China may not yet have acted upon the eurozone’s pleadings for a bailout, but that doesn’t mean Beijing is playing a passive role in Europe. Indeed, as it expands its economic presence and political influence in the EU, it is also rapidly enlarging its presence in (and attraction) to Eastern Europe. Indeed, while China’s interests and motives in Russia and Central Asia are well known, its growing stake in Eastern Europe generally – and Ukraine and Belarus in particular – have received much less attention.
By 2009, China had begun to show an economic interest in former Soviet republics in Eastern Europe, lending Moldova, for example, $1 billion at 3 percent interest over 15 years. But China’s interest in Ukraine and Belarus as production centers of advanced Russian technology – and as places where China could examine Russian weapons and recruit Soviet scientists – dates back to 1992.
As Russian arms sales to China continue to decline, maintaining access to, and commercial interaction with, these states gives China at least some access to Russian military and technological developments in the weapons field. Since Russia now sells many fewer weapons and technologies to China, drawing closer to Ukraine may offer it a back door into the Russian defense sector either through licit or illicit means. Ukraine needs China’s arms market, and China needs the systems it can buy. This mutual interest became apparent during President Hu Jintao’s visit to Ukraine in June 2011. At his meetings with Ukrainian President Viktor Yanukovych, plans were announced to sell China Al-222-25 aircraft engines and lightweight supersonic aircraft. Ukraine is also discussing selling the license for this engine’s production to China, a move that conforms to other Chinese arms buys from Russia, where China sought to buy the license for the product. The condition for this sale is that China buys 250 engines.
But beyond arms sales, both sides have compelling commercial motives for coming together. If China is to succeed in building its version of the Silk Road, or railway ties straight through to Europe, it must traverse either Ukraine or Russia. Ukraine is a far less overbearing partner than Russia, and China is therefore deeply interested in positioning itself more in Eastern Europe as that area develops and as international transportation and communications projects bring it closer to China. In that way, it benefits from establishing ties to plants with lower production costs than in Western Europe, and takes advantage of large and growing markets in Ukraine, European Russia and neighboring countries.
Ukraine, for its part, is eager to elbow its way into those burgeoning Asian and Chinese markets to help secure a major economic partner beyond Russia to counter Moscow’s efforts to monopolize or dominate trade. Indeed, Yanukovych admitted that he hopes to expand what he calls tripartite cooperation among Ukraine, China, and Russia. Such projects would include railroad transit projects for more rapid delivery of products and selling Chinese pipes and compressors for the projected Russo-Chinese gas pipeline.
Yanukovych, meanwhile, is pursuing Chinese investments in Ukraine for massive infrastructural projects like those China has made in Central Asia, such as gas turbines and high-speed railroad tracks between Boryspol Airport and Kyiv. China acceded to Ukraine’s initiative for improved ties and the two presidents signed a strategic partnership agreement. They also signed accords on $3.5 billion worth of deals, including funding for the high-speed railway to Boryspol airport, unspecified energy deals and $12 million in financial aid to Ukraine.
Belarus’ relations with China, meanwhile, also underscore Minsk’s similar desire to develop economic and political cooperation with states beyond Russia to counter Moscow’s unrelenting pressure – its trade with China has dramatically increased over the last decade. At the same time, it supports China’s efforts to promote the renminbi in world trade, and it took part in China’s loans of 65 million renminbi to countries in 2009 to facilitate Chinese imports.
In addition, Minsk has helped promote development in Western China and in the “rustbelt” of Northeast China. Belarus has become a convenient location for Chinese firms that seek to coordinate their efforts to export telecommunications and infrastructure across Eastern Europe. Belarus’ need for investment, as well as its pariah status in Europe, may make it highly receptive to a Chinese initiative to promote an integrated export processing zone in Europe.
Belarus has also faithfully supported China’s interest in maintaining sovereignty concerning domestic political affairs (a position no doubt facilitated by the two countries’ similarly authoritarian approach to governance). Such an understanding no doubt helped lay the groundwork for the $1 billion Chinese loan last June to finance projects in Belarus. Belarus hopes to repay the loan by exporting agricultural produce to China, while Beijing also used Belarus to send Moscow a pointed reminder that its price for gas to China was too high by claiming that Russia demanded too much for gas from Belarus.
After the Sino-Belarusian deals were announced in September 2011, Russian Prime Minister Vladimir Putin complained that Russia enjoys no such far-reaching agreements with Belarus, despite its membership in Russia’s envisioned Eurasian Economic Union. Beijing has monitored the Russo-Belarus negotiations over similar deals with Moscow extremely closely, suggesting that Minsk has become an object of commercial rivalry between Russia and China.
Belarus’ economic profile has probably become too risky for China to provoke an open fight with Russia. Still, these deals underscore the commingling of commercial, political, military, and ideological motives in China’s policies to develop enduring ties among potential partners and gain influence over their commercial and political decisions. Support for China’s core values or for its development is rewarded, if not always to the degree requested by the government in question. But governments tend to receive sufficient rewards to continue justifying their political as well as economic investments in China. And the fact that Beijing so clearly lets Moscow know that it has alternatives to Russia, and even to Russian military systems, reflects the tensions bubbling under the surface between Moscow and Beijing.
Of course, it’s not just about Russia – China also gains new footholds in Europe and platforms for increased domestic influence or leverage in the politics of these countries. In these ways, China’s ties to Belarus and Ukraine, as seen in recent deals and presidential visits, reflect Beijing’s broader foreign policy strategy. They also suggest hidden trends not only in Sino-Russian relations, but in the kinds of economic considerations that may ultimately underscore China’s formal decision about bailing out the eurozone.
Stephen J. Blank is a Research Professor of National Security Affairs at the Strategic Studies Institute, U.S. Army War College.