The changing correlation of power

Russia-China ties at highest level in history – Putin

RT,

18 May, 2014

Russia-China cooperation has reached its highest level ever, Russian President Vladimir Putin has said in an interview with Chinese media on the eve of his visit to Shanghai, where a record package of documents is expected to be signed by the two nations.

Below is the full transcript of the Russian president’s interview with Chinese Central Television, Xinhua news agency, China News Service, The People's Daily, China Radio International, and Phoenix Television.

Question: What are your expectations concerning the upcoming visit to China? What results do you expect from the Summit of the Conference on Interaction and Confidence Building Measures in Asia in Shanghai?

Vladimir Putin: I am always happy to visit hospitable China. It is a pleasure to see how our neighbour is transforming right before our eyes. Shanghai is a vivid illustration of this.

Establishing closer ties with the People’s Republic of China – our trusted friend – is Russia's unconditional foreign policy priority.

Now Russia-China cooperation is advancing to a new stage of comprehensive partnership and strategic interaction. It would not be wrong to say that it has reached the highest level in all its centuries-long history.

I am looking forward to a new meeting with President of China Xi Jinping, with whom I have good working and personal relations. We will discuss how previous agreements are being implemented and outline new objectives for the future. I am sure that the upcoming talks will give a powerful impetus to further strengthening of bilateral cooperation in all areas and deeper coordination in the international arena. The summit’s results and future plans will be reflected in the Joint Statement by the Heads of State and a strong package of documents expected to be signed during the visit.

Russia and China have actively advocated establishing a new security and sustainable development architecture in the Asia-Pacific. It should be based on the principles of equality, respect for international law, indivisibility of security, non-use of force or threat of force. Today this task is becoming increasingly important. The forthcoming Summit of the Conference on Interaction and Confidence Building Measures in Asia (CICA) serves to contribute to addressing this task.

CICA is a well-established cooperation mechanism. It has been successfully working in such spheres as security, new challenges and threats, economy, environmental protection and humanitarian issues, all of which are important for the region.

Russia has taken an active part in CICA’s activities. In mid-April 2014, members of the Conference approved the Statute of the CICA Business Council sponsored by Russia. I am confident that the launch of the Council will enhance practical ties between business communities of the Asian countries.

At the upcoming summit, the Secretariats of CICA and SCO are expected to sign a Memorandum of Understanding. That would serve as another step towards shaping a framework of partnerships between this region’s organisations and forums.

Q: China is consistently making progress towards the "Chinese dream", i.e. a great national rebirth. Russia has also set a goal of restoring a powerful state. How, in your opinion, could our countries interact and help each other in fulfilling these tasks? What areas can be prioritised in this regard?

VP: Promotion of friendly and good-neighbourly partnership relations is fully consistent with the interests of both Russia and China. We do not have any political issues left which could impede the enhancement of our comprehensive cooperation.

Through joint efforts, we have established a truly exemplary collaboration, which should become a model for major world powers.

It is based on respect for the fundamental interests of each other and efficient work for the benefit of the peoples of our two countries.

Russia and China successfully cooperate in the international arena and closely coordinate their steps to address international challenges and crises. Our positions on the main global and regional issues are similar or even identical.

It is encouraging that both sides are willing to further deepen their cooperation. Both Moscow and Beijing are well aware that our countries have not exhausted their potentials. We have a way to go. The priority areas of collaboration at the current stage include the expansion of economic ties and cooperation in science and high-technology sector. Such pooling of capacities is very helpful in fulfilling the tasks of domestic development of our countries.

Q: Cooperation between China and Russia has been steadily increasing, but uncertainties in global economy persist. The emerging markets are faced with new challenges and slowdown of economic growth. How can our two countries help each other to counter these challenges? How can we ensure steady increase of mutual trade and reciprocal investments?

VP: In the context of turbulent global economy, the strengthening of mutually beneficial trade and economic ties, as well as the increase of investment flows between Russia and China are of paramount importance. This is not just a crucial element of socioeconomic development of our countries, but a contribution to the efforts aimed at stabilising the entire global market.

Today, Russia firmly places China at the top of its foreign trade partners.

In 2013, the volume of bilateral trade was close to $90 billion, which is far from being the limit. We will try to increase trade turnover to $100 billion by 2015 and up to $200 billion by 2020.

Our countries successfully cooperate in the energy sector. We steadily move towards the establishment of a strategic energy alliance. A large scale project worth over $60 billion is underway to supply China with crude oil via the Skovorodino-Mohe pipeline.

The arrangements on export of Russian natural gas to China have been nearly finalised. Their implementation will help Russia to diversify pipeline routes for natural gas supply, and our Chinese partners to alleviate the concerns related to energy deficit and environmental security through the use of "clean" fuel.

At the same time, we are working actively to reduce dependence of bilateral trade on external market conditions. Therefore, in order to develop trade and economic cooperation we pay particular attention to the breakthrough areas such as higher energy efficiency, environmental protection, production of drugs and medical equipment, developing new information technologies, as well as nuclear energy and outer space.

We implement a list of joint projects in 40 priority areas with total investments of about $20 billion.

These areas include civil aircraft industry. An agreement has been reached on joint design of a wide-body long-range aircraft. In the future we will develop a heavy helicopter. I am sure that our companies can manufacture and supply competitive products to the world markets.

We also intend to actively develop investment cooperation, the scope of which obviously does not meet real capacities and needs of our countries yet. We have examples of successful projects. I would like to note the participation of Chinese capital in the reconstruction of an airport in the Kaluga Region and building of plants for production of automotive parts and construction materials in that Russian constituent entity.

To our mind, there are many other promising areas for investments. We can point to different branches of machine engineering, processing of agricultural products, mining operations, and development of transport and energy infrastructure.

We must also strengthen financial cooperation and protect ourselves from exchange-rate fluctuations among the world's major currencies. Therefore, we are now considering how to increase mutual settlements in national currencies.

Q: Russia has recently announced the creation of a special economic zone in Vladivostok. What could, in your view, be the role of China in its creation and in the development of the Russian Far East as a whole?

VP: Accelerated socioeconomic development of Siberia and the Far East is one of Russia's key national priorities for the 21st century. We are now implementing a whole package of programmes to modernise and upgrade transport, energy and social infrastructure in these regions.

We are aiming at the creation of special areas of advanced economic development with an investment-friendly environment.

Competitive conditions for launching export-oriented enterprises in non-primary sectors have been created.

In the areas of advanced development, new companies will enjoy some substantial benefits. These are tax holidays with respect to a number of taxes and reduced insurance premium rates; liberalisation of the customs regime, including free customs zones; special rules for access to land and for connecting to infrastructure facilities.

Today, the relevant federal law is being finalised. Development institutions are being created and promising centres are being selected. One of them will probably be established in Vladivostok on Russky Island where the APEC 2012 Summit took place.

Obviously, we are interested in Chinese businessmen making use of these opportunities and becoming one of the leaders here, since both Russia and China will benefit from an accelerated development of the Russian Far East.

It is important not to limit our relations to trade. It is essential to establish strong technological and industrial alliances; attract investments to the infrastructure and energy sectors; to jointly promote scientific research and humanitarian contacts; lay a solid foundation for a sustainable long-term development of our trade and economic relations. And the Russian Far East can and must become a natural venue for the said efforts.

Q: How would you rate the present level of cooperation between our countries in the humanitarian sphere and its prospects? Which projects within the framework of reciprocal theme years (national, language, tourism, youth exchanges) have impressed you most?

VP: The humanitarian contacts between Russia and China are in keeping with the steady development of the whole complex of strategic partnership relations between our countries. At the moment, their level is as high as never before. The major projects of national, language and tourism theme years in which millions of our citizens participated, have played a significant role in that.

It is noteworthy that a number of events are now being carried out on a regular basis. These are festivals of culture, film weeks, youth sports games, student festivals, camps for schoolchildren and students, fora for university principals, exhibitions of educational services and many other events.

An intergovernmental project of the Russia-China Youth Friendly Exchanges Years planned for 2014–2015 was launched this March. The performance of the recently created Russian-Chinese philharmonic youth orchestra, headed by the artistic director and principal conductor of the Mariinsky Theatre Valery Gergiev, has become a highlight of the theme years’ launch in St Petersburg.

Of course, we are not going to settle down. The mutual interest of youth in history, culture and traditions of the peoples of China and Russia is increasing. It is an objective process, and we are committed to fully supporting it in the future.

Q: In 2015, our countries will celebrate the 70th anniversary of Victory over fascism. What is the impact of joint Russian-Chinese efforts to oppose the attempts aimed at challenging the results of World War II?

VP: It is true that the attempts to rewrite and distort history are becoming more frequent.

Four years ago Russia and China adopted a Joint Statement on the 65th Anniversary of Victory in the Second World War.

We share an idea that it is unacceptable to revise the results of the war, as the consequences will be extremely grave.

It is clearly evident from the tragic events currently unfolding in Ukraine, where violent neo-Nazis are waging a real campaign of terror against civilians.

I would like to express my gratitude to our Chinese friends for cherishing the memory of thousands of our compatriots, who sacrificed their lives to liberate Northeast China from invaders.

Next year we will hold a range of joint events to mark the 70th anniversary of Victory both in the bilateral and the SCO format. During these events, youth will be in the focus of our work.

We will certainly continue to oppose attempts to falsify history, heroize fascists and their accomplices, blacken the memory and reputation of heroic liberators.

Russia's "Holy Grail" Gas Deal With China Now "Only One Digit Away"

Zero Hedge,

18 May, 2014

We have previously profiled the "holy grail" gas deal between Russia and China on several occasions, and noted last week how it is expected to be signed this week - pending some final price negotiations. It appears that was spot on as Reuters reports, Russian state-run Gazprom said it was still "one digit" away from finalising a 30-year gas supply deal with Beijing which is expected to crown Russian President Vladimir Putin's visit to China next week. On the heels of Russia's de-dollarization meetings, the coming week appears a crucial one for the history books of the US Dollar as reserve currency (or will China leverage Russia's need to diversify from Europe and stall the deal once again?)

As we have discussed in detail, Russia has been in talks with China to supply it with 38 billion cubic metres (bcm) of gas a year for more than a decade but the deal has been postponed repeatedly over price disagreements. And as Reuters reports, last week, state China National Petroleum Corp (CNPC) said that it and Gazprom had reached an agreement to sign a contract during Putin's visit but that the two sides had yet to iron out price differences.

Gazprom chief executive Alexei Miller confirmed in an interview on state Rossiya 24 television that the talks were in the final stage and only centred around base price.

"There is just one question - it's ... a starting, base price in the price formula which, it's remarkable, has already been fully agreed upon with our Chinese partners," Miller told news show Vesti on Saturday with Sergey Brilev.

"It's a very little more - to put in only one digit, and a 30-year contract to supply 38 bcm of gas from East Siberia to China will be signed," said Miller.

The question is - of course - will the price disagreements once again spoil the party...

With tensions high with the West over Russia's role in the Ukraine crisis, Moscow is eager to divert some oil and gas from European markets, part of its wider push to Asia.

...

About 80 percent of Gazprom's revenue comes from gas sales to Europe and analysts say that failure to clinch a deal with China, the world's top energy consumer, would expose its huge reliance on Western consumers and might strengthen Beijing's bargaining positions in the months to come.

Miller emphasized that the contract would be signed on mutually beneficial terms, adding that the sides had also agreed to start talks on a second route for Russian gas supplies to China after the current deal is signed.

As we noted previously, quid pro quo:

"Observers expect both leaders to take a united stand on major international issues, and Putin may seek China's support on Russia's dealings with Ukraine."

And also on the dollar as we reported in "Russia Holds "De-Dollarization Meeting": China, Iran Willing To Drop USD From Bilateral Trade." In which case expect random Chinese space rockets to mysteriously explode during take off too.