gap, but sets out again to overtake. Here, too, the view must be comprehensive: geopolitical, social, technological, economic and political.

Ultimately, the future of the West lies in new and closer alliances. These should be formed in the core by the USA, the European Union and democratic India, in a few years an economic area larger than the EU in terms of GDP, as well as other democratic states. A concept to realize such a system, which at the same time can form a protective wall against the exiting power of authority, would be value capitalism, an economic system in which values become a factor of production. Such a system would accelerate and consolidate the cooperation of democratic states into a powerful entity and at the same time open up a perspective for states that have not yet reached the appropriate level of freedom.  Even if the implementation is connected with efforts; without such a cooperation a century of authority can possibly no longer be stopped.

About the Author
Andreas Herteux studied business administration and law. After successfully completing his studies, he worked for Allianz SE. In parallel, he has published books and scientific publications since 2013. Parts of his books have been translated into several languages. In 2018, he founded the Erich von Werner Society. Since 2019, he has focused on the publication and dissemination of research results as well as proposed solutions for global challenges.
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