Russia’s Policy towards China: Key Players and the Decision-making Process
Analyzing the foreign policy of modern states, many scholars lean towards describing different transactions as a result of interactions between states, which have their own interests and will, as the sole actors in international relations,. A more sophisticated analytical framework equates a certain policy with decisions taken by a ruler or the ruling elite. Russia’s “turn to the East” policy (“povorot na Vostok”), sometimes dubbed the “pivot to Asia,” is no exception, and its relations with China are in particular treated in this manner. Experts describe transactions with China from a “national policy” prospective and write about “Russia’s interests,” “Russia’s needs,” “Russia’s fears,” etc. vis-à-vis China. One critical element is missing however: states are just analytical concepts that do not exist in real life. “Russia’s” policy towards “China” (and vice versa) is formed by a complicated combination of interests, calculations, and concerns of individual players, and groups. In order to understand the nature of Russia’s relationship with China, one must decompose “Russia” into a set of powerful decision-makers and influence groups, whose interests and actions (sometimes contradictory to each other) constitute the “national policy.” It is a matter of one country, many players.
This article examines the players who play a key role and have a stake in formulating Moscow’s policy towards China. Based on interviews conducted with officials, managers of state-owned enterprises (SOEs), private businesspeople, and experts in Moscow in late 2014, it describes the players, their interests, factors which influence their decision-making patterns, and decision-making mechanisms at the top political level. A full picture also requires decomposing “China” into stakeholders with regard to Russia as well, but this is a separate task. Russian players tend to think about “China” as a unified entity with significant overlapping of political, economic, and security interests, which justifies our approach in describing the Russian part of the Moscow-Beijing equation.
From Neglect to a Boom in Interest
As with almost every relationship with a major foreign power, Russia’s core interests groups vis-à-vis China are represented by at least five key players. First is the central civil bureaucracy, including the leadership of President Vladimir Putin and his administration. They include the Ministry of Foreign Affairs (MFA) and various governmental bodies in charge of the economy. Given the special role Putin plays in decision-making process, we may consider him to be a separate player in his own right. The third core player is the army and the intelligence community (political SVR and military GRU), with their shared and very specific outlook on the problems of international relations. Fourth are the managers of the Russian state-owned enterprises (SOEs) – with their close connections to the Kremlin and personal bonds to Putin, they are unique in perceiving both commercial and political objectives. This distinguishes them from the fifth player – owners of private companies – who view any transaction with foreign entities through a profit-seeking lens. These four groups are more or less equal in terms of their influence over the decision-making process (except, of course, Putin himself). The relative weight of one power group or another at any given moment depends on many factors, including the international environment, personal relationships to Putin, and the state of the Russian economy.
Two additions need to be made to this general scheme. One is the military-industrial complex, which can be viewed as a player in its own right vis-à-vis China, due both to the volume of its arms trade and its unique position. The weapons-producing industry is controlled by the state, which makes it similar to SOEs in form, but also maintains close institutional ties to the army, which adds concerns over national security to its calculations in transactions with China. Second, there are also specific interests of the regional governments – given the length of the Russian-Chinese border (over 4200 km in two sections) and the strategic importance of the Far East to the country, regional bureaucracies (and local business elites connected to them) also play a significant role. The expert community, the State Duma and Council of the Federation, and political parties do not play any substantial role in policy-making on China, being no more than tools of the Kremlin to imitate political life in a soft authoritarian system. This also reflects the minimal role Russia’s dysfunctional civil society plays in foreign policy making – policy on China is no exception.
Before I describe each player in greater detail, several general observations need to be made. First, since the beginning of the crisis over Ukraine in 2014, China is playing an increasingly important role for the Russian elites and for Putin personally. Beijing is viewed as a political ally in countering the West’s efforts to isolate Russia, and as a crucial market and source of capital and technology, which may help Russia to offset the impact of Western sanctions and falling oil prices. China is viewed in strategic terms as the only influential partner Russia has in the international community, but also in relative terms – every company is trying to secure a loan in the PRC, to attract Chinese investors to its projects, to find customers for its goods, and to develop a working relationship with relevant decision-makers in China. This explains why any transactions with China have a domestic political dimension for the majority of Russian players. Reaching out to China not only helps to meet informal key performance indicators (KPIs) set by the Kremlin (growth and employment rates for the regions, taxes to the state budget for SOEs, etc.), but any successful project with the Chinese and skillful presentation of it to Putin may boost one’s position inside the ruling elite.
Second, and equally importantly, despite the current significance of China for the Russian elites, the state of China-related expertise and experience (and on Asia-related topics in general) for the majority may be described as near complete illiteracy. Since the establishment of a new Russia in 1991, China (or any other Asian power) has never been their priority. Historically Russian elites have viewed their country as European, though not fully accepted into the Western family for a variety of reasons, and themselves as Europeans. Eurocentrism has been deeply rooted, over the centuries the country was facing challenges and opportunities coming mainly from the West. The Cold War with its focus on the United States added America to this worldview, but never changed it. The only desire of the new elites after 1991 was to integrate Russia (and themselves) with the West. Sending their kids to English boarding schools, keeping their assets in London and Zurich, holidaying in Cote-d’Azur, and other patterns of the new Russian ruling class made Asia look remote and irrelevant. Putin, members of his entourage, and members of the growing middle class all had very much in common. An additional factor was Russian sentiments of cultural superiority over Asians in general and the Chinese in particular, fueled by memories of the USSR being Maoist China’s “big brother.”
These factors created a worldview in which real understanding of China was replaced by myths, of which many were Western (e.g., Zbigniew Brzezinski’s warning that parts of Siberia may fall into China’s hands). Many of the Russian elite fear a rising China. There are numerous factors that distort a clear vision of China on Moscow’s part: a lack of understanding about Chinese goals, remote memories of Soviet-Chinese border conflicts in 1969, a deep-rooted tradition of viewing populated countries in the East as a danger to densely populated Siberia and the Far East (playing on the “Yellow threat” which dates back to the 19th century), and growing economic and demographic asymmetry between the Far East and bordering Chinese provinces. One of the most significant factors was the near-complete decimation of the China-watching community in Russia during the economic turmoil in the 1990s and the state’s neglect of experts.
This combination of factors explains why the Russian elite missed the opportunities presented by China’s economic boom in the 1990s and early 2000s. Only after the global credit-crunch of 2008-2009 did they start paying more systematic attention to the Asia-Pacific region, including China. But five years were not enough to bridge the knowledge gap; lack of expertise among all key players in framing a policy toward China remains a key problem in bilateral relations. Putin, whose views and role in the decision-making process will be analyzed first, is no exception.
The Supreme Leader
As paramount leader, Putin plays a decisive role in framing Moscow’s course towards China. His personal role is much broader than that of Barack Obama’s in shaping the US policy on China, as for example, the US president cannot fully control the economic activities of American companies vis-à-vis China, nor is he in charge of the states’ transactions with entities in China, not to mention the role that Congress can play limiting the executive branch’s role. Even in the areas where the White House is in the lead, policy is formed by government agencies through a relatively transparent process following standard procedures. In Russia, Putin enjoys nearly full control over the other players: the civil bureaucracy, regions, army, SOEs, and even private oligarchs. He sets strategic priorities for civil and military/intelligence bureaucracies, controls the management of SOEs, and can also micro-manage particular China-related projects. As for private businesspeople, first and foremost the members of Russia’s Forbes list, Putin is in a position to make them an offer that they cannot refuse. In this context, Putin’s personal outlook on China and his approach to managing Russia’s relations with its giant neighbor become crucial.
There are at least five factors worth noting about Putin’s worldview and management style vis-à-vis China. First is Putin’s extreme Eurocentrism. Throughout his tenure as a national leader Putin has tried to manage Russia’s relationship with the EU and to integrate Russia into Europe on an “equal partnership” basis, meaning that Moscow will negotiate the terms of integration on an equal footing with major European players (like Germany, France and Italy), rather than follow the usual procedure of applying for EU membership and humbly fulfilling all criteria imposed by the European Commission. Reviving Russia’s great power status and dominating neighboring CIS countries was not a goal in itself, but a means to create a solid negotiating position vis-à-vis Europe. Even the creation of the “Eurasian Economic Union” is aimed at establishing a platform to discuss Russia’s integration with Europe and creating a common market from Lisbon to Vladivostok. This can be clearly seen in Putin’s 2011 Izvestia article, the first official declaration of intent about the Eurasian Union. The EU-Russia block, which would eventually combine Russia’s vast natural resources with the EU’s capital and technologies, in Putin’s worldview, would be the most powerful player in a triangle with the United States and China. Thus, China has never played a substantial role in Putin’s grand strategy– relations with China are viewed by Putin as an instrument in a grand bargaining with Europe. China is also an ally in containing a power Putin sees as a major threat to his grand plan – the United States Perhaps the most telling example of this instrumental approach was Putin’s visit to Beijing in 2006, when he and Hu Jintao witnessed a signing ceremony of memoranda between Gazprom and CNPC to construct two gas pipelines (30 bcm and 38 bcm per annum) by 2012. These were then used to push European customers to sign new long-term contracts with Gazprom, as many companies in the EU were reluctant to do so after a gas war between Russia and Ukraine. When the goal was reached later in 2006, Putin never pushed Gazprom to finish the job by sign binding agreements and contracts with the Chinese. Again, at that period of time China itself was not so important.
The second factor is Putin’s growing anti-Americanism. Suspicions about the United States trying to encircle and split Russia are deep in the intelligence and security community, to which the president belongs. Putin’s personal experience with Washington is also not very encouraging. After a brief period of cordial relations with the George W. Bush administration after the 9/11 attack, Putin witnessed US unilateral actions in Afghanistan and Iraq, NATO eastward enlargement, American support for “color revolutions” in Georgia and Ukraine (and to a lesser extent, in Kyrgyzstan), attempts to create a missile-defense system in Europe and not paying attention to Russia’s concerns. He remained suspicious during Medvedev’s short-lived “reset” policy with Obama, and his deep belief about malicious US intensions revived during the war in Libya, during which the Kremlin blamed the West for overstepping the UN Security Council mandate and thus deceiving Moscow, which had not used its veto and thus allowed resolution 1973 to pass. Against this backdrop, China is seen by Putin as a partner to fend off the “American threat.” In Central Asia, Moscow and Beijing joined hands in opposing US military presence and helped to eject the US air base from Manas. Putin has also supported cooperation with China in the UN Security Council to protect regimes in Iran, Myanmar, Zimbabwe etc. With growing conflict between Russia and the West over Ukraine, the anti-American dimension of Putin’s attitude to China is overshadowing his Eurocentric view on cooperation with Beijing. China is increasingly becoming a personal priority for Putin.
A crucial element in Putin’s personal attitude towards China is his friendship with Xi Jinping. Personalizing international relations by establishing personal bonds is a major feature of Putin’s foreign policy (some observers trace it back to his KGB experience in recruiting agents). During his first two terms as president, he had special relationships with Chancellor Gerhard Schroeder, President Jacques Chirac, and Prime-Minister Silvio Berlusconi. In China Putin has worked with Jiang Zemin and Hu Jintao, but the relationship was never very personal – one reason being their age difference (Jiang is 26 years older than Putin, Hu is 10 years older). But in Xi Jinping Putin has found a real “buddy.” Putin is only 7 months older than Xi. According to aides of the Russian president, the first meeting between the two in 2010 was relatively formal (Putin was prime minister, while Xi was vice-chairman of the PRC and heir-in-waiting), but their real friendship started on October 7, 2013, when Putin celebrated his birthday at the APEC summit in I Bali and Xi was the only foreign guest invited to the small party. The two got drunk together, and their working relationship acquired a personal dimension. Putin has more trust in Xi than in any Chinese leader before him and any current Western leader (his relationship with Angela Merkel has soured during the Ukrainian crisis), which also informs his views on cooperation with China. People with access to Putin say that the sincerity he feels in Xi has helped the Kremlin to adjust many policies towards China that had been in place for over a decade.
A fourth element which helps to understand Putin’s stance toward China is the lack of expertise on Asia, a feature he shares with others in the elite. His understanding is based on regular visits (at least once a year) to China and interactions with its leadership, and also on briefs he gets from the Russian ambassador, the Security Council, the Foreign Intelligence Service (SVR) CEOs, and other government officials. His foreign policy aides (Sergey Prikhodko, who is now vice-premier and chief of staff, and Yuri Ushakov, a former ambassador to the United States) do not have a China-watching background or significant experience with Asia. The Foreign Policy Department in the presidential administration has just one staff member on China, but its job is mainly preparing the agenda for Putin’s foreign trips, not policy suggestions. Those close to Putin testify that the president used to be worried about China’s long-term intentions towards Russia, particularly in the Far East and Eastern Siberia. After taking some initial bold steps, for example settling the border dispute with China in 2004, a feat Putin considers as one of his major achievements in foreign policy, his course became increasingly tactical. A lack of understanding, rumours about secret Chinese migration into Russia, and the absence of a clear strategy on Asia led to some restrictive policies: informal limits on Chinese investments into infrastructure, agriculture, strategic oil and gas fields, as well as gently pushing out Chinese investors from the Far East. Now after the deterioration of relations with the West, Russia’s policy towards China has reversed.
The final characteristic of Putin’s management style, which is important for Russia-China relations, is the care Putin takes for the business interests of his friends and long-time allies, even if the proposed project is not in accordance with commercial logic or the long-term interests of the country. He has long supported Gazprom’s plans to build pipelines to China as opposed to additional LNG capacity, because LNG projects would involve foreign companies taking the largest part of construction contracts (the only LNG plant in Russia on Sakhalin is built by Shell). Gazprom is known for establishing special relations with the contractors – some controlled by Putin’s personal friends, such as Gennady Timchenko (Russia’s 6th richest man with assets worth $15.3 billion in 2014, according to Forbes) or Arkady Rottenberg (27th on Russian Forbes list in 2014 with net assets about $4 billion). Another example is the advance payments, which Igor Sechin, president of state-owned oil giant Rosneft and long-term ally of Mr. Putin received in 2013 from Chinese oil companies CNPC and Sinopec in return for future delivery contracts. Rosneft managed to get $20 billion (the overall deal will be worth $240 billion) on non-transparent terms, which, as many diplomats familiar with the matter claim, go against national interests. Sechin needed the money to repay debt, which Rosneft created while absorbing TNK-BP, so Putin signalled a green light on this dubious deal with the Chinese. After the collapse of oil prices, the possible risks from Chinese loans may be covered by the state budget.
The Central Bureaucracy
A vast bureaucratic machine, which manages the relationship with China on a day-to-day basis, provides the top leadership with analytics and sometimes has its own agenda. The bureaucratic mechanism for cooperation with China is complicated, sometimes creating new problems in addition to the challenges it is aimed at addressing. The only two government agencies directly in charge of the “China portfolio” are the MFA and the Ministry of Economic Development and Trade (MEDT). Historically the MFA has played a decisive role, although in the USSR, strategic decisions on relations with foreign powers were made by the International Department of the Communist Party of the Soviet Union Central Committee, which had a direct connection to the party leadership. Now MFA has the largest staff supporting day-to-day work with their Chinese counterparts, but its significance inside the system is lower than in Soviet times. In the MFA, the First Asian Department with China specialist Andrei Kulik at the helm, oversees relations with China, the Democratic People’s Republic of Korea the Republic of Korea, and Mongolia. The deputy minister in charge of Asia, Igor Morgulov, is also a seasoned China-watcher with vast experience in the region. Despite professional expertise, diplomats in Moscow play a technical role: they put together internal briefs, manage letter exchanges, prepare multiple visits of Russian officials to China, and draft some state-to-state agreements.
There are about 30 China specialists in the MFA Moscow headquarters, and the Russian embassy in Beijing is second only to the embassy in Washington. Ambassador Andrei Denisov, former first deputy foreign minister and an old university friend of Sergei Lavrov, is considered to be the leading authority on China among Russian bureaucrats. His memos go directly to Putin’s desk. Overall, however, insiders familiar with the Kremlin’s workings agree that the MFA plays no central role in shaping policy towards China and is merely a technical body.
The same goes for the MEDT, which administers the Office of the Russian Trade Representative to the PRC, in charge of managing trade statistics, organizing exhibitions at major Chinese trade fairs, and helping Russian companies find partners in China. The central headquarters of MEDT in Moscow houses a department for Asian, African, and Latin American states, which is led by professional sinologist Evgeniy Popov and oversees trade and economic affairs. The Department for Support of Projects in Asia-Pacific is much smaller, and its overlapping powers pose a problem.
Normal Russian bureaucratic practice entails just one inter-governmental commission to deal with any foreign country. In the case of China however, there are four, all overseen by deputy prime ministers. The dialogue on social and humanitarian issues, co-chaired by Olga Golodets and Vice-Premier Liu Yandong of China, is of least importance – it focuses on cultural exchanges, education etc. The other commissions are very powerful. The original bilateral commission (for preparation of regular meetings between heads of government) is now chaired by Deputy Prime Minister Dmitri Rogozin, who is in charge of the military-industrial complex (his Chinese counterpart was Wang Yang). The “strategic dialogue in the fuel and energy sector,” started in 2009 by Deputy Prime Minister Igor Sechin in charge of energy working with Wang Qishan. Sechin established the commission in order to concentrate power in energy negotiations with China, which he also needed as chairman of the board for Rosneft and InterRAO, a state-owned power-generation company. After Sechin took the position of Rosneft chairman in 2012, this commission was inherited by his successor – Deputy Prime Minister Arkadi Dvorkovich (working with Zhang Gaoli). Finally, at Putin’s request, an inter-governmental commission was created in September 2014 to handle priority investment projects – a measure to speed up cooperation with China in the context of sanctions. It is co-chaired by Zhang Gaoli and First Deputy Prime Minister Igor Shuvalov, so trusted by Putin that he is dubbed the “shadow prime minister.” Deputy Prime Minister Yuri Trutnev is overseeing the development of the Far East (and is also chairman of the board of diamond-producer ALROSA and RusHydro, the hydropower monopoly). Although he has no commission with the Chinese, he has a say in some bilateral projects.
The existence of these three commissions to provide government support to corporate projects sometimes creates difficulties for companies which have to negotiate with the secretariats of two or three deputy prime ministers at the same time. The powers of deputy prime ministers do not fully match their domestic portfolio. Dvorkovich is also in charge of all infrastructure, agriculture, and civil manufacturing inside Russia, so all projects with the Chinese must get his approval, even if many are in Shuvalov’s commission. If the project is in the Far East (as is the Summa Group’s project on Zarubino port), it should get permission from three deputy prime-ministers, whose inter-personal relationships are complicated. This leads to delays and misunderstandings for companies, whose projects the bureaucracy is meant to support. Things become further complicated when regional administrations get involved.
Local officials usually have no say in determining strategy on the national level. Since Putin came to power in 2000, the Kremlin has undermined the power base of governors and made them dependent on Moscow in both financial and political terms. The lion’s share of regional taxes first goes to the federal budget and then is redistributed as Moscow’s wishes. In 2012 local governors’ elections were reinstated, but the Kremlin has full control of the election process – deciding who is allowed to run and who is supposed to win. A typical governor is not as influential as a US governor or even a party secretary of a Chinese province. When it comes to Russia-China relations, governors follow Moscow’s instructions. In 2004-2005 Moscow informally asked them to gently push Chinese businesspeople out of bordering regions. They did so, despite the fact that this undermined a source of economic growth. Now management of foreign relations in regions bordering China is conducted by Trutnev, who is also the president’s plenipotentiary representative for the whole borderland region except Chitinskaya oblast and the Altai Republic.
Governors of bordering regions are still important in two respects: first, implementing business projects or cross-border cooperation projects approved at the top level (a program of regional cooperation between the Russian Far East and Northeast China signed in 2009 by Dmitri Medvedev and Hu Jintao with over 100 projects was not implemented, in large part because of mismanagement on the regional level); second, providing information to the center about China’s economic and demographic presence in the Far East and Eastern Siberia. The job is divided between the governors and local chiefs of the Federal’naya Sluzhba Bezopasnosti (FSB, the domestic security service). Security is an important concern for the Kremlin vis-à-vis China.
The Army, Intelligence Community, and Military-industrial Complex
The security dimension of relations with China has been important throughout history. With a length of over 4200 km, Russia’s land border with China is the largest with a major power ( Kazakhstan is a treaty ally of Russia). Arguably, it has been one of the most peaceful borders in Russian history – as opposed to the borders with Europe or with Turkey, which have always been at risk of invasion. But since the Sino-Soviet split, and especially after the 1969 border conflict, it became a highly militarized outpost with thousands of Russian troops ready to fend off “the Chinese threat.” After 1989 when Mikhail Gorbachev and Deng Xiaoping normalized relations, troop numbers have been sharply lowered as the border was opened for trade. Despite the final settlement of the territorial dispute, security concerns are still among the major drivers in Moscow’s approach towards China, a consequence of the role the army and broader security community plays in policy-making.
The security community nearly dominates the discussion on sales of Russian weaponry to China. As the problem has both commercial and security aspects, this is the area where the army leadership, the SVR, the FSB and bosses of the defense industry need to find a delicate balance of their interests, with Putin having the final say. The most influential figure in these discussions is Sergey Chemezov, head of “Russian technologies” – a large conglomerate of SOEs, which controls all weapon-producing industries (except military jets, which are controlled by the state-owned United Aviation Company). Chemezov met Putin in Dresden in the 1980s, working for the KGB, and their personal relationship can influence his position on selling weapons to China. Other major stakeholders are Rogozin, who is in charge of the defense industry and Minister of Defense Sergey Shoigu – one of the most powerful men in Putin’s inner circle.
Elite thinking on the arms trade with China went through several stages. In the early 1990s the military industries of these former rivals entered a stage of mutual dependence. After the West imposed an arms embargo on China after the 1989 Tiananmen Square massacre, Russia became a critical source of sophisticated weapons and Chinese orders helped troubled military plants to survive. According to expert estimates, the share of Chinese contracts in the revenue of the Russian defense industry in the 1990s was never less than 30 percent, and in some years exceeded 50 percent. In the 1990s, military-technical co-operation was one of the pillars of mutual trade, and served as the basis for their bilateral partnership.
In the 2000s, Russian arms started to face increasing competition from Chinese manufacturers in the domestic market, and Moscow became worried about the Chinese habit of copying Russian equipment, such as the Su-27 jet fighter. Policymakers also became increasingly nervous about selling their most sophisticated weapons to the growing Chinese military. The last large orders were placed in 2007. As a leading Russian analyst of arms trade with China, Vasiliy Kashin points out that domestic developments in the industry were also important. After Russian arms exporters had broken into new markets in the 2000s, China’s share in the total volume of exported Russian military equipment decreased dramatically. For Chemezov, growing domestic demand, new export markets, and diversification into civilian markets, have lessened arms manufacturers’ dependence on Chinese contracts, while providing Moscow with a significant degree of freedom in negotiating future contracts with Beijing. According to a 2012 statement by Rogozin, exports accounted for only 22 per cent of the defense industry’s total revenue. At the same time China remains a major buyer of Russian weapons, second only to India. The data available indicate that Russian military exports to China exceeded $1.9 billion in 2011. Rosoboronexport (part of “Russian Technologies”) reports that China accounts for 12 per cent of the overall $17.6 billion in new arms sales; this puts total contracts at more than $2.1 billion.
Apart from the arms trade debate, the security community is providing an overall assessment of the Chinese military threat to Russia, and is participating in the debate on whether Beijing harbors long-term ambitions to colonize Pacific Russia. With Putin and many other members of the current elite having a KGB background, the security community is particularly influential. First is the SVR, which has a network of agents in China and manages political intelligence. Reviews on the quality of intelligence it provides on China are mixed. Some insiders claim that its agents do not have good access to Chinese sources, the level of technology is substantially behind the relevant US agencies as a benchmark, and analysts are insufficiently paid to attract the best talent (estimates put the figure at $18.000 a year for a mid-level analyst at current rates). Still, decision-makers are accustomed to trusting SVR memos; so clearly their service is highly regarded in the Kremlin. Also influential is the Main Intelligence Directorate of the General Staff of the Armed Forces, monitoring PLA activity with particular stress on technology. Last but not least in the top tier of influence is the FSB, which is put in charge of counter-espionage and is very influential in debates on the possibilities of Chinese investment into the Far East. Insiders describe this debate being “virtually hijacked by the siloviki” in previous years, but confirm that since Western sanctions were imposed and Putin seeks to reorient the entire economy towards China, the civil bureaucracy and the business community now play a more significant role.
SOEs and Private Companies
As economic ties are the backbone of Russia-China relations, the Russian business community plays an important role. They do not have a chamber which may function as a platform to discuss common interests or to lobby for China-relevant policies. In 2004 Moscow and Beijing created the Russia-China Business Council (RCBC), a corporate membership organization which brings together the largest companies engaged in bilateral projects. Since April 2014 it is chaired by Gennadiy Timchenko, who was put on the US sanctions list after Russia annexed Crimea. Some experts have claimed that his placement at the helm of RCBC was a signal to the West, but the mogul himself does not have any personal interest working on the Chinese track. RCBC remains a hollow organization with rare public events during official visits and little value for participants. Russian business does not have a coordinated agenda; every company acts on its own. There is a major distinction between three types of corporate players.
First are the large SOEs. Governed in the name of the state by long-time friends and lieutenants of Putin, they are the largest players in bilateral trade from the Russian side, with Rosneft (led by Igor Sechin), Gazprom (led by Alexey Miller, Putin’s friend from his St. Petersburg days), Transneft (led by former KGB agent Nikolay Tokarev) and “Russian Railways” (led by Vladimir Yakunin) in the lead. One must add to that group the biggest Russian state-owned banks: commercial banks Sberbank, VTB, and Gazprombank), and VEB, the “political” development bank. Their heads have direct access to Putin and may influence his position on particular projects. Their motivations may not be a desire to increase the value for shareholders, but personal goals in their quest for influence and money. A good example is Rosneft’s deal with CNPC and Sinopec described above, where Sechin pushed the prepayment scheme with China because he needed capital for aggressive domestic expansion, including the merger with TNK-BP. Despite the very harsh conditions Chinese companies imposed, Sechin proceeded to secure the amount of cash he needed. Similarly, Gazprom has lobbied for the sale of Russian gas to China via pipelines and has always turned down the LNG option, many independent analysts in Russia believe, due to a desire to bring into the project contractors with close ties to management. Gazprom does not have its own LNG technology, so it would be dependent on foreign contractors and have no room to allocate contracts to friendly firms. These companies can use their directors’ connections in the Kremlin to overcome objections raised by relevant bureaucracies (as was the case when the MFA tried to warn about possible risks with the 2013 Rosneft deal), and extract additional tax deductions and other benefits from the government.
The second group are private business people, who are long-time friends of Putin. Timchenko and Rottenberg both own large infrastructure companies involved in building large pipelines. Insiders believe that their position was a factor in Gazprom’s decision to reject Chinese advance payment for the “Power of Siberia” gas pipeline, which Beijing was ready to provide if Chinese companies would build the pipeline. (Beijing reportedly promised that it could be at least 30% cheaper for Russia and would be executed on time). The last group is private companies, which belong to the oligarchs of the 1990s or to some Putin-era moguls with no direct connections to the president. These companies operate according to pure commercial logic, and in order to push deals they use the usual lobbying instruments, working directly with relevant governmental bodies but with limited access to Putin (compared to Timchenko and Rottenberg).
Decomposition of “Russia” into many players provides clues to some aspects of the relationship between Moscow and Beijing. The analysis shows how complex the decision-making process can be in order to accommodate the many interests at stake. While the most important decisions are made by Putin himself, the views and interests of other players may influence the final policy. Personalization, bureaucratic overlap, the rent-seeking behavior of well-connected bosses of SOEs, and lack of professional expertise on China can explain the awkwardness of Russia’s moves in Asia and its unsuccessful attempts to exploit China’s growth for its own national interests.