Xi Is Hosting Putin On Thursdays Opening Of The Beijing Winter Olympics. What Will Be On The Discussion Agenda?

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By Chris Devonshire-Ellis 

China’s President Xi Jinping is welcoming Russian President Vladimir Putin to the opening of the Beijing Winter Olympics on Thursday (February 4). Due to the Covid pandemic, it will be Putin’s first overseas trip for over two years. The opening ceremony will be held at the Beijing National Stadium – commonly known as ‘The Birds Nest’. Russia has sent 212 athletes to compete in fifteen different events. The United States has 222 athletes competing and China 387.

Apart from the sports – Putin is an active ice-hockey player and is sure to be watching the Russian team compete – there will be much else for the two leaders to dwell on.

US Sanctions – The Deployment Mechanism

China will be studying hard the way in which the United States both threatens and imposes sanctions and the decision processes behind these events. In some respects, Russia since the breakup of the Soviet Union has been a case study in how the US treats a fallen super-power and the extents and mechanisms it uses to keep an erstwhile foe economically subdued.

The language emanating from Washington as concerns Ukraine has been remarkable in its violent imagery, with US Generals and Senators using very tough language. Understanding the US decision making and diplomatic pressures it places on its allies aside, there may be other reasons behind recent US imagery, which has included threats from Senator Bob Menendez of ”Russians going home in body bags” and ”Lethal weaponery” – mindful of course that Russia hasn’t actually made incursions as yet and the Ukraine President himself has downplayed an invasion risk, calling the US rhetoric as ”panicked and unhelpful.”

The Health of Joe Biden

One theory behind the strong language and threats coming from Washington about Ukraine is the possibility of a fast-declining President in terms of mental capacity. Such rumors continue to hang around, and if true, may account for two scenarios – the President is not fit enough to stand up to Washington’s Hawks, or that US aggression is a cover for an un-fit President with the United States being overly hostile to buy them time and tell perceived enemies to back off while they work out what to do. President Putin met with Biden last year and declared that the US President appeared mentally alert, but Biden’s recent TV appearances have not been convincing. Both Beijing and Moscow will be making assessments as to whom is pulling strings behind the scenes, any apparent weaknesses in Presidential aptitude, and the implications if true.

Actual US Sanctions: Technology & Communications

The United States has come very close to suggesting that Russia would be disconnected from the global SWIFT payments network, which would have a massive impact on Russian trade. However, both China and Russia deploy similar domestic systems, which could be combined, although technical issues would need to be resolved. The extent of global roll-out of a combined China-Russian payments system would also need to be discussed with many multi-lateral partners, both will have an idea of who would be receptive to the idea. It would certainly include Iran, while Turkey, possibly India and another 20 countries that the United States currently has trade embargoes on. Assessing how far the two countries are in creating an alternative to SWIFT will have been an on-going discussion over recent years with updates and decisions taken to accelerate such a system almost certainly on the agenda.

Also on the table will be the on-going US threat of imposing trade sanctions on specific commodities such as certain rare earths, and even technical instruments such as semi-conductors, which Washington is doing its best to slow down techinical progress and component access made by both China and Russia. The entire range of intended or likely sanctions the US and EU intend to impose will be studied in great detail by economists and analysts from both sides to work out contingencies.

Actual US / EU Sanctions: Trade & Gas

This is a complex issue, not least because the US trade issue for Russia is minimal, but because it includes the EU with whom China and to a lesser but still valuable degree Russia have extensive trade relations with.  China and Russia will need to find alignment on this, as should Russia suspend gas supplies to the EU, this will damage European productivity and therefore its trade with China.

On the other hand, should the EU stop sending certain supplies to Russia, then Russia will need to source them from elsewhere. This is an issue I discussed yesterday and part of the solution is China. China signed off a Free Trade Agreement with the Eurasian Economic Union (EAEU) in September 2018, however at present tariff reductions have not been agreed. Trade negotiators on both sides can be expected to be busy while the Presidents watch Ice Hockey and wait for considered opinions. Some relaxation of tariffs will almost certainly arise, and it will be interesting to see in what areas these will be realized. Matching the EU’s refusal to export certain goods to Russia and matching those sourcing requirements up from alternative suppliers will be an on-going strategy.

Regional Security

Most of the Central Asian Heads of States are attending, with Afghanistan a primary regional concern. Quasi-meetings of the Security division of the Shanghai Cooperation Organisation will take place, as will discussions on US weapons sales and troop deployments in Asia. Concerns will be viewed over North Korea, and Taiwan as the US doubled its military deployment there in 2021. Regional security tensions are extending once again into East Asia.

Other Bilateral / Multilateral Discussions

Also attending as Official Guests of China are 29 other visiting dignitaries including Egyptian President Abdel Fattah Al-Sisi, Saudi Arabia’s Crown Prince Mohammed bin Salman, Qatar’s Emir Sheikh Tamim bin Hamad Al Thani, Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed Al Nahyan, and Pakistani Prime Minister Imran Khan. The presidents of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Poland, Serbia, Singapore, Argentina, Ecuador, and Mongolia will also be in Beijing, along with UN chief Antonio Guterres, UN General Assembly President Abdulla Shahid and World Health Organization head Tedros Adhanom Ghebreyesus.

Putin has meetings scheduled with the Egyptian and Pakistani Presidents, both of whom are interested in having free trade agreements with the EAEU. Egypt has been getting close to Russia, with Al-Sisi the primary guest attendee at this years St.Petersburg International Economic Forum. Serbia and Singapore already have FTA with the EAEU while fellow EAEU members Kazakhstan and Kygyzstan are also in attendance, as are Commonwealth of Independent States (CIS) members Tajikistan, Turkmenistan and Uzbekistan. It gives the games official guest list a distinctly Central Asia emphasis.

With China having held a Central Asia Summit last week, discussions following on from those will undoubtedly continue. The only Western attendee in any official capacity is Poland, a member of the EU yet with sympathies towards Beijing and Moscow. With the West in absentia, the Beijing Winter Olympics can be expected to bring forward progress in Eastern trade ties, sanctions aversions and regional security.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact us at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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