Chinese Premier Li Keqiang seeks to manage expectations in Moscow

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(Sept 18): Chinese Premier Li Keqiang kicked off a three-day visit to Moscow on Monday, where he hopes to counter the effects of the US trade war with agriculture deals.

But analysts warned he might find Russia wanting more economically from its neighbour in the face of ongoing Western sanctions.

Talks between Li and his counterpart Russian Prime Minister Dmitry Medvedev will focus on trade, with Li saying on arrival in Moscow that the two sides hoped to increase investment and relax market access, as well as expand economic cooperation.

“The two countries should take this opportunity to combine China’s industrial, capital and market advantages with Russia’s resources, technology and talents to inject new momentum into economic and social development,” Li said in an interview with the Russian news agency TASS.

In his interview with TASS, Li hearkened back to the “upgrade” in bilateral ties that occurred during Chinese President Xi Jinping’s visit to Moscow in June, beginning what Xi and Russian President Vladimir Putin called a “new era” of strategic cooperation.

Bilateral ties have expanded in the face of years of Western sanctions against Moscow, and China’s trade war with the United States. Trade between the two countries, worth more than US$100 billion, grew by 27.1 per cent in 2018.

Li’s visit is expected to revolve around expanding economic cooperation in sectors like energy, and increasing imports of Russian agricultural products against the backdrop of China’s trade war with Washington, according to Zhang Jianrong, deputy director of the Russian and Central Asian Studies Centre of the Shanghai Academy of Social Sciences.

“The agricultural sector is a new target for growth, which is growing rather fast, like in the area of soybeans,” Zhang said. “Instead of soybeans from the US, China wants to import more from Russia and other countries.”

In mid-July, Russia and China agreed to “deepen trade in soybeans” and, later that month, China approved soybean imports from all parts of Russia.

Despite increased interest in Russian soybeans, supplies are by no means enough to cover the gap left by the US, and growth in imports has been limited.

In 2018, China imported just 817,000 tonnes of soybeans from Russia, according to Chinese customs data, an increase of 64.7 per cent on the previous year, but barely one per cent of China’s annual 100 million tonne annual consumption.

Despite the growing economic ties, analysts said Russia had received less than it expected from China in recent years when it came to financial resources and investment.

“Russia has had great expectations with regard to China,” said Artyom Lukin, associate professor at Far Eastern Federal University in Vladivostok. “In particular, there were hopes that Chinese investment would stream into Russia and its Far East. However, so far Russia has seen very little of Chinese money.

During Li’s visit, China might continue to push Russia to export more substitute goods, like soybeans, which have been hit with tariffs in the ongoing trade war with the US.

But, Lukin said, Russia would need large investments from China, particularly in transport infrastructure, before this could be achieved. “If China wants more soybeans and other vital commodities from Russia, it must be ready to invest big time in Russia,” he said.

While Li’s visit was mainly economic, the two prime ministers would continue the tone set by Xi and Putin, according to Arkady Moshes, director of the European Union’s eastern neighbourhood and Russia research programme at the Finnish Institute of International Affairs in Helsinki.

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The US imposed harsh sanctions on Russia in 2014 over the annexation of Crimea, including blocking access to the US financial system and limiting transactions with US businesses. The EU also imposed sanctions on Russia that year, including banning European firms from investing in Crimea, and limiting financial transactions with some Russian banks and companies.

“You can sense a certain frustration in Russia … five years ago people expected more,” Moshes said, adding that Russia had hoped to see more loans and investment from Beijing during its years of economic difficulties.

“Political solidarity is there, but Russia clearly wanted to receive more money, and probably more technology from China. That hasn’t happened, and it is probably not going to happen soon.”