The Bear and the Dragon: How the Ukraine War Could Worsen U.S.-China Relations

By: Eduardo Rivas

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On February 24, 2022, Russian President Vladimir Putin ordered the Russian military to invade the former Soviet state of Ukraine through a so-called “special military operation.” The invasion forced countries around the world to reconsider their relationship with Russia. For instance, the United States imposed sanctions on Russian companies and implemented other stringent measures against Russia. The United Kingdom took a similarly hawkish and assertive approach against Russia by providing more than $1 billion in military support and implementing strict sanctions on Russia, with former Prime Minister Boris Johnson declaring that the U.K. will fight for Ukraine “for as long as it takes.” Belarus, a country closely aligned economically and militarily with Russia, had served as the staging ground for the invasion by allowing Russian troops into Belarus under the guise of military exercises. China, however, has taken a different approach. The ongoing Russia-Ukraine war is allowing China to further intensify economic ties with Russia, which is straining China’s relations with the U.S. and the rest of the world.

After Putin ordered the invasion of Ukraine, U.S. President Joe Biden imposed strict sanctions on Russia. Some of the sanctions imposed by the U.S. include freezing American tech exports to Russia, blocking Russian banks’ access to SWIFT, banning Russian aircraft in American airspace, banning Russian oil exports to America, implementing travel bans and asset freezes on Russian oligarchs, banning transactions with Russia’s central bank, revoking Russia’s “most-favored nation” trade status, imposing sanctions on dozens of defense companies, 328 members of the Duma legislative body, and the chief executive of Sberbank, suspending information exchanges with Russia’s tax authorities, and banning new imports of Russian gold. The most notable of Biden's efforts include signing an order alongside other nations to ban Russian banks’ access to the global financial network SWIFT. Through these efforts, the Biden administration intends to inflict economic pain on Russia and strengthen Ukraine. Unfortunately, the effects of sanctions have been mixed. As of June, Russia’s currency has increased in value to 40 rubles per dollar, a seven-year high. As the price of oil and gas has risen, higher earnings from Russia’s exports and a sharp decline in imports have caused the ruble to appreciate significantly. China’s importation of Russian oil has helped drive higher revenues for Russia. The value of Chinese oil and gas imports from Russia rose by 28 percent in May from the previous month. However, because of Western sanctions the Russians needed to export their oil (Russian Ural crude) to China at a $30 discount compared to Brent crude to cover the extra costs and risks such as transportation and insurance. Despite slashed prices, Russia has been able to almost entirely regain its pre-war oil and gas export value — driven by increased demand in China and the rest of Asia. From March to May, sales of Russian crude oil to Europe decreased by 554,000 barrels a day while sales to Asia increased by 503,000 barrels a day. Of the 503,000 barrels, 165,000 barrels have gone to China. The Chinese initially cut back on importing Russian goods, fearing they would be perceived as openly supporting the invasion of Ukraine and be subjected to Western sanctions. However, China has since increased its purchase of Russian oil and taken advantage of discounted prices. From March to June 2022, China purchased $25.3 billion worth of Russian oil, gas, and coal, almost double the amount from March to June 2021. Russia has since become China’s largest supplier of oil, gas, and coal, pushing down Saudi Arabia to its second-largest supplier.

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Stronger economic ties between Russia and China after the invasion in February may be signaling a fundamental shift in trade relations. Besides Russian energy, trade has increased in other areas as well. In the first quarter of 2022, overall bilateral trade between Russia and China rose by 28% compared to the same period last year. During the St. Petersburg International Economic Forum in June, Russian and Chinese companies reached agreements on trade in industries such as food and other daily commodities that would boost their respective economies. After the Russian invasion, China lifted import restrictions on wheat. The commodity has become highly volatile to the state of food security after global wheat prices soared in 2022. Additionally, China has been a major exporter of tech products to Russia. According to the Congressional Research Service, China supplied 72% of Russia’s computers, 56% of its semiconductor devices, 26% of its integrated circuits, and 72% of its telecom equipment in 2021. In March 2022, after the Ukrainian invasion, Chinese laptop exports dropped by 40 percent and telecom equipment dropped 98 percent compared to February 2022 due to Chinese companies wanting to avoid U.S. sanctions. However, the Congressional Research Service suggests that even though the United States has put certain export controls on Russia on military technologies, China could still support Russia’s military systems through semiconductors and technology trade. China’s ambassador to Russia, Zhang Hanhui, stated on May 9, 2022, that China would deepen cooperation with Russia on military technology, energy, and space despite U.S. sanctions discouraging Chinese electronic companies to export their products to Russia.

On the diplomatic front, the Russian invasion of Ukraine has significantly complicated the relationship between China and Russia and placed China in a precarious position. In a joint statement during the opening ceremony of the 2022 Olympic Winter Games in Beijing, just before the war, Russia and China announced what they called a friendship with “no limits” and “no ‘forbidden’ areas of cooperation.” This friendship has included joint military exercises such as the “Joint Sea” series with their naval forces and the “Aerospace Security” series with their air and missile defense forces, joint military technology projects including artificial intelligence and space technologies, joint statements, and echoing Russian propaganda regarding the invasion of Ukraine. In one significant exercise, both countries flew joint patrols near the Japanese and South Korean air defense zones when President Biden traveled to Asia in May 2022.

Furthermore, China’s Foreign Minister Wang Yi said in March, after the conflict had already started, that China and Russia would continue deepening their relationship as a “strategic partnership of coordination for a new era.” Yi also stated how the foundation of the two states’ relationship comes from their “clear logic of history and driven by strong internal dynamics.” With their alignment, they share a view of the U.S. as their main security challenge and intend to deteriorate its power and influence. However, during the beginning of the war, China had reservations regarding Russia’s decision. A day after Russia invaded Ukraine, China “briefly paused” new imports of Russian crude and had two of its largest state-owned banks stop financing purchases of Russian commodities. Alongside these economic measures, China abstained from voting on a UN Security Council resolution on ending the Ukraine War, supported a diplomatic solution to the invasion, and stated that Russia’s security demands were legitimate. Other notable actions during the first month of the war included pursuing a role in facilitating peace talks with China’s six-point initiative to prevent a humanitarian crisis in Ukraine. Yet, China officially referred to the war as only the “Ukraine issue.” It is suggested that China quietly shifted its pro-Russian position to balance other interests China has while keeping a strong relationship with Russia. However, China offered Russia closer cooperation in their first call since the early days of the war, stating that China is “willing to continue maintaining mutual support on major issues of mutual concern involving sovereignty, security, and other core interests, building closer bilateral strategic cooperation.” China has also offered to help Russia continue to implement the consensus made between Chinese President Xi Jinping and President Putin as well as to promote “the development of the global governance system” during the June 2022 China-Russia Think Tank High-end Forum. Furthermore, President Xi said during the plenary session of the 25th St. Petersburg International Economic Forum that it will be ready to work with Russia to make contributions to “deepening global development cooperation and building a community with a shared future for mankind.” This shift in supporting Russia and deepening cooperation at first seems counterintuitive to sustaining U.S. relations, but it follows past precedent on how China has responded to Russian aggression. In 2014, when Russia annexed the Ukrainian region of Crimea, China initially gave little support to Russia's annexation. Subsequently, China grew its partnership with Russia after the annexation of Crimea and hardened its view of the U.S. and NATO as joint threats to their nations.

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China Daily

For the U.S., the invasion of Ukraine has significantly increased tensions with China. Before the war, the U.S. had somewhat of a competitive or adversarial relationship with China with the intent of “addressing its relationship with [China] from a position of strength.” In 2012, trade tensions started growing between the two countries when China violated international trade norms by placing restrictions on exporting rare earth minerals. When President Donald Trump came into office, America’s foreign policy shifted towards a more hard-line approach, including tariffs to combat “economic aggression” and increased support for Hong Kong and Taiwan. President Biden kept Trump’s tariffs but pivoted towards a strategy built upon America's relationship with its democratic allies. After Russia invaded Ukraine, the U.S. took the lead as one of the biggest supporters of Ukraine while China quietly supported Russia’s position. Although the U.S. has not placed significant sanctions on China after the invasion, the Biden administration warned President Xi against sending military equipment to Russia. Overall, the Russia-Ukraine invasion has not provoked any concrete actions from the U.S. against China, however, the U.S. seems open to applying increased diplomatic and economic pressure because of their growing support for Russia.

The Russia-Ukraine war has been a tragedy for the Ukrainian people. The war has destroyed the lives of thousands of innocent lives and places the sovereignty of Ukraine at existential risk. However, America’s future relationship with China also faces a dark future given the intensifying Sino-Russian relationship. In this regard, the past is a helpful guide. During the Cold War, President Richard Nixon and Secretary of State Henry Kissinger re established relations with China. When the Soviet Union and China clashed with each other in 1969, Kissinger took advantage of the rift. They exploited a wedge between China and the Soviet Union, forcing them apart and undermining the strategic partnership against the U.S. they once had. Yet today, an anti-American strategic partnership between China and Russia like the one they had before Nixon's visit to China seems increasingly likely. One key difference between America's current situation and the Cold War era is that both Russia and China have the same perception of the U.S: they both view the U.S. as their most important security challenge. The Russia-Ukraine War has only increased the likelihood of this dangerous outcome. Russia is likely to continue intensifying its relationship with China. These new developments could become the nightmare scenario diplomats and statesmen of the past have warned against for decades.

Sources

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